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
[FEE REQUIRED]
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
[NO FEE REQUIRED]
FOR THE FISCAL YEAR ENDED JULY 2, 1995 COMMISSION FILE NO. 0-14864
LINEAR TECHNOLOGY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 94-2778785
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1630 MCCARTHY BOULEVARD
MILPITAS, CALIFORNIA 95035-7417
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (408) 432-1900
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
(TITLE OF CLASS)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---------- ----------
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the 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 non-affiliates of the
Registrant was approximately $2,666,155,900 as of September 11, 1995, based upon
the closing sale price on the Nasdaq National Market System reported for such
date. Shares of common stock held by each officer and director and by each
person who owns 5% or more of the outstanding common stock have been excluded in
that such persons may be deemed to be affiliates. This determination of
affiliate status is not necessarily a conclusive determination for other
purposes.
There were 73,775,292 shares of the Registrant's common stock issued and
outstanding as of September 11, 1995.
DOCUMENTS INCORPORATED BY REFERENCE:
(1)Items 1 and 2 of Part I, Items 5, 6, 7 and 8 of Part II, and Item 14(a) 1.
of Part IV incorporate information by reference from Exhibit 13.1 to this
Form 10-K which contains certain information included in Registrant's Annual
Report to Shareholders for the fiscal year ended July 2, 1995.
(2)Items 10, 11 and 12 of Part III incorporate information by reference from
the definitive proxy statement (the "1995 Proxy Statement") for the Annual
Meeting of Shareholders to be held on November 8, 1995.
<PAGE>
PART I
Item 1. Business
General
Linear Technology Corporation (together with its consolidated
subsidiaries, "Linear Technology" or the "Company") designs, manufactures and
markets a broad line of standard high performance linear integrated circuits.
Applications for the Company's products include telecommunications, notebook and
desk top computers, video/multimedia, computer peripherals, cellular telephones,
industrial, automotive and process controls, network and factory automation
products and satellites. The Company was organized and incorporated in 1981 by a
management team with significant experience in the design, manufacture and
marketing of linear circuits. The Company competes primarily on the basis of
performance, functional value, quality, reliability and service.
The linear circuit industry
Semiconductor components are the electronic building blocks used in
electronic systems and equipment. These components are classified as either
discrete devices (such as individual transistors) or integrated circuits (in
which a number of transistors and other elements are combined to form a more
complicated electronic circuit). Integrated circuits ("ICs") may be divided into
two general categories, digital and linear (or analog). Digital circuits, such
as memory devices and microprocessors, generally process on-off electrical
signals, represented by binary digits, "1" and "0." In contrast, linear circuits
monitor, condition, amplify or transform continuous analog signals associated
with physical properties, such as temperature, pressure, weight, light, sound or
speed, and play an important role in bridging between real world phenomena and a
variety of electronic systems. Linear circuits also provide voltage regulation
and power control to electronic systems, especially in hand-held battery powered
systems.
According to World Semiconductor Trade Statistics, worldwide monolithic
linear integrated circuit sales, estimated to be approximately $13.6 billion in
1994, represent approximately 15% of the total integrated circuit market. Linear
Technology competes primarily in the non-consumer segment of the linear IC
market, which was approximately 63% of the total monolithic linear IC market for
1994.
The Company believes that several factors generally distinguish the
linear integrated circuit business from the digital circuit business, including:
Importance of Individual Design Contribution. The Company
believes that the creativity of individual design engineers is of
particular importance in the linear circuit industry. The design of a
linear integrated circuit
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generally involves a greater variety and less repetition of circuit
elements than digital design. In addition, the interaction of linear
circuit elements is complex, and the exact placement of these elements
in the circuit is critical to the circuit's precision and performance.
Computer-aided engineering and design tools for linear circuits are not
as accurate in modeling circuits as those tools used for designing
digital circuits. As a result, the contributions of a relatively small
number of individual design engineers are generally of greater
importance in the design of linear circuits than in the design of
digital circuits.
Smaller Capital Requirements. Digital circuit design attempts
to minimize device size and maximize speed by increasing circuit
densities. The process technology necessary for increased density
requires very expensive wafer fabrication equipment. In contrast,
linear circuit design focuses on precise matching and placement of
circuit elements, and linear circuits often require large feature sizes
to achieve precision and high voltage operation. Accordingly, the
linear circuit manufacturing process generally requires smaller initial
capital expenditures, particularly for photomasking equipment and clean
room facilities, and less frequent replacement of manufacturing
equipment because the equipment has, to date, been less vulnerable to
technological obsolescence.
Market Diversity; Relative Pricing Stability. Because of the
varied applications for linear circuits, manufacturers typically offer
a greater variety of device types to a more diverse group of customers,
who typically have smaller volume requirements per device. As a result,
linear circuit manufacturers are often less dependent upon particular
products or customers, linear circuit markets are generally more
fragmented, and competition within those markets tends to be more
diffused. The Company believes that competition in the linear circuit
market is particularly dependent upon performance, functional value,
quality, reliability and service. As a result, linear circuit pricing
has generally been more stable than most digital circuit pricing.
Less Japanese Competition. To date, Japanese firms have
concentrated their efforts on the high volume digital and consumer
linear markets, as opposed to the high performance end of the linear
circuit market served by the Company.
The Semiconductor Industry. The semiconductor industry is
characterized by rapid technological change, price erosion, cyclical
market patterns, occasional shortages of materials, capacity
constraints, variations in manufacturing efficiencies, and significant
expenditures for capital equipment and product development.
Furthermore, new product introductions and patent protection of
existing products are critical factors for future sales growth and
sustained profitability. Although the Company believes that the high
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performance segment of the linear circuit market is generally less
affected by price erosion, cyclical market patterns and significant
expenditures for capital equipment and product development than other
semiconductor market sectors, future operating results may reflect
substantial period to period fluctuations due to these or other
factors.
Although the Company believes that it has the product lines,
manufacturing facilities and technical and financial resources for its current
operations, sales and profitability can be significantly affected by the above
and other factors. Additionally, the Company's common stock could be subject to
significant price volatility should sales and/or earnings fail to meet the
expectations of the investment community.
Products and markets
Linear Technology produces a wide range of products for a variety of
customers and markets. The Company emphasizes standard products to address
larger markets and to reduce the risk of dependency upon a single customer's
requirements. The Company targets the high performance segment of the linear
circuit market. "High performance" is characterized by higher precision, both
high power or micropower, higher speed, more subsystem integration on a single
chip and many other special features. The Company initially identified industry
standard, high performance products and then designed and manufactured both its
own version of these older established products, commonly referred to as second
source products, and enhanced versions of these products. For the past several
years, however, the Company has been focusing virtually all of its design
efforts on proprietary products which are original designs by the Company
offering unique characteristics differentiating them from those offered by
competitors. For fiscal 1995, sales of proprietary products were approximately
92% of the Company's net sales.
Although the types and mix of linear products vary by application, the
principal product categories are as follows:
Amplifiers - These circuits amplify the voltage or output current of a
device. The amplification represents the ratio of the output voltage or current
to the input voltage or current. The most widely used device is the operational
amplifier due to its versatility and precision.
High Speed Amplifiers - These amplifiers are used to amplify signals
above 5MHz for applications such as video, fast data acquisition and data
communication.
Voltage Regulators - Voltage regulators control the voltage of a device
or circuit at a specified level. This category of product consists primarily of
two types, the linear regulator and the switch mode regulator. Switch mode
regulators are also used to convert voltage up or down within an electronic
system for power management.
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Voltage References - These circuits serve as electronic benchmarks
providing a constant voltage for system usage. Precision references have a
constant output independent of input, temperature changes or time.
Interface - Interface circuits act as an intermediary to transfer
signals between or within electronic systems. These circuits are used in
computers, modems, instruments and remote data acquisition systems.
Data Converters - These circuits change linear (analog) signals into
digital signals, or vice versa, and are often referred to as data acquisition
subsystems, A/D converters and D/A converters. The accuracy and speed with which
the analog signal is converted to its digital counterpart is considered a key
characteristic for these devices.
Other - Other linear circuits include buffers, comparators,
sample-and-hold devices, and switched capacitor filters, which are used to limit
and/or manipulate signals in such applications as cellular telephones, base
stations, navigation system instrumentation and detection circuitry.
Linear circuits are used in various applications including:
telecommunications, notebook and desk top computers, video/multimedia, computer
peripherals, cellular telephones, industrial, automotive and process controls,
network and factory automation products and satellites. The Company focuses its
product development and marketing efforts on non-consumer applications where the
Company believes it can position itself competitively with respect to product
performance and functional value.
The following table sets forth, with respect to each of the market
areas served by the Company, examples of specific end applications of the
Company's products.
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Market End Applications/Products Example Product Families
------ ------------------------- ------------------------
---
Industrial Process Flow or rate metering |
Control Position/pressure/ |
temperature sensing |
and control |
Robotics |
Energy Management |
Process control |
data communication | Data acquisition products
Network and factory | High performance operational
automation | amplifiers
| Interface (RS 485/232) products
Instrumentation/ Curve tracers | Instrumentation amplifiers
Measurement Logic analyzers | Linear voltage regulators
EKG, CAT scanners |- Line drivers
Multimeters | Line receivers
Network analyzers | Precision comparators
Oscilloscopes | Precision voltage references
Scales | Switched capacitor filters
Test equipment | Switching voltage regulators
Voltmeters | Voltage references
|
Military/Space Communications |
Displays |
Firing control |
Ground support |
equipment |
Guidance control |
Radar systems |
Sonar systems |
Surveillance equipment |
Satellites |
---
---
Computer/Data Communications/ | Battery charging
Processing interface modems | DC - DC converters
Disk drives | Data acquisition products
Notebook computers | Linear voltage regulators
Desk top computers | Line drivers
Monitors |- Line receivers
Plotters | Micropower products
Printers | Precision operational amplifiers
Power supplies | Precision voltage references
Personal digital | Switched capacitor filters
assistance systems | Switching voltage regulators
Battery chargers | PCMCIA power switching
Video/multimedia | Power management
---
Telecommunications ---
and Other Cellular phones | DC - DC converters
(Automotive, Pagers | High-speed amplifiers
Audio) Engine/transmission | Line drivers
control | Line receivers
Modems/fax machines | Low noise operational amplifiers
PBX |- Micropower products
Security systems | Power management
Global positioning | Switched capacitor filters
systems | Voltage references
T1 telecommunication | Voltage regulators
High bit rate digital | Data acquisition products
subscriber loop | V.35 transceiver
Channel service unit/ |
data service unit |
---
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Marketing and customers
The Company markets its products worldwide, primarily through a network
of independent sales representatives and electronics distributors, to a broad
range of customers in diverse industries. In certain limited geographical
markets the Company has direct sales staff. The Company sells to over 9,000
Original Equipment Manufacturer (OEM) customers, many of which purchase on an
individual purchase order basis, rather than pursuant to long-term agreements.
In fiscal 1995, sales to two of the Company's domestic distributors represented
13% and 10% of net sales for the fiscal year. In fiscal 1994, one domestic
distributor accounted for 12% of net sales. Distributors are not end customers,
but rather serve as a channel of sale to many end users of the Company's
products. No other distributor or customer accounted for 10% or more of net
sales for fiscal 1995, 1994 or 1993.
The Company has agreements with 21 independent sales representatives in
the United States and 2 in Canada. Commissions are paid to sales representatives
upon shipments either directly from the Company or through distributors. The
Company has agreements with 6 independent distributors in the United States, 2
in Canada, 18 in Europe, 3 in Japan, 2 each in Korea and Taiwan, and 1 each in
Singapore, South Africa, Israel and Australia. The Company's distributors
purchase the Company's products for resale to customers. Additionally, domestic
distributors often sell competitors' products. Under certain agreements, the
Company's distributors are entitled to price rebates on inventory if the Company
lowers the prices of its products. The agreements also generally permit
distributors to exchange up to 5% of purchases semi-annually. See Note 1 of
Notes to Consolidated Financial Statements incorporated by reference to Exhibit
13.1 of this Form 10-K which contains certain information included in the
Company's 1995 Annual Report to Shareholders.
The Company's sales organization is divided into domestic and
international regions, with sales managers based at the Company's headquarters
and in the metropolitan areas of Boston, Philadelphia, Raleigh, Chicago, Dallas,
Los Angeles, Irvine, London, Dusseldorf, Munich, Stuttgart, Paris, Singapore,
Tokyo, Taipei and Seoul. The Company's products typically require a
sophisticated technical sales effort.
During fiscal 1995, 1994, and 1993, export sales were primarily to
Europe and Asia and represented approximately 49%, 45% and 40% of net sales,
respectively. Because most of the Company's export sales are billed and payable
in United States dollars, export sales are generally not directly subject to
fluctuating currency exchange rates. A strengthening of the dollar in relation
to other currencies may, however, create pricing pressure. Although export sales
are subject to certain control restrictions, including approval by the Office of
Export Administration of the United States Department of Commerce, the Company
has not experienced any material difficulties relating to such restrictions.
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The Company's backlog of released and firm orders was approximately
$93.3 million at July 2, 1995, as compared with $45.7 million at July 3, 1994.
In addition to its backlog, the Company had $15.6 million of product sold to and
held by domestic distributors at July 2, 1995 as compared to $12.5 million at
July 3, 1994. Shipments to domestic distributors are not recognized as sales
until the distributor has sold the products to its customers. The Company
expects to ship virtually all of its backlog as of July 2, 1995 prior to June
30, 1996. The Company defines backlog as consisting of distributor stocking
orders and OEM orders for which a delivery schedule has been specified by the
OEM customer for product shipment. Although the Company receives volume purchase
orders, most such purchase orders are cancelable by the customer without
significant penalty. Lead time for the release of purchase orders depends upon
the scheduling practices of the individual customer, so the rate of booking new
orders varies from month to month. In addition, the Company's agreements with
certain distributors provide for limited price protection. Consequently, the
Company does not believe that its backlog at any time is necessarily
representative of actual sales for any succeeding period.
In the operating history of the Company, seasonality of business has
not been a material factor, although the results of operations for the first
fiscal quarter of each year are impacted slightly by customary summer holidays,
particularly in Europe.
The Company warrants that its products, until they are incorporated in
other products, are free from defects in workmanship and materials and conform
to the Company's published specifications. Warranty expense has been nominal to
date.
Manufacturing
The Company's wafer fabrication and manufacturing facility located at
its headquarters in Milpitas, California, was built to Company specifications to
support a number of sophisticated process technologies and to satisfy rigorous
quality assurance and reliability requirements of United States military
specifications and major worldwide OEM customers. The Company currently uses
four-inch diameter wafers in the production of its devices. The Company's basic
process technologies include high speed bipolar, high gain, low noise bipolar
and silicon gate complementary metal-oxide semiconductor ("CMOS") processes. The
Company has also a proprietary complementary bipolar process. The Company's
bipolar processes are used in linear circuits where high voltages, high power,
low noise or effective component matching is necessary. The Company's
proprietary silicon gate CMOS processes provide switch characteristics required
for many linear circuit functions, as well as an efficient mechanism for
combining linear and digital circuits on the same chip. The Company's CMOS
processes were developed to address the specific requirements of linear circuit
functions. The complementary bipolar process was developed to address higher
speed analog functions. The Company's basic processes can be combined with a
number of adjunct processes to create a diversity of IC components. The
accompanying chart provides a brief overview of the Company's IC process
capabilities:
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|------------------------------------------------------------------------------+
| PROCESS CAPABILITIES
|------------------------------------------------------------------------------+
| |
| Process Families Benefit/Market Advantage Product Application |
| ---------------- ------------------------ -------------------- |
| P-Well SiGate CMOS General purpose, stability Switches, filters, |
| data conversion, |
| chopper amplifiers |
| |
| N-Well SiGate CMOS Speed, density, stability Switches, data |
| conversion |
| |
| BICMOS Speed, density, stability, Data conversion |
| flexibility |
| |
| High Power Bipolar Power (100 watts), high Linear and smart |
| current (10 amps) power products, |
| switching regulators |
| |
| Low Noise Bipolar Precision, low current, Op amps, voltage |
| low noise, high gain references |
| |
| High Speed Bipolar Fast, wideband, video Op amps, video, |
| high data rate comparators, |
| switching regulators |
| |
| JFETS Speed, precision, low Op amps, switches |
| current sample and hold |
| |
| Rad-Hard Total dose radiation All space products |
| hardened |
| |
| Complementary Bipolar Speed, low distortion, Op amps, video amps, |
| precision converters |
| |
| CMOS/Thin Films Stability, precision Filters, data |
| conversion |
| |
| High Voltage CMOS High voltage general-purpose, Switches, chopper |
| compatible with Bipolar amplifiers |
| |
| Bipolar/Thin Films Precision, stability, Converters, |
| matching amplifiers |
- -------------------------------------------------------------------------------+
The Company emphasizes quality and reliability from initial product
design through manufacturing, packaging and testing. The Company's design team
focuses on fault tolerant design and optimum location of circuit elements to
enhance reliability. Linear Technology's wafer fabrication facility has been
designed to minimize wafer handling and the impact of operator error through the
use of microprocessor-controlled equipment. In 1984, the Company obtained
Defense Electronics Supply Center (DESC) qualification to participate in high
reliability JAN38510 (class B) military
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business. In 1987, the Company received Jan Class S Microcircuit Certification
which enables the Company to manufacture products intended for use in space or
for critical applications where replacement is extremely difficult or impossible
and where reliability is imperative. The Company has been recertified by a joint
team from DESC, Naval Weapons Support Center (NWSC), National Aeronautics and
Space Administration (NASA), and the space division of the United States Air
Force (USAF).
In 1993, the Company was certified to comply with the ISO9001
international quality standard. This certification covers the Company's design,
manufacturing and service organizations and is an important standard especially
in the European marketplace.
During fiscal 1995, the Company commenced construction of a six-inch
wafer fabrication facility in Camas, Washington. Manufacturing production there
is scheduled to begin in calendar 1996.
Processed wafers are sent to either the Company's assembly facility in
Penang, Malaysia or to offshore independent assembly contractors where the
wafers are separated into individual circuits and packaged. The Penang facility
opened in October 1994 and services approximately 50% of the Company's assembly
requirements for plastic packages. Significant assembly subcontractors used by
the Company are Carsem(M) Sdn and Unisem(M) Sdn in Malaysia, ASAT in Hong Kong,
Anam Industrial Co., Team Pacific and Pacific Semiconductor in the Philippines,
and Chinteik in Bangkok. The Company also maintains domestic assembly operations
to satisfy particular customer requirements, especially those for military
applications, and to provide rapid turnaround for new product development.
Following processing at these locations, the Company's products are
returned to Milpitas or the Company's facility in Singapore for final testing,
inspection and packaging as required.
Linear Technology from time to time has experienced competition from
other manufacturers seeking assembly of circuits by independent contractors. The
Company currently believes that alternative foreign assembly sources could be
obtained without significant interruption. Foreign assembly is subject to risks
normally associated with foreign-owned operations, including changes in local
governmental policies, currency fluctuations, transportation delays and the
imposition of export controls or increased import tariffs.
From time to time certain materials, including silicon wafers and
plastic molding compounds, have been in short supply. To date the Company has
experienced no delays in obtaining raw materials, which would have adversely
affected production. As is typical in the industry, the Company must allow for
significant lead times in delivery of its materials.
Manufacturing of individual products, from wafer fabrication through
final testing, may take from ten to sixteen weeks. Since the Company sells a
wide variety of device types, and customers typically expect delivery of
products within a short period of time following order, the Company maintains a
substantial work-in-process and finished goods inventory.
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Based on its anticipated production requirements, the Company believes
it will have sufficient available resources and manufacturing capacity for
fiscal 1996.
Patents, licenses and trademarks
The Company has been awarded 60 United States patents, and has filed 33
additional patent applications. Although the Company believes that these patents
and patent applications may have value, the Company's future success will depend
primarily upon the technical abilities and creative skills of its personnel,
rather than on its patents.
In August 1994, Analog Devices, Inc. filed suit against the Company
alleging infringement of three patents in the complementary bipolar area.
Although the outcome of any litigation is uncertain, the Company believes that
resolution of these matters will not have a material adverse effect on the
Company's financial condition or results of operations.
As is common in the semiconductor industry, the Company has at times
been notified of claims that it may be infringing patents issued to others. If
it appears necessary or desirable, the Company may seek licenses under such
patents, although there can be no assurance that all necessary licenses can be
obtained by the Company on acceptable terms.
In addition, from time to time the Company may negotiate with other
companies to license patents, products or process technology for use in its
business.
Government sales
The Company currently has no material U.S. Government contracts.
Competition
Linear Technology competes in the high performance segment of the
linear market. Competition among manufacturers of linear integrated circuits is
intense, and many of the Company's competitors, including Analog Devices, Inc.,
Motorola, Inc., National Semiconductor Corporation and Texas Instruments, Inc.,
may have significantly greater financial, technical, manufacturing and marketing
resources than the Company. The principal elements of competition include
product performance, functional value, quality and reliability, technical
service and support, price, diversity of product line and delivery capabilities.
The Company believes it competes favorably with respect to these factors,
although it may be at a disadvantage in comparison to larger companies with
broader product lines and greater technical service and support capabilities.
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Research and development
The Company's ability to compete depends in part upon its continued
introduction of technologically innovative products on a timely basis. Linear
Technology's product development strategy emphasizes a broad line of standard
products to address a diversity of customer applications. The Company's research
and development efforts are directed primarily at designing and introducing new
products and, to a lesser extent, developing new processes and advanced
packaging.
As of July 2, 1995, the Company had 102 employees engaged in new
product design at its Milpitas facility. In addition, at fiscal year end, the
Company had 14 employees at its Singapore design center and 10 employees at its
Boston design center.
For the fiscal years 1995, 1994, and 1993, the Company spent
approximately $23,931,000, $18,394,000, and $14,773,000, respectively, on
research and development.
Environmental regulation
Federal, state and local regulations impose various environmental
controls on the storage, use, discharge and disposal of certain chemicals and
gases used in semiconductor processing. The Company's facilities have been
designed to comply with these regulations, and the Company believes that its
activities conform to present environmental regulations. Increasing public
attention has, however, been focused on the environmental impact of electronics
manufacturing operations. While the Company to date has not experienced any
materially adverse business effects from environmental regulations, there can be
no assurance that changes in such regulations will not require the Company to
acquire costly remediation equipment or to incur substantial expenses to comply
with such regulations. Any failure by semiconductor companies, including the
Company, to control the storage, use or disposal of, or adequately restrict the
discharge of hazardous substances could also subject them to significant
liabilities.
Employees
As of July 2, 1995, the Company had 1,350 employees, including 127 in
marketing and sales, 270 in research, development and engineering related
functions, 898 in manufacturing and production, and 55 in management,
administration and finance. The Company's success depends upon a number of key
employees, the loss of whom could adversely impact the Company. The Company
believes that its future success will depend in large part upon its ability to
attract, retain and motivate highly skilled employees. In the San Jose/Silicon
Valley area, where the Company's principal facilities are located, competition
for such employees is intense.
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The Company has never had a work stoppage, no employees are represented
by a labor organization, and the Company considers its employee relations to be
good.
Executive Officers of the Registrant
The executive officers of the Company, and their ages as of July 2,
1995, are as follows:
Name Age Position
---- --- --------
Robert H. Swanson, Jr.......56 President, Director and Chief Executive Officer
Paul Chantalat..............45 Vice President Quality and Reliability
Paul Coghlan................50 Vice President of Finance and Chief Financial
Officer
Timothy D. Cox..............47 Vice President of North American Sales
Clive B. Davies.............52 Vice President and Chief Operating Officer
Robert C. Dobkin............51 Vice President of Engineering
Sean T. Hurley..............57 Vice President of Operations
Thomas D. Recine............57 Vice President of Marketing
Hans J. Zapf................55 Vice President of International Sales
Arthur F. Schneiderman......53 Secretary
Mr. Swanson, a founder of the Company, has served as President, Chief
Executive Officer and a director of the Company since its incorporation in
September 1981. From August 1968 to July 1981, he was employed in various
positions at National Semiconductor Corporation ("National"), a manufacturer of
integrated circuits, including Vice President and General Manager of the Linear
Integrated Circuit Operation and Managing Director in Europe. Mr. Swanson has a
BS degree in Industrial Engineering from Northeastern University.
Mr. Chantalat has served as Vice President of Quality and Reliability
since July 1991. From January 1989 to July 1991, he held the position of
Director of Quality and Reliability. From July 1983 to January 1989 he held the
position of Manager of Quality and Reliability. From February 1976 to July 1983,
he was employed in various positions at National, where his most recent position
was Group Manager of Manufacturing Quality Engineering. Mr. Chantalat received a
BS and an MS in Electrical Engineering from Stanford University in 1970 and
1972, respectively.
Mr. Coghlan has served as Vice President of Finance and Chief Financial
Officer of the Company since December 1986. From October 1981 until joining the
Company, he was employed in various positions at GenRad, Inc., a manufacturer of
automated test equipment, including Corporate Controller, Vice President of
Corporate Quality and most recently Vice President and General Manager of the
Structural Test Products Division. Before joining GenRad, Inc., Mr. Coghlan was
associated with Price Waterhouse & Company in the United States and Paris,
France for twelve years. Mr. Coghlan received a BA from Boston College in 1966
and an MBA from Babson College in 1968.
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Mr. Cox was appointed Vice President of North American Sales in July
1991. From February 1991 to July 1991 he held the position of Director of
National Sales. From January 1990 to February 1991, and February 1983 to October
1987 he was employed at National where his most recent position was Director of
Northwestern Sales. From October 1987 to June 1989, he was Vice President of
Sales for Micro Linear. Prior to 1983, Mr. Cox was employed for seven years as
Vice President & Principal of Micro Sales Inc. Mr. Cox received a BSEE in 1970
from Valparaiso Technical Institute, Valparaiso, Indiana.
Dr. Davies has served as Vice President and Chief Operating Officer
since January 1989. From July 1982 to January 1989, Dr. Davies held the position
of Vice President of Quality, Reliability and Customer Service. From April 1971
to July 1982, he was employed in various positions at National, including Group
Director for Advanced Technology, Group Managing Director of the Singapore and
Hong Kong Manufacturing Operations and Business Director of Standard Linear
Integrated Circuit Operations. Dr. Davies received a B.Sc. (Honors) in Physics
in 1964 and a Ph.D. in Physics in 1967 from the University of Reading, England.
Mr. Dobkin, a founder of the Company, has served as Vice President of
Engineering since its incorporation in September 1981. From January 1969 to July
1981, he was employed in various positions at National, where his most recent
position was Director of Advanced Circuit Development. Mr. Dobkin has extensive
experience in linear circuit design. Mr. Dobkin attended the Massachusetts
Institute of Technology.
Mr. Hurley has served as Vice President of Operations since January
1989. From January 1973 to January 1989 he was employed in various positions at
National, most recently as Director of Linear Operations. Before joining
National, Mr. Hurley was Director of European Operations for Applied Materials,
Inc. Mr. Hurley received a B.S. in Chemistry in 1961 and an M.S. in Solid State
Physics in 1965 from the University of London.
Mr. Recine joined Linear Technology in July 1991 from Marcon Sales, an
electronic sales representative firm, which he helped found in 1984. Prior to
that he was Vice President of Flagship Software Systems, of which he was also a
founder. From 1970 to 1982, he was with National as a Director of Marketing for
discrete transistors, linear integrated circuits, distribution marketing and
sales and field sales operations. He entered the semiconductor industry in 1962
with Motorola, becoming a Product Line Manager in 1970. Mr. Recine holds an MBA
from Northeastern University and a BS in physics from the University of Windsor
(Ontario, Canada).
Mr. Zapf was appointed Vice President of International Sales in July
1991. From June 1982 to July 1991, he was Director of International Marketing
and Sales. From September 1972 to June 1982, Mr. Zapf was with Teledyne
Semiconductor where he held several management positions in Europe and the
United States
14
<PAGE>
including Vice President of Marketing and Sales. Prior to September 1972, Mr.
Zapf worked as a designer for Brown Boveri in Switzerland. Mr. Zapf holds an
MSEE degree from Zurich University.
Mr. Schneiderman has served as Secretary of the Company since September
1981. He is an attorney and a member of the law firm of Wilson, Sonsini,
Goodrich & Rosati, Professional Corporation, general counsel to the Company.
Item 2. Properties
Since 1982, the Company has occupied a building in Milpitas,
California, of approximately 40,600 square feet, which is currently used for
manufacturing and adjunct support services. In 1987, the Company purchased this
building. Also, since 1987 the Company has leased and occupied an adjacent
building of approximately 43,000 square feet, currently used for testing,
shipping and administration. The Company also leases approximately 60,000 square
feet in neighboring buildings to house its circuit design activities, regional
sales staff and receiving functions.
In July 1994, the Company occupied its new 50,000 square foot
manufacturing facility in Singapore. Test and packaging operations are performed
at this facility along with some design and product distribution activity. The
Company has a 30 year lease, with an option to extend for an additional 30
years, for the land where the Singapore plant is located.
In October 1994, the Company opened a 55,000 square foot assembly plant
in Penang, Malaysia. The Company has a 60 year lease for the land where the
plant was constructed.
During fiscal 1995, the Company started construction of its next wafer
fabrication facility in Camas, Washington. Construction is scheduled to be
completed in fiscal 1996. The land for the site of the facility is owned by the
Company.
The Company also leases sales offices in the metropolitan areas of
Boston, Philadelphia, Raleigh, Chicago, Dallas, Los Angeles, Irvine, London,
Dusseldorf, Munich, Stuttgart, Paris, Tokyo, Taipei and Seoul. See Note 2 of
Notes to Consolidated Financial Statements incorporated by reference to Exhibit
13.1 of this Form 10-K which contains certain information included in the
Company's 1995 Annual Report to Shareholders.
Item 3. Legal Proceedings
The Company is involved in various legal actions arising in the
ordinary course of business. While the outcome of such matters is uncertain, the
Company believes that these matters will not have a material adverse effect on
the Company's financial
15
<PAGE>
condition or results of operations. See also patent litigation set forth in
Item 1 under the caption "Patents, licenses and trademarks."
Item 4. Submission of Matter to a Vote of Security Holders
Not applicable.
16
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The information required by the Item is incorporated by reference to
the section entitled "Quarterly Results and Stock Market Data" of Exhibit 13.1
to this Form 10-K which contains certain information included in the
Registrant's 1995 Annual Report to Shareholders.
Item 6. Selected Financial Data
The information required by the Item is incorporated by reference to
the section entitled "Selected Financial Information/Five-Year Trend" of Exhibit
13.1 to this Form 10-K which contains certain information included in the
Registrant's 1995 Annual Report to Shareholders.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required by the Item is incorporated by reference to
the section entitled "Management's Discussion and analysis of Results of
Operations and Financial Condition" of Exhibit 13.1 to this Form 10-K which
contains certain information included in the Registrant's 1995 Annual Report to
Shareholders.
Item 8. Financial Statements and Supplementary Data
Consolidated Financial Statements of Linear Technology at July 2, 1995
and July 3, 1994 and for each of the three years in the period ended July 2,
1995, the report of Ernst & Young LLP, independent auditors thereon and
unaudited quarterly financial data for the two year period ended July 2, 1995
are incorporated by reference to Exhibit 13.1 of this Form 10-K which contains
certain information included in the Registrant's 1995 Annual Report to
Shareholders.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
17
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this item for the Company's directors is
incorporated by reference to the 1995 Proxy Statement, under the caption
"Election of Directors," and for the executive officers of the Company, the
information is included in Part I hereof under the caption "Executive Officers
of the Registrant."
Item 11. Executive Compensation
Incorporated by reference to the 1995 Proxy Statement, the section
titled "Executive Compensation."
Item 12. Security Ownership of Certain Beneficial Owners and Management
Incorporated by reference to the 1995 Proxy Statement, the section
titled "Record Date and Voting Securities" and the section titled "Security
Ownership."
Item 13. Certain Relationships and Related Transactions
Not applicable.
18
<PAGE>
PART IV
Item 14. Exhibits, Financial Statements, Schedules, and Reports on Form 8-K
(a) 1. Financial Statements
The financial statements listed in the accompanying Index to
Consolidated Financial Statements are filed as part of this Annual
Report.
2. Schedules
The financial statement schedule listed in Item 14(d) is filed
as part of this Annual Report.
All other schedules are omitted since the information required
by the schedule is not applicable or is not present in amounts
sufficient to require submission of the schedule, or because the
information required is included in the Consolidated Financial
Statements and notes thereto.
3. Exhibits
The exhibits listed in Item 14(c) are filed as part of this
Annual Report. Each compensatory plan required to be filed has been
indicated in Item 14(c).
(b) Reports on Form 8-K.
None
(c) Exhibits
3.1 Articles of Incorporation of Registrant, as amended.
3.3 Bylaws of Registrant, as amended. (2)
10.1 1981 Incentive Stock Option Plan, as amended, and
form of Stock Option Agreements, as amended (includ-
ing Restricted Stock Purchase Agreement). (*) (4)
10.11 Agreement to Build and Lease dated January 8, 1986
between Callahan-Pentz Properties, McCarthy Six and
the Registrant. (1)
10.25 1986 Employee Stock Purchase Plan, as amended, and
form of Subscription Agreement. (*) (3)
19
<PAGE>
10.35 1988 Stock Option Plan, as amended, form of
Incentive Stock Option Agreement, as amended, and
form of Nonstatutory Stock Option Agreement, as
amended. (*) (7)
10.36 Form of Indemnification Agreement. (2)
10.45 Land lease dated March 30, 1993 between the
Registrant and the Singapore Housing and Development
Board. (5)
10.46 Land lease dated November 20, 1993 between the Registrant and the
Penang Development Corporation. (6)
13.1 Certain information included in the Registrant's
Annual Report to Shareholders for the fiscal year
ended July 2, 1995.
21.1 Subsidiaries of Registrant.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
24.1 Power of Attorney. (see page 23)
27.1 Financial Data Schedule.
- ------------------------------------------------------------------
(Footnotes to Item 14 (c))
(*) The item listed is a compensatory plan of the Company.
(1) Incorporated by reference to identically numbered exhibits filed in
response to Item 16(a), "Exhibits," of the Registrants Registration
Statement on Form S-1 and Amendment No. 1 and Amendment No. 2 thereto
(File No. 33-4766), which became effective on May 28, 1986.
(2) Incorporated by reference to identically numbered exhibit filed in
response to Item 6, "Exhibits and Reports of Form 8-K," of the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
October 2, 1988.
(3) Incorporated by reference to identically numbered exhibit filed in
response to Item 6, "Exhibits and Reports on Form 8-K," of the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1990.
20
<PAGE>
(4) Incorporated by reference to identically numbered exhibit filed in
response to Item 6, "Exhibits and Reports on Form 8- K," of the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
December 30, 1990.
(5) Incorporated by reference to identically numbered exhibit filed in
response to Item 14(a)(3) "Exhibits," of the Registrant's Annual Report
on Form 10-K for the fiscal year ended June 27, 1993.
(6) Incorporated by reference to identically numbered exhibit filed in
response to Item 14(a)(3) "Exhibits," of the Registrant's Annual Report
on Form 10-K for the fiscal year ended July 2, 1994.
(7) Incorporated by reference to identically numbered exhibit filed in
response to Item 6, "Exhibits and Reports on Form 8-K," of the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
October 2, 1994.
(d) Financial Statement Schedule filed as a part of this Annual Report is listed
below:
Schedule
Number Description
-------- -----------------------------------------------
II Valuation and qualifying accounts and reserves.
21
<PAGE>
LINEAR TECHNOLOGY CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
(Item 14(a)1)
Page Reference to
Exhibit 13.1
Consolidated balance sheets at
July 2, 1995 and July 3, 1994 E13.1-6
Consolidated statements of income
for each of the three years in the
period ended July 2, 1995 E13.1-5
Consolidated statements of shareholders'
equity for each of the three years in
the period ended July 2, 1995 E13.1-8
Consolidated statements of cash flows
for each of the three years in the period
ended July 2, 1995 E13.1-7
Notes to consolidated financial statements E13.1-9 to E13.1-14
Report of Ernst & Young LLP, independent auditors E13.1-15
The Consolidated Financial Statements listed in the above index are
hereby incorporated by reference to Exhibit 13.1 of this Form 10-K which
contains certain information included in the Registrant's Annual Report to
Shareholders for the year ended July 2, 1995.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
LINEAR TECHNOLOGY CORPORATION
-----------------------------
(Registrant)
By: /s/ Robert H. Swanson, Jr.
--------------------------
Robert H. Swanson, Jr.
President and Chief
Executive Officer
September 27, 1995
POWER OF ATTORNEY
Know all persons by these presents, that each person whose signature
appears below constitutes and appoints Robert H. Swanson, Jr. and Paul Coghlan,
jointly and severally, his attorneys-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any amendments to this
Report on Form 10-K, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
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.
/s/ Robert H. Swanson, Jr. /s/ Paul Coghlan
- ------------------------------------- ----------------------------------------
Robert H. Swanson, Jr. Paul Coghlan
President and Chief Executive Officer Vice President of Finance and Chief
(Principal Executive Officer) and Financial Officer (Principal Financial
Director Officer and Principal Accounting Officer)
September 27, 1995 September 27, 1995
/s/ David S. Lee /s/ Thomas S. Volpe
- ------------------------------------- ----------------------------------------
David S. Lee Thomas S. Volpe
Director Director
September 27, 1995 September 27, 1995
/s/ Leo T. McCarthy /s/ Richard M. Moley
- ------------------------------------- ----------------------------------------
Leo T. McCarthy Richard M. Moley
Director Director
September 27, 1995 September 27, 1995
23
<PAGE>
SCHEDULE II
LINEAR TECHNOLOGY CORPORATION
<TABLE>
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(Dollars in thousands)
<CAPTION>
Additions
Balance at Charged to Balance at
Beginning Costs and End of
of Period Expenses Deductions (1) Period
---------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended June 27, 1993......... $ 529 $ 60 $ 99 $ 490
========= ========== ============= ==========
Year ended July 3, 1994.......... $ 490 $ 60 $ -- $ 550
========= ========== ============= ==========
Year ended July 2, 1995.......... $ 550 $ 181 $ 3 $ 728
========= ========== ============= ==========
<FN>
(1) Write-offs of doubtful accounts.
</FN>
</TABLE>
24
EXHIBIT 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
LINEAR TECHNOLOGY CORPORATION
Robert H. Swanson, Jr. and Arthur F. Schneiderman hereby certify that:
1. They are the President and Secretary, respectively, of LINEAR
TECHNOLOGY CORPORATION, a California corporation.
2. The articles of incorporation of this Corporation are amended
and restated to read as follows:
"I
The name of this corporation is Linear Technology Corporation.
II
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
III
This corporation is authorized to issue two classes of shares of stock
to be designated, respectively, "common stock" and "preferred stock." The number
of shares of common stock authorized is 40,000,000. The number of shares of
preferred stock authorized is 2,000,000.
The shares of preferred stock authorized by these Articles of
Incorporation may be issued from time to time in one or more series. For any
wholly unissued class or series of preferred stock, the Board of Directors is
hereby authorized to determine or alter any or all of the rights, preferences,
privileges or restrictions of such stock, including without limitation, the
dividend rights, dividend rates, conversion rights, voting rights, rights and
terms of redemption (including sinking fund provisions), redemption prices, and
liquidation preferences, the number of shares constituting any such series and
the designation thereof, or any of them.
The Board of Directors is further authorized to increase or decrease
the number of shares of any series, the number of which was fixed by it,
subsequent to the issue of shares of such series then outstanding, subject to
the limitations and restrictions stated in the resolution of the Board of
Directors originally fixing the number of shares of such series. In case the
number of shares of any series shall be so decreased, the shares constituting
such decrease shall resume the status which they had prior to the adoption of
the resolution originally fixing the number of shares of such series."
-1-
<PAGE>
3. The foregoing amendment and restatement of the articles of
incorporation has been duly approved by the Board of Directors.
4. The foregoing amendment and restatement of the articles of
incorporation has been duly approved by the required vote of shareholders in
accordance with Sections 902 and 903 of the California Corporations Code. The
total number of outstanding shares of capital stock of the Corporation at the
time of approval of the amendment was 4,635,814 shares of Common Stock,
4,515,000 shares of Series A Preferred Stock, 1,666,669 shares of Series B
Preferred Stock, and 2,775,800 shares of Series C Preferred Stock. All
outstanding shares of Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock have been converted into shares of Common Stock in
accordance with their terms. The number of shares of each class voting in favor
of the amendment and restatement equaled or exceeded the vote required. The
percentage vote required was more than 50% of the outstanding Common Stock and
more than 50% of the outstanding Series A Preferred Stock, more than 50% of the
outstanding Series B Preferred Stock, and more than 50% of the outstanding
Series C Preferred Stock, voting separately by series.
We further declare under penalty of perjury under the laws of the State
of California that the matters set forth in this Certificate are true of our own
knowledge.
Executed at Milpitas, California this 4th day of June, 1986.
/s/ Robert H. Swanson, Jr.
-----------------------------------------
Robert H. Swanson, Jr., President
/s/ Arthur F. Schneiderman
-----------------------------------------
Arthur F. Schneiderman, Secretary
-2-
<PAGE>
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION OF
LINEAR TECHNOLOGY CORPORATION
Robert H. Swanson, Jr. and Arthur F. Schneiderman hereby certify that:
1. They are the President and Secretary, respectively, of Linear
Technology Corporation, a California corporation.
2. Article IV, Section 2 and Section 3, of the Articles of
Incorporation of this corporation which now read:
"Section 2. Indemnification of Corporate Agents. This
corporation is authorized to provide indemnification of agents
(as defined in Section 317 of the California General
Corporation Law) for breach of duty to the corporation and its
shareholders through bylaw provisions, through resolutions of
the board of directors or shareholders, or through agreement
with the agents, or through any of the foregoing means, in
excess of the indemnification otherwise permitted by Section
317 of the California General Corporation Law, subject to the
limits on such excess indemnification set forth in Section 204
of the California General Corporation Law.
Section 3. Repeal or Modification. Any repeal or
modification of the foregoing provisions of this Article IV by
the shareholders of the corporation shall not adversely affect
any right or protection of a director of the corporation
existing at the time of such repeal or modification."
are hereby amended in their entirety to read as follows:
"Section 2. Indemnification of Corporation Agents.
This corporation is authorized to indemnify the directors and
officers of the corporation to the fullest extent permissible
under California law.
"Section 3. Repeal or Modifications. Any repeal or
modification of the foregoing provisions of this Article IV
shall not adversely affect any right of indemnification or
limitation of liability of an agent of this corporation
relating to acts or omissions occurring prior to such repeal
or modification."
3. The foregoing Certificate of Amendment of Articles of Incorporation
has been duly approved by the Board of Directors.
-1-
<PAGE>
4. The foregoing Certificate of Amendment of Articles of Incorporation
has been duly approved by the required vote of shareholders in accordance with
Section 902 of the California Corporations Code. The total number of outstanding
shares of capital stock of the corporation is 16,395,255 shares of Common Stock
and no shares of Preferred Stock. The number of shares voting in favor of the
Certificate of Amendment of Articles of Incorporation equaled or exceeded the
vote required. The percentage vote required was more than 50% of the outstanding
Common Stock.
We further declare under penalty of perjury under the laws of the State
of California that the matters set forth in the Certificate of Amendment of
Articles of Incorporation are true of our own knowledge.
Executed at Milpitas, California this 2nd day of November, 1989.
/s/ Robert H. Swanson, Jr.
---------------------------------------
Robert H. Swanson, Jr., President
/s/ Arthur F. Schneiderman
---------------------------------------
Arthur F. Schneiderman, Secretary
-2-
<PAGE>
CERTIFICATES OF AMENDMENT OF
ARTICLES OF INCORPORATION OF
LINEAR TECHNOLOGY CORPORATION
Robert H. Swanson, Jr. and Arthur F. Schneiderman hereby certify that:
1. They are President and Secretary, respectively, of LINEAR TECHNOLOGY
CORPORATION, a California corporation.
2. The Articles of Incorporation of this corporation are amended to add
the following Article IV:
"IV
Section 1. Limitation of Directors' Liability. The liability of the
directors of the corporation for monetary damages shall be eliminated to the
fullest extent permissible under California law.
Section 2. Indemnification of Corporate Agents. This corporation is
authorized to provide indemnification of agents (as defined in Section 317 of
the California General Corporation Law) for breach of duty to the corporation
and its shareholders through bylaw provisions, through resolution of the board
of directors or shareholders, or through agreement with the agents, or through
any of the foregoing means, in excess of the indemnification otherwise permitted
by Section 317 of the California General Corporation Law, subject to the limits
on such excess indemnification set forth in Section 204 of the California
General Corporation Law.
Section 3. Repeal or Modification. Any repeal or modification of the
foregoing provisions of this Article IV by the shareholders of the corporation
shall not adversely affect any right or protection of a director of the
corporation existing at the time of such repeal or modification."
3. The foregoing Certificate of Amendment of Articles of Incorporation
has been duly approved by the Board of Directors.
4. The foregoing Certificate of Amendment of Articles of Incorporation
has been duly approved by the required vote of shareholders in accordance with
Section 902 of the California Corporations Code. The total number of outstanding
shares of capital stock of the corporation is 16,298,581 shares of Common Stock
and no shares of Preferred Stock. The number of shares voting in favor of the
Certificate of Amendment of Articles of Incorporation equaled or exceeded the
vote required. The percentage vote required was more than 50% of the outstanding
Common Stock.
-1-
<PAGE>
We further declare under penalty of perjury under the laws of the State
of California that the matters set forth in the Certificate of Amendment of
Articles of Incorporation are true of our own knowledge.
Executed at Milpitas, California this 2nd day of November, 1989.
/s/ Robert H. Swanson, Jr.
-----------------------------------------
Robert H. Swanson, Jr. President
/s/ Arthur F. Schneiderman
-----------------------------------------
Arthur F. Schneiderman, Secretary
-2-
<PAGE>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
LINEAR TECHNOLOGY CORPORATION
PAUL COGHLAN and ARTHUR F. SCHNEIDERMAN, certify that:
1. They are the Vice President of Finance and the Secretary,
respectively, of LINEAR TECHNOLOGY CORPORATION, a California corporation.
2. The first paragraph of Article III of the Articles of Incorporation
of this corporation is amended to read as follows:
"This corporation is authorized to issue two classes of shares
of stock to be designated, respectively, "common stock" and
"preferred stock." The number of shares of common stock
authorized is 120,000,000. The number of shares of preferred
stock authorized is 2,000,000. Upon the amendment of this
Article III to read as set forth above in this paragraph, each
outstanding share of common stock shall be divided into two
(2) shares of common stock."
3. The foregoing amendment of the Articles of Incorporation was duly
approved by the Board of Directors at its meeting held on July 25, 1995, at
which a quorum was present and acting throughout.
4. The change which has been made hereby to the Articles of
Incorporation is to effect a two-for-one stock split of the Common Stock.
Pursuant to Section 902(c) of the California Corporations Code, share holder
approval of this amendment is not required.
5. Pursuant to Section 110(c) of the California Corporations Code, the
foregoing amendment of the Articles of Incorporation of this corporation shall
become effective at the close of business on August 11, 1995.
-1-
<PAGE>
6. The undersigned declare under penalty of perjury that the matters
set forth in the foregoing certificate are true of their own knowledge.
Executed at Milpitas, California on July 27, 1995
/s/ Paul Coghlan
---------------------------------------------
Paul Coghlan, Vice President of Finance
/s/ Arthur F. Schneiderman
---------------------------------------------
Arthur F. Schneiderman, Secretary
-2-
EXHIBIT 13.1
LINEAR TECHNOLOGY CORPORATION
QUARTERLY RESULTS AND STOCK MARKET DATA (UNAUDITED)
In thousands, except per share amounts
================================================================================
Fiscal 1995 July 2, Apr. 2, Jan. 1, Oct. 2,
Quarter Ended 1995 1995 1995 1994
- --------------------------------------------------------------------------------
Net sales $76,703 $68,135 $62,103 $58,082
Gross profit 53,205 46,983 42,111 39,461
Net income 25,817 21,805 19,244 17,830
Net income per share 0.34 0.28 0.25 0.24
Cash dividend paid per share 0.035 0.035 0.035 0.030
Stock price range per share:
High 33.62 29.50 24.75 24.62
Low 26.88 23.00 20.00 18.88
Fiscal 1994 July 3, Apr. 3, Jan. 2, Sept. 26,
Quarter Ended 1994 1994 1994 1993
- --------------------------------------------------------------------------------
Net sales $55,804 $51,667 $48,027 $45,040
Gross profit 37,908 34,835 31,314 28,845
Net income 16,703 15,217 13,099 11,808
Net income per share 0.22 0.20 0.17 0.16
Cash dividend paid per share 0.030 0.030 0.030 0.025
Stock price range per share:
High 23.88 24.38 19.38 18.50
Low 19.38 19.00 15.50 14.12
On July 25, 1995, the Company declared a two-for-one split of its common stock
to shareholders of record on August 11, 1995. All share and per share
information have been restated to reflect the stock split.
Fiscal year 1995 had 52 weeks, whereas fiscal year 1994 had 53 weeks with 14
weeks during the quarter ended January 2, 1994.
Net income per share amounts are based on the weighted average common and common
equivalent shares outstanding during the quarter.
The stock activity in the above table is based on the high and low closing bid
prices. These prices represent quotations between dealers without adjustment for
retail markups, markdowns or commissions, and may not represent actual
transactions. The Company's common stock is traded on the Nasdaq National Market
under the symbol LLTC.
At July 2, 1995, there were approximately 789 shareholders of record.
LINEAR TECHNOLOGY CORPORATION
SELECTED FINANCIAL INFORMATION/FIVE-YEAR TREND
In thousands, except per share amounts
================================================================================
FIVE FISCAL YEARS
ENDED JULY 2, 1995 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------
Income statement information
Net sales $265,023 $200,538 $150,867 $119,440 $ 94,152
Net income 84,696 56,827 36,435 25,017 16,939
Net income per share 1.11 0.75 0.49 0.35 0.24
Shares used in the calculation
of net income per share 76,328 75,352 73,814 72,432 70,416
Balance sheet information
Cash and short-term
investments $250,222 $176,801 $127,878 $ 95,278 $ 69,225
Total assets 367,553 268,399 196,492 159,799 120,742
Long-term debt and non-current
capital lease obligations -- -- 259 1,726 6,439
Cash dividends paid per share 0.14 0.12 0.08 -- --
- --------------------------------------------------------------------------------
During fiscal year 1993, the Company initiated a quarterly cash dividend
program. No cash dividends were declared or paid prior to fiscal year 1993.
- --------------------------------------------------------------------------------
E13.1-1
<PAGE>
LINEAR TECHNOLOGY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
The table below states the income statement items as a percentage of net
sales and provides the percentage change of such items compared to the prior
fiscal year amount.
Percentage
Fiscal Year Ended Increase
----------------- ----------
1995 1994
July 2, July 3, June 27, over over
1995 1994 1993 1994 1993
- --------------------------------------------------------------------------------
Net sales 100.0% 100.0% 100.0% 32% 33%
Cost of sales 31.4 33.7 37.8 23 19
- --------------------------------------------------------------------------------
Gross profit 68.6 66.3 62.2 37 42
- --------------------------------------------------------------------------------
Expenses:
Research and development 9.0 9.2 9.8 30 25
Selling, general and administrative 14.3 16.3 17.4 16 24
- --------------------------------------------------------------------------------
23.3 25.5 27.2 21 24
- --------------------------------------------------------------------------------
Operating income 45.3 40.8 35.0 46 55
- --------------------------------------------------------------------------------
Interest income, net ` 3.2 2.3 1.9 85 55
- --------------------------------------------------------------------------------
Income before income taxes 48.5% 43.1% 36.9% 49% 55%
================================================================================
Effective tax rates 34.1% 34.3% 34.6%
- --------------------------------------------------------------------------------
Net sales in fiscal 1995 increased 32% over fiscal 1994 and 76% over fiscal
1993, as net sales were $265.0 million in fiscal 1995 compared to $200.5 million
in fiscal 1994 and $150.9 million in fiscal 1993. The increases in net sales
were due primarily to higher unit sales. The average selling price in fiscal
1995 increased slightly as compared to the average selling prices in fiscal 1994
and 1993. As a percentage of net sales, proprietary product sales were
approximately 92% in fiscal 1995, 89% in fiscal 1994, and 87% in fiscal 1993.
Each of the Company's major geographic markets showed increases in net
sales in fiscal 1995 as compared to the prior fiscal year with the Asia Pacific
and Japan areas experiencing the largest percentage increases. International
sales constituted 49% of net sales in fiscal 1995 as compared to 45% for fiscal
1994 and 40% for fiscal 1993.
Gross profit was $181.8 million, or 68.6% of net sales, in fiscal 1995 as
compared to $132.9 million, or 66.3% of net sales, in fiscal 1994 and $93.8
million, or 62.2% of net sales, in fiscal 1993. The continued increase in gross
profit as a percentage of net sales was due primarily to the absorption of fixed
costs over the increased sales volume and the cost savings from the Singapore
test manufacturing operations, where the majority of incremental sales units
have been tested.
E-13.1-2
<PAGE>
Research and development expenses in fiscal 1995 were $23.9 million, or
9.0% of net sales, compared to $18.4 million, or 9.2% of net sales, in fiscal
1994 and $14.8 million, or 9.8% of net sales, in fiscal 1993. The spending
increases for the past two years were mostly related to increased staffing of
and compensation to design engineering personnel and increased mask sets and
prototype wafer expenses. As a percentage of net sales, research and development
expenses for fiscal 1995 decreased slightly as compared to the percentage for
fiscal 1994 due primarily to support engineering labor increasing at a lower
rate than the increase in net sales.
Selling, general and administrative expenses continued to decline as a
percentage of net sales as fiscal 1995 expenses were $37.9 million, or 14.3% of
net sales, compared to $32.6 million, or 16.3% of net sales, in fiscal 1994 and
$26.3 million, or 17.4% of net sales, in fiscal 1993. As a percentage of net
sales, selling, general and administrative expenses continued to decline due to
proportionally lower labor costs, commissions and other expenses. Selling,
general and administrative staffing increased at a much lower rate than sales
growth and therefore labor costs and other expenses have increased at a lower
percentage than the increase in net sales. Commission expense as a percentage of
net sales decreased in fiscal 1995 due to proportionally lower domestic sales as
most domestic sales are subject to commission whereas, practically all
international sales are commission-free.
Net interest income in fiscal 1995 increased 85% from fiscal 1994, as net
interest income was $8.5 million in fiscal 1995 versus $4.6 million in fiscal
1994 and $3.0 million in fiscal 1993. The increase in interest income for fiscal
1995 as compared to fiscal 1994 was due to the higher interest income earned as
a result of an increase in overall interest rates from the prior year and
additional interest income realized from higher investment balances in fiscal
1995 as compared to fiscal 1994. Net interest income for fiscal 1994 increased
55% over net interest income for fiscal 1993 due to interest earned on the
higher investment balances and lower interest expense due to reductions of debt
obligations. Net interest income in fiscal 1994 was slightly negatively impacted
by a lower average interest rate in fiscal 1994 as compared to the average
interest rate in fiscal 1993.
The Company's effective tax rate in fiscal 1995 was 34.1% as compared to
34.3% in fiscal 1994 and 34.6% in fiscal 1993. The effective tax rate for fiscal
1995 declined from the tax rate in fiscal 1994 primarily due to the increased
activity and, therefore, tax benefits from the Singapore operations, which has
been granted a tax holiday. The lower effective tax rate in fiscal 1994 as
compared to the tax rate in fiscal 1993 was due primarily to the reinstatement
of the federal research and development tax credit.
Net income for fiscal 1995 was $84.7 million ($1.11 per share) versus $56.8
million ($0.75 per share) for fiscal 1994 and $36.4 million ($0.49 per share)
for fiscal 1993. Net income increased in fiscal 1995 primarily due to the
increase in net sales while operating expenses declined as a percentage of net
sales for the factors mentioned above. During fiscal 1995, the Company opened an
assembly plant in Penang, Malaysia which resulted in a significant increase in
the volume of parts assembled internally instead of at subcontractors.
Consequently, net sales per employee for fiscal 1995 declined slightly from
fiscal 1994 due to the added assembly employees. However, net income per
employee increased from $57 thousand in fiscal 1994 to $63 thousand in fiscal
1995.
Factors Affecting Future Operating Results
Past performance of the Company may not be a good indicator of future
performance due to factors affecting the Company, its competitors, the
semiconductor industry and the overall economy. The semiconductor industry is
characterized by rapid technological change, price erosion, cyclical market
patterns, occasional shortages of materials, capacity constraints, variation in
manufacturing efficiencies and significant expenditures for capital equipment
and product development. Furthermore, new product introductions and patent
protection of existing products are critical factors for future sales growth and
sustained profitability.
Although the Company believes that it has the product lines, manufacturing
facilities and technical and financial resources for its current operations,
sales and profitability can be significantly affected by the above and other
factors. Additionally, the Company's common stock could be subject to
significant price volatility should sales and/or earnings fail to meet
expectations of the investment community.
E13.1-3
<PAGE>
Liquidity and Capital Resources
During fiscal 1995, the Company increased its cash and short-term
investments by $73.4 million to a total of $250.2 million at July 2, 1995. The
Company achieved this increase in cash while making significant capital
expenditures for future growth and increasing its dividends to shareholders. At
the end of fiscal 1995, working capital was $260.9 million and the Company had
no long-term debt.
The Company's operations continue to be its main source of cash. Net income
for fiscal 1995 increased 49% over net income for fiscal 1994 as net income was
$84.7 million in fiscal 1995 compared to $56.8 million in fiscal 1994.
Additionally, depreciation and amortization expense, a non-cash expense, was
$8.6 million in fiscal 1995 versus $6.3 million in fiscal 1994.
The proceeds and tax benefits from common stock issued under stock option
plans totaled $16.3 million in fiscal 1995 as compared to $13.7 million in
fiscal 1994. Although the number of shares issued under employee stock plans
declined from fiscal 1994 to fiscal 1995, the proceeds increased by $1.6 million
due to higher average exercise and purchase prices. Generally, when an employee
exercises a nonstatuatory stock option under the Company's option plans, the
gain that an employee receives is tax deductible to the Company. Due to the
increase in the market value of the Company's common stock in fiscal 1995, the
tax benefit from the exercise of stock options realized by the Company was
approximately $1.0 million higher in fiscal 1995 as compared to that in fiscal
1994.
The Company purchased $22.1 million in capital assets in fiscal 1995 which
brings the total spending for buildings and equipment to $38.3 million over the
past two fiscal years. During fiscal 1995, the Company spent approximately $1.7
million for wafer fabrication equipment at its Milpitas facility. In fiscal
1995, the Company commenced construction of a wafer fabrication plant in Camas,
Washington. The initial investment in the project, including equipment, is
estimated at approximately $35-40 million of which approximately $1 million was
spent in fiscal 1995. Manufacturing production is scheduled to begin in calendar
1996.
During fiscal 1995, the Company opened its new assembly facility in Penang,
Malaysia. Total cost for plant construction and equipment for the Penang
facility over the past two years was approximately $15 million, of which $13.4
million was spent in fiscal 1995.
The Company continues to expand its test and back-end capacity at its
Singapore facility. During fiscal 1995, the Company added $3.5 million in
equipment and facility improvements to the Singapore plant. Over the past two
years, the Company has spent approximately $11 million plant construction and
equipment for its Singapore manufacturing facility.
Cash dividends of $9.8 million, or $0.14 per share, were paid by the
Company in fiscal 1995 as compared to $8.3 million, or $0.12 per share, in
fiscal 1994. In July 1995, the Company's Board of Directors announced that the
quarterly cash dividend was increased to $0.04 per share. Future dividends will
be based on quarterly financial performance.
Historically, the Company has satisfied its liquidity needs through cash
generated from operations, the placement of equity securities and the
utilization of lease financing for capital equipment and facilities. Given its
strong financial condition and performance, the Company's near-term plan is to
primarily finance its capital needs internally.
E13.1-4
<PAGE>
LINEAR TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
In thousands, except per share amounts
================================================================================
THREE YEARS ENDED JULY 2, 1995 1995 1994 1993
- --------------------------------------------------------------------------------
Net sales $265,023 $200,538 $150,867
Cost of sales 83,263 67,636 57,036
- --------------------------------------------------------------------------------
Gross profit 181,760 132,902 93,831
- --------------------------------------------------------------------------------
Expenses:
Research and development 23,931 18,394 14,773
Selling, general and administrative 37,867 32,612 26,313
- --------------------------------------------------------------------------------
61,798 51,006 41,086
- --------------------------------------------------------------------------------
Operating income 119,962 81,896 52,745
- --------------------------------------------------------------------------------
Interest income, net 8,488 4,599 2,970
- --------------------------------------------------------------------------------
Income before income taxes 128,450 86,495 55,715
- --------------------------------------------------------------------------------
Provision for income taxes 43,754 29,668 19,280
- --------------------------------------------------------------------------------
Net income $ 84,696 $ 56,827 $ 36,435
================================================================================
Net income per share $ 1.11 $ 0.75 $ 0.49
Shares used in the calculation of net income
per share 76,328 75,352 73,814
- --------------------------------------------------------------------------------
See accompanying notes.
E13.1-5
<PAGE>
LINEAR TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
In thousands, except share amounts
================================================================================
JULY 2, 1995 AND JULY 3, 1994 1995 1994
- --------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 48,146 $ 39,950
Short-term investments 202,076 136,851
Accounts receivable, net of allowance for
doubtful accounts of $728 ($550 in 1994) 29,770 26,517
Inventories:
Raw materials 1,270 1,315
Work-in-process 4,726 6,233
Finished goods 3,723 2,468
- --------------------------------------------------------------------------------
Total inventories 9,719 10,016
Deferred tax assets 20,608 14,691
Prepaid expenses and other current assets 6,432 3,101
- --------------------------------------------------------------------------------
Total current assets 316,751 231,126
- --------------------------------------------------------------------------------
Property, plant and equipment, at cost:
Land, building and improvements 26,978 21,530
Manufacturing and test equipment 65,235 50,532
Office furniture and equipment 2,277 1,952
- --------------------------------------------------------------------------------
94,490 74,014
- --------------------------------------------------------------------------------
Accumulated depreciation and amortization (43,688) (36,741)
- --------------------------------------------------------------------------------
Net property, plant and equipment 50,802 37,273
- --------------------------------------------------------------------------------
$367,553 $268,399
================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 6,545 $ 5,255
Accrued payroll and related benefits 14,841 11,202
Deferred income on shipments to distributors 17,227 12,165
Income taxes payable 10,178 8,027
Other accrued liabilities 7,037 6,272
- --------------------------------------------------------------------------------
Total current liabilities 55,828 42,921
- --------------------------------------------------------------------------------
Deferred tax liabilities 3,195 2,003
Commitments
Shareholders' equity:
Preferred stock, no par value, 2,000,000 shares
authorized, none issued or outstanding -- --
Common stock, no par value, 120,000,000 shares
authorized; 73,586,292 shares issued and
outstanding (72,616,826 shares in 1994) 100,939 84,979
Retained earnings 207,591 138,496
- --------------------------------------------------------------------------------
Total shareholders' equity 308,530 223,475
- --------------------------------------------------------------------------------
$367,553 $268,399
================================================================================
See accompanying notes.
E13.1-6
<PAGE>
LINEAR TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
In thousands
================================================================================
THREE YEARS ENDED JULY 2, 1995 1995 1994 1993
================================================================================
Cash flow from operating activities:
Net income $ 84,696 $ 56,827 $ 36,435
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 8,563 6,339 5,806
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (3,253) (6,511) (287)
Decrease (increase) in inventories 297 (1,640) (455)
Decrease (increase) in deferred tax assets (5,917) (4,283) (731)
Decrease (increase) in prepaid expenses
and other current assets (3,331) (646) (802)
Increase (decrease) in accounts payable,
payroll and other accrued liabilities 5,694 5,685 2,380
Tax benefit from stock option transactions 8,734 7,775 4,654
Increase (decrease) in deferred income
on shipments to distributors 5,062 4,138 1,189
Increase (decrease) in income taxes payable 2,151 1,934 (1,465)
Increase (decrease) in deferred tax
liabilities 1,192 657 318
- --------------------------------------------------------------------------------
Cash provided by operating activities 103,888 70,275 47,042
- --------------------------------------------------------------------------------
Cash flow from investing activities:
Purchase of short-term investments (146,832) (119,044) (158,299)
Proceeds from sales and maturities of short-term
investments 81,607 85,190 122,823
Purchase of property, plant and equipment (22,092) (16,243) (7,624)
- --------------------------------------------------------------------------------
Cash used in investing activities (87,317) (50,097) (43,100)
- --------------------------------------------------------------------------------
Cash flow from financing activities:
Payments on long-term debt and capital lease
obligations -- (1,467) (4,713)
Issuance of common shares under employee stock
plans 7,600 5,962 4,412
Purchase of common stock (6,139) (1,336) (1,206)
Payment of cash dividends (9,836) (8,268) (5,311)
- --------------------------------------------------------------------------------
Cash used in financing activities (8,375) (5,109) (6,818)
- --------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 8,196 15,069 (2,876)
Cash and cash equivalents, beginning of period 39,950 24,881 27,757
- --------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 48,146 $ 39,950 $ 24,881
================================================================================
Supplemental disclosures of cash flow information:
Cash paid during the fiscal year
for income taxes $ 37,594 $ 23,585 $ 16,504
- --------------------------------------------------------------------------------
See accompanying notes.
E13.1-7
<PAGE>
<TABLE>
LINEAR TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
In thousands
==========================================================================================================
<CAPTION>
Total
Common Stock Retained Shareholders'
THREE YEARS ENDED JULY 2, 1995 Shares Amount Earnings Equity
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at June 28, 1992 70,021 $ 62,352 $ 61,179 $123,531
Issuance of common stock for cash under
employee stock option and stock
purchase plans 1,437 4,412 -- 4,412
Tax benefit from stock option transactions -- 4,654 -- 4,654
Purchase and retirement of common stock (110) (104) (1,102) (1,206)
Net income -- -- 36,435 36,435
Cash dividend - $0.08 per share -- -- (5,311) (5,311)
- ----------------------------------------------------------------------------------------------------------
Balance at June 27, 1993 71,348 71,314 91,201 162,515
Issuance of common stock for cash under
employee stock option and stock
purchase plans 1,335 5,962 -- 5,962
Tax benefit from stock option transactions -- 7,775 -- 7,775
Purchase and retirement of common stock (66) (72) (1,264) (1,336)
Net income -- -- 56,827 56,827
Cash dividend - $0.12 per share -- -- (8,268) (8,268)
- ----------------------------------------------------------------------------------------------------------
Balance at July 3, 1994 72,617 84,979 138,496 223,475
Issuance of common stock for cash under
employee stock option and stock
purchase plans 1,289 7,600 -- 7,600
Tax benefit from stock option transactions -- 8,734 -- 8,734
Purchase and retirement of common stock (320) (374) (5,765) (6,139)
Net income -- -- 84,696 84,696
Cash dividend - $0.14 per share -- -- (9,836) (9,836)
- ----------------------------------------------------------------------------------------------------------
Balance at July 2, 1995 73,586 $100,939 $207,591 $308,530
==========================================================================================================
See accompanying notes.
</TABLE>
E13.1-8
<PAGE>
LINEAR TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED JULY 2, 1995
1. Description of Business and Significant Accounting Policies
Description of Business and Export Sales
Linear Technology Corporation (the Company) designs, manufactures and
markets high performance linear integrated circuits. Applications for the
Company's products include telecommunications, notebook and desk top computers,
video/multimedia, computer peripherals, cellular telephones, industrial,
automotive and process controls, network and factory automation products and
satellites.
Export sales by geographic area were as follows:
In thousands 1995 1994 1993
- -------------------------------------------------------
Europe $58,243 $48,099 $36,282
Japan 26,371 15,593 10,842
Asia Pacific and other 44,870 27,053 13,854
- -------------------------------------------------------
Total export sales $129,484 $90,745 $60,978
=======================================================
Basis of Presentation
The accompanying consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiaries after elimination of all
significant intercompany accounts and transactions. The Company's fiscal year
ends on the Sunday nearest June 30. Fiscal 1995 and 1993 were 52 week periods,
whereas fiscal 1994 was a 53 week period.
Accounts denominated in foreign currencies have been translated using
the U.S. dollar as the functional currency. Foreign currency gains and losses,
which were immaterial for fiscal 1995, 1994 and 1993, are reflected in income
currently.
Cash Equivalents and Short-Term Investments
Cash equivalents are highly liquid investments with a maturity of three
months or less. Investments with a maturity of over three months at the time of
purchase are classified as short-term investments.
Effective the beginning of fiscal 1995, the Company adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." In accordance with the Statement, prior years
financial statements have not been restated to reflect the change in accounting
principle. The effect of adopting the Statement was not material to the
Company's shareholders' equity.
At the time of investment purchase and each balance sheet date, the
Company determines the appropriate classification of its investments in debt and
equity securities. As of July 2, 1995, all of the Company's investments in debt
securities were classified as available-for-sale which means that although the
Company principally holds securities until maturity, they may be sold under
certain circumstances. The debt securities were carried at amortized cost which
approximates fair market value. Realized gains and losses for the fiscal year
ended July 2, 1995 were not significant. At July 2, 1995, the Company had no
investments in equity securities.
E13.1-9
<PAGE>
The estimated fair values of cash equivalents and short-term investments
are based on quoted market prices. The following is a summary of investments as
of July 2, 1995:
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
In thousands Cost Gains Losses Value
================================================================================
Cash equivalents:
Money market funds and floating
rate notes $ 26,952 4 $ -- $ 26,956
Municipal bonds 12,368 -- 3 12,365
Other debt securities 4,934 4 -- 4,938
- --------------------------------------------------------------------------------
44,254 8 3 44,259
- --------------------------------------------------------------------------------
Short-term investments:
Municipal bonds 114,818 217 425 114,610
U.S. Treasury securities and
obligations of U.S.
government agencies 85,306 174 353 85,127
Other debt securities 1,952 28 -- 1,980
- --------------------------------------------------------------------------------
202,076 419 778 201,717
- --------------------------------------------------------------------------------
Total cash equivalents and
short-term investments $246,330 $427 $781 $245,976
================================================================================
The amortized cost and estimated fair value of investments in debt
securities at July 2, 1995, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because the issuers of the
securities may have the right to repay obligations without prepayment penalties.
Amortized Estimated
In thousands Cost Fair Value
- ---------------------------------------------------------------
Due in 1 year or less $188,441 $187,989
Due in 1-3 years 57,889 57,987
- ---------------------------------------------------------------
Total cash equivalents and
short-term investments $246,330 $245,976
===============================================================
Concentrations of Credit Risk
The Company's investment policy restricts investments to high credit
quality investments with a maturity of three years or less and limits the amount
invested with any one issuer. Concentrations of credit risk with respect to
accounts receivable are generally not significant due to the diversity of the
Company's customers and geographic sales areas. The Company performs ongoing
credit evaluations of its customers' financial condition and requires
collateral, primarily letters of credit, as deemed necessary.
In fiscal 1995, sales to two of the Company's domestic distributors
represented 13% and 10% of net sales for the fiscal year. In fiscal 1994, one
domestic distributor accounted for 12% of net sales. Distributors are not end
customers, but rather serve as a channel of sale to many end users of the
Company's products. No other distributor or customer accounted for 10% or more
of net sales for fiscal 1995, 1994 or 1993.
Inventories
Inventories are stated at the lower of standard cost, which approximates
actual cost determined on a first-in, first-out basis, or market.
Property, Plant and Equipment
Depreciation and amortization are provided using the straight-line
method over the estimated useful lives of the assets (3-7 years for equipment
and 10-30 years for buildings and building improvements). Leasehold improvements
are amortized over the shorter of the asset's useful life or the term of the
lease.
E13.1-10
<PAGE>
Deferred Income on Shipments to Distributors
The Company sells to domestic distributors under agreements allowing
price protection and right of return on merchandise unsold by the distributors.
Because of the uncertainty associated with pricing concessions and future
returns, the Company defers recognition of such sales and profits in its
financial statements until the merchandise is sold by the domestic distributors.
The Company estimates international distributor returns and defers a portion of
international distributor sales and profits based on these estimated returns.
Income Taxes
Effective the beginning of fiscal 1994, the Company changed its method
of accounting for income taxes from the deferred method in accordance with APB
Opinion No. 11 to the liability method required by Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." As permitted under
the new rules, prior years' financial statements have not been restated. The
cumulative effect of adopting the Statement and the effect of the Statement on
the results of operations were not material.
Common Stock
In July 1995, the Company's Board of Directors declared a two-for-one
split of the Company's common stock for shareholders of record as of August 11,
1995. All share and per share information have been restated to reflect the
stock split.
Net Income per Share
Net income per share is based upon the weighted average number of shares
of common stock outstanding and common equivalent shares, if dilutive.
Reclassifications
Certain fiscal 1994 and 1993 amounts have been reclassified to conform
with the fiscal 1995 presentation.
2. Lease Commitments
The Company leases certain of its facilities under operating leases,
some of which have options to extend the lease period. In addition, the Company
has entered into long-term land leases for the sites of its Singapore and
Malaysia manufacturing facilities.
At July 2, 1995, the future minimum lease payments under noncancelable
operating leases having an initial term in excess of one year were as follows:
fiscal 1996: $1,481,000; fiscal 1997: $900,000; fiscal 1998: $565,000; fiscal
1999: $535,000; fiscal 2000: $538,000 and thereafter: $9,152,000.
Total rent expense under operating leases was approximately $1,928,000,
$1,701,000 and $1,490,000 in fiscal 1995, 1994 and 1993, respectively.
E13.1-11
<PAGE>
3. Employee Benefit Plans
Stock Option Plans
The Company established stock option plans in 1981 and 1988 under which
options to purchase shares of the Company's common stock may be granted to
employees and directors at a price no less than the fair market value on the
date of the grant, as determined by the Board of Directors. The 1981 plan has
expired and, therefore, no additional shares may be granted under this plan. The
1988 plan shall continue in effect for a term of ten years, unless terminated by
the Board of Directors. The authorized number of shares available for grant
under the 1988 plan was increased by 4,000,000 during fiscal 1995. At July 2,
1995, the total authorized number of shares under both plans was 30,500,000.
Options become exercisable over a five-year period (generally 10% every
six months). All options expire ten years after the date of the grant.
Activity during fiscal 1993, 1994 and 1995 was as follows:
Outstanding options, June 28, 1992 7,942,640
Granted 1,521,600
Canceled (266,000)
Exercised (option price range per share: $0.38 to $9.38) (1,315,682)
- ----------------------------------------------------------------------
Outstanding options, June 27, 1993 7,882,558
Granted 2,632,000
Canceled (207,400)
Exercised (option price range per share: $0.38 to $17.38) (1,228,446)
- ----------------------------------------------------------------------
Outstanding options, July 3, 1994 9,078,712
Granted 1,926,000
Canceled (236,300)
Exercised (option price range per share: $0.38 to $22.50) (1,211,606)
- ----------------------------------------------------------------------
Outstanding options, July 2, 1995 9,556,806
======================================================================
At July 2, 1995:
Shares exercisable (4,068,832 at July 3, 1994) 4,624,206
Shares available for grant (2,313,480 at July 3, 1994) 4,615,780
Option price range per share:
Shares outstanding $0.96 - $28.88
Shares exercisable $0.96 - $24.12
- ----------------------------------------------------------------------
Stock Purchase Plan
The Company's stock purchase plan permits eligible employees to purchase
common stock through payroll deductions at the lower of 85% of the fair market
value of common stock at the beginning or the end of each six month offering
period. The offering periods commence on approximately May 1 and November 1 of
each year. The shares reserved for issuance under this plan totaled 1,600,000 at
July 2, 1995. Through July 2, 1995, 1,415,246 shares had been issued under this
plan. During fiscal 1995, 77,860 shares were issued at an average price of
$20.35 per share pursuant to this plan.
Retirement Plan
The Company has established a 401(k) retirement plan for its qualified
U.S. employees. Profit sharing contributions made by the Company to this plan
were $3,003,000, $1,801,000 and $541,000 for fiscal 1995, 1994 and 1993,
respectively.
E13.1-12
<PAGE>
4. Income Taxes
The components of income before income taxes are as follows:
In thousands 1995 1994 1993
- -------------------------------------------------------------------------------
United States operations $116,905 $80,174 $51,352
Foreign operations 11,545 6,321 4,363
- -------------------------------------------------------------------------------
$128,450 $86,495 $55,715
===============================================================================
The provision for income taxes consists of the following:
Deferred
Liability Method Method
--------------------- --------
In thousands 1995 1994 1993
- -------------------------------------------------------------------------------
United States federal:
Current $39,924 $27,712 $16,195
Deferred (4,222) (3,370) (531)
- -------------------------------------------------------------------------------
35,702 24,342 15,664
- -------------------------------------------------------------------------------
State:
Current 8,132 5,500 3,322
Deferred (503) (256) 118
- -------------------------------------------------------------------------------
7,629 5,244 3,440
- -------------------------------------------------------------------------------
Foreign-Current 423 82 176
- -------------------------------------------------------------------------------
$43,754 $29,668 $19,280
===============================================================================
Actual current tax liabilities are lower than the amounts reflected
above by the tax benefit from stock option activity of $8,734,000, $7,775,000
and $4,654,000 for fiscal 1995, 1994 and 1993, respectively. The tax benefit
from stock option activity is recorded as a reduction in current income taxes
payable and an increase in common stock.
The provision for income taxes reconciles to the amount computed by
applying the statutory U.S. federal rate at 35% for fiscal 1995 and 1994 (34%
for fiscal 1993) to income before income taxes as follows:
Deferred
Liability Method Method
--------------------- --------
In thousands 1995 1994 1993
- -------------------------------------------------------------------------------
Tax at U.S. statutory rate $44,958 $30,273 $18,943
State income taxes, net of federal benefit 4,959 3,409 2,270
Research and development credit (819) (644) --
Earnings of foreign subsidiaries subject
to lower rates (3,853) (1,294) (833)
Tax exempt interest income (1,525) (1,050) (690)
Other 34 (1,026) (410)
- -------------------------------------------------------------------------------
$43,754 $29,668 $19,280
===============================================================================
E13.1-13
<PAGE>
In accordance with the liability method, deferred income taxes reflect
the net tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for
income tax purposes. Significant components of the Company's deferred tax assets
and liabilities recorded in the balance sheet as of July 2, 1995 and July 3,
1994 are as follows:
In thousands 1995 1994
- -----------------------------------------------------------------
Deferred tax assets:
Inventory valuation $ 7,123 $ 4,870
Deferred income 7,167 5,372
State income taxes 4,317 2,885
Other 2,001 1,564
- -----------------------------------------------------------------
Total deferred assets 20,608 14,691
- -----------------------------------------------------------------
Deferred tax liabilities:
Depreciation and amortization 3,195 2,003
- -----------------------------------------------------------------
Net deferred tax assets $17,413 $12,688
=================================================================
During fiscal 1993, in accordance with the deferred tax method, deferred
income tax expense was provided for significant timing differerences. The
principle components of deferred tax expense included $449,000 for deferred
income on shipments to distributors and $249,000 for other items reduced by
$285,000 for depreciation and amortization.
The Company's Singapore subsidiary has been granted a six year tax
holiday, with the opportunity to extend to a seventh year, subject to meeting
certain capital expenditure and research and development criteria. The six year
tax holiday expires in September 1995. The Company believes that it has
fulfilled all of the requirements necessary to receive the seventh year of the
tax holiday. The Company's Malaysia subsidiary is expected to be granted a five
year tax holiday.
The impact of the Singapore tax holiday was to increase net income by
approximately $3,624,000 ($0.05 per share) in fiscal 1995, $1,306,000 ($0.02 per
share) in fiscal 1994 and $882,000 ($0.01 per share) in fiscal 1993. The Company
does not provide a residual U.S. tax on the undistributed earnings of its
Singapore and Malaysia subsidiaries, as it is the Company's intention to
permanently invest the earnings overseas. Should these earnings be remitted to
the U.S. parent, additional U.S. taxable income would be $20,488,000.
E13.1-14
<PAGE>
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
The Board of Directors and Shareholders of Linear Technology Corporation
We have audited the accompanying consolidated balance sheets of Linear
Technology Corporation as of July 2, 1995 and July 3, 1994 and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended July 2, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Linear Technology Corporation at July 2, 1995 and July 3, 1994, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended July 2, 1995, in conformity with generally accepted
accounting principles.
Ernst & Young LLP
San Jose, California
July 20, 1995
E13.1-15
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Linear Technology Corporation of our report dated July 20, 1995 included in
the 1995 Annual Report to Shareholders of Linear Technology Corporation.
Our audits also included the financial statement schedule of Linear Technology
Corporation listed in Item 14(d). This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. 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 set forth therein.
We also consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 33-8306, 33-27367, 33-37432, 33-57330 and 33-58745) pertaining to
the 1986 Employee Stock Purchase Plan, 1981 Incentive Stock Option Plan and 1988
Incentive Stock Option Plan of Linear Technology Corporation and in the related
Prospectuses of our report dated July 20, 1995, with respect to the consolidated
financial statements incorporated herein by reference, and our report included
in the preceding paragraph with respect to the financial statement schedule
included in this Annual Report (Form 10-K) of Linear Technology Corporation.
/s/ Ernst & Young LLP
San Jose, California
September 27, 1995
EXHIBIT 21.1
LINEAR TECHNOLOGY CORPORATION
LIST OF SUBSIDIARIES
1. Linear Technology (U.K.) Limited
2. Linear Technology KK
3. Linear Technology GmbH
4. Linear Technology S.A.R.L.
5. Linear Technology PTE
6. Linear Technology Foreign Sales Corporation
7. Linear Technology (Taiwan) Corporation
8. Linear Technology Korea
9. Linear Semiconductor Sdn Bhd
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