<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[NO FEE REQUIRED]
For the transition period from to
-------------- --
COMMISSION FILE NUMBER 0-3698
SILICONIX INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 94-1527868
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
2201 LAURELWOOD ROAD
SANTA CLARA, CALIFORNIA 95054
(Address of principal executive offices)
(408) 988-8000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $0.01 PAR VALUE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. [ ]
The aggregate market value of voting stock held by nonaffiliates is
$64,800,000, based upon the closing price for the registrant's Common Stock on
March 19, 1996 ($34.00).
The number of shares of the registrant's Common Stock, $0.01 par value,
outstanding at March 19, 1996 was 9,959,680.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Siliconix incorporated 1995 Annual Report to Shareholders:
Parts I, II and IV.
2. Portions of the definitive Proxy Statement dated April 15, 1996 to be filed
with the Securities and Exchange Commission on or about April 15, 1996,
pursuant to Section 14 of the Securities Exchange Act of 1934, in
connection with the 1996 Annual Meeting of Shareholders of Siliconix
incorporated: Part III.
1
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PART I
ITEM 1. BUSINESS
GENERAL
Siliconix designs, markets, and manufactures power and analog semiconductor
products. The Company focuses on technologies and products for the computer,
data storage, communications, and automotive markets; additionally, many of the
Company's products are also used in instrumentation, industrial, and hi-rel
(military) applications.
Founded in 1962, in the past decade Siliconix made a deliberate and
successful transition from serving broad-based industrial and hi-rel markets to
high-volume commercial business. Building strong customer relationships in the
computer, hard disk drive, and communications markets, Siliconix used its
technology and applications expertise to develop value-added products for power
conversion, power interface, and motor control. Today, these markets exhibit
design cycles as short as a few months and product life cycles as short as six
to twelve months, thus creating numerous new opportunities for the Company. The
automotive market, which is also a key segment for the Company, exhibits very
long design cycles, sometimes as much as four or five years, and product life
cycles as long or longer. Participation in both types of businesses helps the
company balance growth opportunities with research and development investments
required to maintain technology leadership.
PRODUCTS
All of the analog and power products produced by the Company can be divided
into two general classes: discrete devices and integrated circuits (ICs).
Discrete devices are active components that generate, control, regulate,
amplify, or switch electronic signals or energy. They must be interconnected
with other components (E.G., resistors, capacitors, inductors, etc.) to create
an electronic circuit. ICs consist of a number of active and passive
components, interconnected on a single chip, that are intended to perform a
specific function.
The Company's discrete devices include small-signal field-effect transistors
(MOSFETs, JFETs, and DMOS FETs), designed to handle less than one watt of power,
and power MOSFETs, designed to handle more than one watt.
Power MOSFETs are the Company's fastest growing products in terms of sales.
In this product line, Siliconix has focused on low-voltage products that are
prevalent in battery-operated products (E.G., notebook computers and cellular
phones) and in automotive systems. Siliconix has maintained technology
leadership in low-voltage surface-mount power MOSFETs through both silicon
technologies and product packaging. Advanced silicon process technologies, such
as the Company's "Trench" technology, offer very high cell densities and low
device on-resistance. These process technologies have been coupled with
innovative packaging techniques to create surface-mount product families, such
as LITTLE FOOT-Registered Trademark- and LITE FOOT-Registered Trademark- power
MOSFETs, that provide customers with size and performance benefits as well as
manufacturing compatibility with digital integrated circuits.
In the small-signal transistor area, Siliconix is among the market leaders,
offering technologies that range from very mature product lines (E.G., JFETs),
which remain critical for some applications, to proprietary processes, such as
the Company's lateral DMOS process, that offer performance advantages over
competitors' similar product lines.
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Siliconix integrated circuits include power conversion and interface ICs,
motor control ICs, and signal processing ICs. The Company's power conversion
and interface ICs are based on low-voltage mixed-signal silicon processes that
offer customers higher frequencies and greater efficiencies than competitive
products. They are used in applications where an input voltage from a battery
or other supply source must be switched or converted to a level that is
compatible with logic signals used by microprocessors and other digital
components in the system. The Company's motor control ICs are used to control
motion in data storage applications (E.G., optical and hard disk drives) and to
control the speed of small motors in office equipment, such as copy machines.
The signal processing ICs supplied by Siliconix include analog switches and
multiplexers, and bus interface ICs. The analog switches and multiplexers are
primarily used in instrumentation and industrial equipment that receives and/or
outputs real-world analog signals. The Company's bus interface ICs are designed
for automotive applications, such as diagnostic equipment and multiplex systems.
The following table shows net sales and the percentage of the Company's net
sales attributable to the product categories for the periods indicated.
<TABLE>
<CAPTION>
Years Ended December 31
-----------------------
(dollars in thousands) 1995 1994 1993
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Integrated Circuits $ 64,179 26% $ 52,911 27% $ 35,642 21%
Discrete Devices,
LITTLE FOOT and
LITE FOOT 186,112 74% 143,542 73% 134,608 79%
Other 0 0% 0 0% 32 --%
-------- --- -------- --- -------- ---
$250,291 100% $196,453 100% $170,282 100%
</TABLE>
MANUFACTURING
Siliconix performs all of its wafer fabrication at its Santa Clara,
California manufacturing headquarters, where the Company maintains both a
conventional four-inch wafer fab and a Class 1 (clean room classification)
six-inch wafer fab. The four-inch wafer facility is used for the fabrication of
analog integrated circuits and low-power discrete products. The six-inch wafer
facility enables the fabrication of advanced power devices. Assembly and
testing of the Company's products are performed in Company facilities in Taiwan
and Shanghai, China, and by subcontractors in the Philippines, India, Taiwan,
The People's Republic of China, and Italy. The Shanghai facility is jointly
owned by Siliconix and the Shanghai Institute of Metallurgy. All of the
Company's manufacturing sites use Statistical Process Control-based methods of
total quality control and have ISO 9000 certification.
In 1995, the Company finalized plans to transfer the four-inch fabrication
production from Santa Clara to a third party foundry in Asia. It is anticipated
that substantially all of the continuing activities will be transferred by March
1997.
Raw materials used by the Company include single-crystal silicon wafers,
chemicals, gases, metal wire, and ceramic, plastic, and glass-to-metal packages.
Although these materials are generally available from two or more sources, the
industry has experienced difficulties in obtaining supplies of some raw
materials from time to time; such difficulties in the future could adversely
affect the Company's operations.
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Government regulations impose various environmental controls on the discharge
of certain chemicals and gases used in the manufacturing process. The Company
believes that its activities substantially conform to present and anticipated
regulations and is constantly upgrading its Santa Clara facility to ensure
continued compliance with such regulations. In 1990, the Company reached a
settlement for cleanup of soil and ground water at a site the Company occupied
prior to 1972, with the current owner of that site, and settled a lawsuit
against its insurance carriers in 1992 and 1993 with respect to this matter.
The Company also established a remedial activity to remove soil and groundwater
contamination at its Santa Clara site in 1990. For details on these matters,
see Item 3, Legal Proceedings. While the Company has experienced only limited
effects on its operations from environmental regulations, there can be no
assurance that changes in such regulations will not impose the need for
additional capital equipment or other requirements.
SALES
In early 1992, the semiconductor division of the Daimler-Benz
Microelectronics Group, then an informal consortium consisting of Siliconix,
Telefunken Semiconductors, Matra MHS, Dialog Semiconductor, and Eurosil,
concluded that there were efficiencies to be gained by consolidating further the
roles of the members' sales organizations, thus eliminating the duplication of
many functions. Additionally, it was determined that the unity of these various
organizations would bring greater value to the customers by allowing them to
deal with one entity for all of their purchasing needs. In late 1992 an
implementation plan was begun to consolidate the sales functions of the members,
and an announcement was made that the new name of the Microelectronics Group
would be "TEMIC." This consolidation of the sales organizations was completed
in 1993, so that today the Company's products are sold worldwide by the TEMIC
sales organization, which also manages a worldwide network of sales
representatives and distributors. Specific advantages to Siliconix from this
arrangement are broader market coverage and lower sales costs.
In 1995, to further the goals of TEMIC, four sales companies were
established, TEMIC North America, TEMIC Asia Pacific, TEMIC France and TEMIC
Germany. These companies were established to fulfill all sales responsibilities
for TEMIC within their respective regions. TEMIC North America is a wholly
owned subsidiary of Siliconix incorporated; TEMIC Asia Pacific is a division of
TEMIC (S) Pte. Ltd., a wholly owned subsidiary of Siliconix incorporated; TEMIC
France is a wholly owned subsidiary of Matra MHS; and TEMIC Germany is a
division of Telefunken Semiconductors. The sales companies function as agents
earning a commission as a fixed percentage of sales and perform all sales-
related functions under their legal names.
The following table shows net sales and the percentage of the Company's net
sales on a geographic basis for the periods indicated (dollars in thousands).
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
North America $ 93,613 37% $ 81,383 41% $ 77,645 46%
Europe and Africa 64,897 26% 49,330 25% 40,091 24%
Japan 31,944 13% 19,347 10% 11,008 6%
Asia Pacific 59,837 24% 46,393 24% 41,538 24%
-------- --- ------- --- ------- ---
$250,291 100% $196,453 100% $170,282 100%
</TABLE>
4
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In 1995, one customer accounted for 13% of the Company's net sales. The
Company markets its products in different geographic areas as follows.
NORTH AMERICA: Sales are made by the TEMIC North America field sales force
and manufacturer's representative organizations, the latter being compensated by
commissions only. Area sales managers coordinate these representatives and the
TEMIC North America sales force. TEMIC North America has sales offices in or
near Santa Clara, California; Troy, Michigan; Annandale, New Jersey; and Dallas,
Texas.
Sales not made directly to the original equipment manufacturers are made
through distributors, which currently have approximately 200 locations
throughout the United States and Canada. TEMIC North America provides certain
distributors with contractual protection for their inventory against reductions
in published prices and against product obsolescence.
EUROPE AND AFRICA: Sales are made by the TEMIC France and TEMIC Germany
sales force and manufacturer's representative organizations. As in North
America, sales not made directly to the original equipment manufacturers are
made through distributors, with approximately 30 locations. The distributors
are provided with certain inventory obsolescence and price protections similar
to those granted to domestic distributors.
JAPAN: Sales in Japan are made by TEMIC Asia Pacific.
ASIA PACIFIC: Sales are made in Hong Kong, Korea, Taiwan, The People's
Republic of China and in Southeast Asia, by TEMIC Asia Pacific, headquartered in
Singapore. In these locations, as in the United States, TEMIC Asia Pacific
sells directly to original equipment manufacturers through TEMIC Field Sales
Engineers or through manufacturer's representatives. Direct TEMIC sales agents
and representatives are compensated by commissions only.
Sales in the rest of the world are made through manufacturer's
representatives, stocking representatives and distributors.
For further information, see Note 7 of Notes to the Consolidated Financial
Statements, which is incorporated herein by reference.
ORDER BACKLOG
As of December 31, 1995, the backlog of orders booked was $92.6 million.
The backlog as of December 31, 1994 was $65.7 million. The Company includes
in backlog only open orders which have been released by the customer for
shipment in the calendar year 1996. The Company's customers encounter
uncertain and changing demand for their products. They typically order
products from the Company based on their forecasts. If demand falls below
customers' forecasts, or if customers do not control their inventory
effectively, they may cancel or reschedule their shipments previously ordered
from the Company, in many instances without the payment of any penalty.
Therefore, backlog is not necessarily indicative of sales for any future
period.
COMPETITION
The semiconductor industry is highly competitive. Many of the Company's
competitors are larger companies with greater financial resources and limited
dependency on semiconductor products as their
5
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sole source of sales and earnings. The Company has been able to compete
effectively by being selective in its choice of products and markets, and by
being a technology leader in those areas. Through closely established customer
relationships, the Company acquires in-depth applications know-how for the
markets it serves and develops products that specifically address customer
needs.
RESEARCH AND DEVELOPMENT
Research and development activities are directed toward expanding technology
leadership. Focus is on developing new products and processes, and activities
are ongoing to improve the cycle time from new product development to product
release. Total expenditures were $19.1 million in 1995, $15.8 million in 1994,
and $13.4 million in 1993. Significant effort has been expended on new power
products and ICs where continued rapid market growth is expected. See Note 2 of
Notes to the Consolidated Financial Statements.
PATENTS AND LICENSES
Siliconix protects its technology leadership by securing patents on
proprietary products and processes. As of December 31, 1995, Siliconix owned 88
U.S. patents, covering primarily semiconductor device structures, processes, and
circuitry. Expiration dates for these patents range from 1997 to 2014. An
additional six patents have been allowed but not yet issued. There were also 47
U.S. patent applications pending. The Company believes that, as it increasingly
utilizes these patents in the design and manufacture of its products, its
royalty obligations will decrease significantly. See Note 8 of Notes to the
Consolidated Financial Statements.
EMPLOYEES
In 1988 through 1990, Siliconix reduced the number of employees through
attrition and through the elimination of jobs where efforts were duplicated
or automation has been employed to increase operating efficiency. In the last
three years, the total number of employees has remained relatively flat, with
only key positions focused on target growth areas being added. On December
31, 1995, the Company employed 1,269 people, of whom 860 were employed in the
United States, 393 in East Asia, and 16 in Europe.
There are no collective bargaining agreements between the Company and its
employees, and there have been no work stoppages due to labor difficulties. The
Company considers its relations with its employees to be excellent.
EXECUTIVE OFFICERS
The following sets forth the name, age, offices presently held, business
experience and principal occupation of the Company's executive officers:
<TABLE>
<CAPTION>
Name Office Presently Held
---- ---------------------
<S> <C>
Richard J. Kulle President, Chief Executive Officer and a Director
King Owyang Executive Vice President, Technology and Silicon
Operations
Juergen F. Biehn Vice President and Chief Financial Officer
G. Thomas Simmons Vice President, Marketing
</TABLE>
6
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Mr. Kulle, age 51, joined the Company in June 1987 as the Vice President of
Worldwide Manufacturing and became Executive Vice President in August 1989 and
President, Chief Executive Officer and a director in March 1990. Prior to
joining the Company, he served twenty-one years at General Electric, the last
two years as Manager IC Product Operations of AVLSI products and the previous
years in numerous management positions throughout its semiconductor division.
Mr. Kulle has a B.S. degree in Operations Management Industrial Engineering.
Dr. Owyang, age 50, joined the Company in January 1988 as a divisional Vice
President of Research and Development. He assumed additional responsibility for
Corporate Reliability and Quality Assurance in April 1990. He became Vice
President, Engineering in May 1990 and Executive Vice President, Technology and
Silicon Operations in April 1992. Prior to joining the Company, he served
fourteen years at General Electric Semiconductor Division, the last two years as
Manager of Research and Development Engineering of Power Integrated Circuit
Products. Dr. Owyang holds B.S. and Ph.D. degrees in Physics.
Mr. Biehn, age 54, joined the Company in March 1991 as Vice President and
Corporate Controller. He became Chief Financial Officer in October 1991. For
more than the previous five years, he was employed by AEG Aktiengesellschaft (an
affiliate of AEG Capital Corporation, which owns 80.4% of the outstanding Common
Stock of the Company), a German company with interests in rail systems,
microelectronics, power distribution, large power generating systems and
automation systems, in a variety of positions, most recently Manager
Departmental Director for controlling in the central administration
headquarters. Mr. Biehn holds a German M.A. degree.
Mr. Simmons, age 54, joined the Company in October 1994 as Vice President,
Marketing. Prior to joining the Company, Mr. Simmons served from April 1993 to
October 1994 as Vice President of Marketing and Sales of Fountain Hills Systems,
a company that designs and manufactures ergonomic keyboards, and from March 1990
to April 1993 as President of Simmons & Associates, a management consulting
firm. Prior to that, he held senior management positions at Oki Semiconductor,
Intel, Fairchild, and Motorola. Mr. Simmons holds a B.S. degree in Engineering
and Economics and an M.B.A. as well.
7
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ITEM 2. PROPERTIES.
The Company owns its principal manufacturing plant and general offices which
are located in three two-story buildings totaling 220,100 square feet on a
12-acre site in Santa Clara, California. The Company recently purchased the
building adjacent to this facility, a two-story structure containing 14,500
square feet of general office space. Siliconix Limited currently occupies,
under an agreement with TEMIC UK Limited, a subsidiary of Matra MHS,
approximately 3,000 square feet of space in premises located in Bracknell,
United Kingdom, where the Company's European Headquarters are located. TEMIC
(S) PTE. LTD., also a subsidiary of the Company, occupies approximately 5,800
square feet of administrative space in premises in Singapore, where the
Company's Far East Administrative Headquarters are located. This space is
leased from AEG Aktiengesellschaft (AEG AG), an affiliate of the Company. TEMIC
(S) PTE. LTD. also leases approximately 20,000 square feet of manufacturing and
general office space in Manila from Telefunken Semiconductors, an affiliated
company. Siliconix (Taiwan) Limited, a subsidiary of Siliconix (Hong Kong)
Limited, owns a 50,000-square-foot portion of a building in the Nan-Tse Export
Processing Zone, a suburb of Kaohsiung, Taiwan, which consists of manufacturing
and general office space. TEMIC Japan KK, another subsidiary of the Company,
leases 1,100 square feet of general office space in Tokyo from AEG AG. Shanghai
Simconix Co. Ltd., a joint venture between the Company and the Shanghai
Institute of Metallurgy (the "SIM"), leases 19,200 square feet of manufacturing
and general office space in Shanghai from the SIM.
ITEM 3. LEGAL PROCEEDINGS.
In 1995, the Company was a party to two environmental proceedings. The first
involved property that the Company vacated in 1972. In July 1989, the
California Regional Water Quality Control Board ("RWQCB") issued Cleanup and
Abatement Order No. 89-115 both to the Company and the current owner of the
property. The Order alleged that the Company contaminated both the soil and the
groundwater on the property by the improper disposal of certain chemical
solvents. The RWQCB considered both parties to be liable for the contamination
and sought to have them decontaminate the site to acceptable levels. The
Company subsequently reached a settlement of this matter with the current owner
of the property. The settlement also provided that the current owner will
indemnify the Company and its employees, officers and directors against any
liability that may arise out of any governmental agency actions brought for
environmental cleanup of the subject site, including liability arising out of
RWQCB Order No. 89-115, to which the Company remains nominally subject.
The second proceeding involves the Company's Santa Clara, California
facility, which the Company has owned and occupied since 1969. In February
1989, the RWQCB issued Cleanup and Abatement Order No. 89-27 to the Company.
The Order is based on the discovery of contamination of both the soil and the
groundwater on the property by certain chemical solvents. The Order calls for
the Company to specify and implement interim remedial actions and to evaluate
final remedial alternatives. The RWQCB issued a subsequent order requiring the
Company to complete the decontamination. The Company has begun to comply with
the RWQCB's orders.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
8
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
As of March 19, 1996 there were 920 holders of record of the Company's Common
Stock. Under Delaware law, the Company may pay dividends only from retained
earnings or, if none, from net profits for the current or preceding fiscal year.
The Company has paid no dividends since December 1980 in order to retain the
Company's earnings to fund future growth requirements. No change in such policy
is anticipated in the near future.
A presentation of the highest and lowest "last trade" price for the Company's
Common Stock for each quarterly period during 1994 and 1995 is incorporated by
reference from the Company's 1995 Annual Report to Shareholders, portions of
which are filed as Exhibit 13 hereto. The Company's Common Stock trades on the
Nasdaq Stock Market under the symbol "SILI."
ITEM 6. SELECTED FINANCIAL DATA.
Incorporated by reference from the Company's 1995 Annual Report to
Shareholders, portions of which are filed as Exhibit 13 hereto.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Incorporated by reference from the Company's 1995 Annual Report to
Shareholders, portions of which are filed as Exhibit 13 hereto.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The report of KPMG Peat Marwick LLP on the financial statements for the years
ended December 31, 1995, 1994 and 1993 is found on page 10 of this Annual Report
on Form 10-K. The remainder of the financial statements are incorporated by
reference from the Company's 1995 Annual Report to Shareholders, portions of
which are filed as Exhibit 13 hereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
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Independent Auditors Report
Board of Directors
Siliconix incorporated:
We have audited the accompanying consolidated balance sheets of Siliconix
incorporated as of December 31, 1995 and 1994, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1995. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 financial position of Siliconix
incorporated as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Palo Alto, California
January 23, 1996
10
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The executive officers of the Company are identified in Item 1 of Part I of
this Annual Report on Form 10-K. Identification of the directors of the Company
is incorporated by reference from the "Election of Directors" section of the
Company's definitive Proxy Statement dated April 15, 1996 to be mailed to
shareholders in connection with the 1996 Annual Shareholders Meeting and filed
with the Securities and Exchange Commission on or about April 15, 1996 (the
"Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION.
Incorporated by reference from the "Compensation of Officers and Directors,"
"Compensation and Incentive Plans of the Company," and "Report of Compensation
Committee" sections of the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Incorporated by reference from the "Security Ownership" section of the Proxy
Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Incorporated by reference from the "Certain Transactions" section of the
Proxy Statement.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) DOCUMENTS FILED AS PART OF FORM 10-K
1. FINANCIAL STATEMENTS.
Independent Auditors' Report on the Financial Statements for the Years
Ended December 31, 1995, 1994, and 1993 (see page 10 hereof)
The remainder of the Financial Statements are incorporated by
reference from the Company's 1995 Annual Report to Shareholders,
portions of which are filed as Exhibit 13 hereto.
Consolidated Statements of Operations for the years ended
December 31, 1995, 1994, and 1993
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1995, 1994, and 1993
Consolidated Balance Sheets as of December 31, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994, and 1993
Notes to Consolidated Financial Statements
Quarterly Financial Data (unaudited)
2. FINANCIAL STATEMENT SCHEDULE.
A. Independent Auditors' Report on Financial Statement Schedule
II. Valuation and Qualifying Accounts
All other schedules have been omitted as the required information
is reported or incorporated by reference elsewhere in this Annual
Report or is not applicable.
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3. EXHIBITS
3.1 Restated Certificate of Incorporation(1)
3.2 Bylaws
10.2 One-Year Key Professional Incentive Bonus Plan(1)
10.3 Key Professional Performance Unit Plan
10.5 Amended and Restated License Agreement dated April 10, 1990 between the
Company and International Rectifier Corporation(1)
10.6 Amendment to Amended and Restated License Agreement dated December 21,
1990 between the Company and International Rectifier Corporation(1)
10.10 Pension Contract dated January 26, 1995 between Richard J. Kulle and
TEMIC TELEFUNKEN microelectronic GmbH(2)
13 Portions of Siliconix incorporated 1995 Annual Report to Shareholders
22 Subsidiaries of the Company
- ---------------------
(1)Incorporated by reference from Exhibits to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1990, filed with the SEC on
April 15, 1991.
(2)Incorporated by reference from Exhibits to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994, filed with the SEC on
April 10, 1995.
(b) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K in the last quarter of
the year ended December 31, 1995.
13
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FINANCIAL STATEMENT SCHEDULE
A. Independent Auditors' Report
II. Valuation and Qualifying Accounts
14
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INDEPENDENT AUDITORS REPORT
Board of Directors
Siliconix incorporated:
Under date of January 23, 1996, we reported on the consolidated balance sheets
of Siliconix incorporated as of December 31, 1995 and 1994, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1995, as contained
in the annual report on Form 10-K for the year 1995. In connection with our
audits of the aforementioned consolidated financial statements, we also audited
the related consolidated financial statement schedule listed in 14(a)2. The
consolidated financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this consolidated
financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Palo Alto, California
January 23, 1996
15
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SILICONIX INCORPORATED
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
---------
Balance
At Charged to Balance
Beginning Costs and Charged to At End
of Period Expenses Revenues Deductions of Period
<S> <C> <C> <C> <C> <C>
1993:
Allowance for Doubtful Accounts $ 1,721 $ 380 $ - $ 872 $ 1,229
Allowance for Price Adjustments 446 - 725 436 735
Allowance for Returned Parts and
Distributor Adjustments 3,090 - 4,552* 4,058* 3,584
------- -------- ------- ------- --------
$ 5,257 $ 380 $ 5,277 $ 5,366 $ 5,548
1994:
Allowance for Doubtful Accounts $ 1,229 $ 326 $ - $ 492 $ 1,063
Allowance for Price Adjustments 735 - 1,248 1,081 902
Allowance for Returned Parts and
Distributor Adjustments 3,584 - 11,734 12,126 3,192
-------- ------ ------- ------- -------
$ 5,548 $ 326 $12,982 $13,699 $ 5,157
1995:
Allowance for Doubtful Accounts $1,063 $ 1,075 $ - $ 297 $ 1,841
Allowance for Price Adjustments 902 - 922 1,381 443
Allowance for Returned Parts and
Distributor Adjustments 3,192 - 9,064 9,014 3,242
------- -------- ------- -------- -------
$ 5,157 $ 1,075 $ 9,986 $ 10,692 $ 5,526
</TABLE>
*Certain amounts related to 1993 returns were presented on a net basis as
compared to 1995 and 1994, which are presented on a gross basis.
16
<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 report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: March 28, 1996
SILICONIX INCORPORATED
By: /s/RICHARD J. KULLE
-------------------------------
Richard J. Kulle
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Principal Executive Officer
/s/ RICHARD J. KULLE President, Chief Executive
- ------------------------- Officer and a Director March 28, 1996
Richard J. Kulle
Principal Financial Officer
/s/ JUERGEN BIEHN Vice President and
- ------------------------- Chief Financial Officer March 28, 1996
Juergen Biehn
Principal Accounting Officer
/s/ RAYMOND F. WERNER Corporate Controller March 28, 1996
- -------------------------
Raymond F. Werner
/s/ HANSPETER EBERHARDT Director March 28, 1996
- -------------------------
Hanspeter Eberhardt
/s/ FRANK MAIER Director March 28, 1996
- -------------------------
Frank Maier
/s/ GUSTAV MUEHLSCHLEGEL Director March 28, 1996
- -------------------------
Gustav Muehlschlegel
/s/ ROBERT L. WEHRLI Director March 28, 1996
- -------------------------
Robert L. Wehrli
/s/ PETER WESTRICK Director March 28, 1996
- -------------------------
Peter Westrick
</TABLE>
17
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
-------
<S> <C>
3.1 Restated Certificate of Incorporation(1)
3.2 Bylaws
10.2 One-Year Key Professional Incentive Bonus Plan(1)
10.3 Key Professional Performance Unit Plan
10.5 Amended and Restated License Agreement dated
April 10, 1990 between the Company and International
Rectifier Corporation(1)
10.6 Amendment to Amended and Restated License Agreement
dated December 21, 1990 between the Company and
International Rectifier Corporation(1)
10.10 Pension Contract dated January 26, 1995 between
Richard J. Kulle and TEMIC TELEFUNKEN
microelectronic GmbH(2)
13 Portions of Siliconix incorporated 1995 Annual
Report to Shareholders
22 Subsidiaries of the Company
</TABLE>
- ---------------------
(1) Incorporated by reference from Exhibits to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1990, filed with the SEC on
April 15, 1991.
(2) Incorporated by reference from Exhibits to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994, filed with the SEC on
April 10, 1995.
18
<PAGE>
BYLAWS
OF
SILICONIX INCORPORATED
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE.
The registered office of the corporation in the State of Delaware shall
be in the City of Wilmington, County of New Castle.
Section 2. OTHER OFFICES.
The corporation shall also have offices at such other places, both
within and without the State of Delaware, as the Board of Directors may from
time to time determine or the business of the Corporation may require.
ARTICLE II
CORPORATE SEAL
Section 3. CORPORATE SEAL.
The corporate seal shall consist of a die bearing the name of the
corporation and the inscription "Corporate Seal---Delaware."
ARTICLE III
STOCKHOLDERS' MEETINGS
Section 4. PLACE OF MEETINGS.
Meetings of the stockholders of the corporation shall be held at such
place, either within or without the State of Delaware, as may be designated from
time to time by the Board of Directors.
Section 5. ANNUAL MEETINGS.
The annual meeting of the stockholders of the corporation for the
purpose of election of Directors and for such other business as may lawfully
come before it shall be held on such date and at such time as may be designated
from time to time by the Board of Directors.
1
<PAGE>
Section 6. SPECIAL MEETINGS.
Special meetings of the stockholders of the corporation may be called,
for any purpose or purposes at any time, by the President, the Board of
Directors or any holder or holders of shares entitled to cast no less than 10%
of the votes at such meeting.
Section 7. NOTICE OF MEETINGS.
Except as otherwise provided by law or the Certificate of Incorporation,
written notice of each meeting of stockholders shall be given not less than ten
(10) nor more than sixty (60) days before the date of the meeting to each
stockholder entitled to vote at such meeting, such notice to specify the place,
date and hour and purpose or purposes of the meeting. Notice of the time, place
and purpose of any meeting of stockholders may be waived in writing, signed by
the person entitled to notice thereof, either before or after such meeting, and
will be waived by any stockholder by his attendance thereat in person or by
proxy, except when the stockholder attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Any stockholder so
waiving notice of such meeting shall be bound by the proceedings of any such
meeting in all respects as if due notice thereof had been given. However, notice
shall not be required to be given to any stockholder to whom (i) notice of two
(2) consecutive annual meetings, and all notices of meetings or of the taking of
action by written consent without a meeting, sent to the stockholder during the
period between the two (2) consecutive annual meetings, or (ii) at least two (2)
payments of dividends or interest on securities, sent by first class mail,
during a twelve (12) month period, have been mailed addressed to such person at
his address as shown on the records of the corporation and have been returned
undeliverable. Any such stockholder shall be bound by the proceedings of any
such meeting in all respects as if due notice thereof had been given. If any
such stockholder shall deliver to the Secretary a written notice stating his
current address, the applicable notice requirements shall be reinstated as to
that stockholder.
Section 8. QUORUM.
At all meetings of stockholders, except where otherwise provided by
statute, the Certificate of Incorporation, or by these Bylaws, the presence, in
person or by proxy duly authorized, of the holders of a majority of the
outstanding shares of stock entitled to vote shall constitute a quorum for the
transaction of business. Any shares, the voting of which at such meeting has
been enjoined, or which for any reason cannot be lawfully voted at such meeting,
shall not be counted to determine a quorum at such meeting. In the absence of a
quorum any meeting of stockholders may be adjourned, from time to time, by vote
of the holders of a majority of the shares represented thereat, but no other
business shall be transacted at such meeting. Any meeting at which a quorum is
present may continue to transact business until adjournment notwithstanding the
withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by law, the Certificate of Incorporation or these Bylaws, all
action taken by the holders of a majority of the voting power represented at any
meeting at which a quorum is present shall be valid and binding upon the
corporation.
2
<PAGE>
Section 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS.
Any meeting of stockholders, whether annual or special, may be adjourned
from time to time by the vote of a majority of the shares, the holders of which
are present either in person or by proxy. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting the corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than
thirty (30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 10. VOTING.
For the purpose of determining those stockholders entitled to vote at
any meeting of the stockholders, except as otherwise provided by law, only
persons in whose names shares stand on the stock records of the corporation on
the record date, as provided in Section 12 of these Bylaws, shall be entitled to
vote at any meeting of stockholders. Every person entitled to vote or execute
consents shall have the right to do so either in person or by an agent or agents
authorized by a written proxy executed by such person or his duly authorized
agent, which proxy shall be filed with the Secretary at or before the meeting at
which it is to be used. An agent so appointed need not be a stockholder. No
proxy shall be voted after three (3) years from its date of creation unless the
proxy provides for a longer period. All elections of Directors shall be by
written ballot, unless otherwise provided in the Certificate of Incorporation.
Section 11. JOINT OWNERS OF STOCK.
If shares or other securities having voting power stand of record in the
names of two (2) or more persons, whether fiduciaries, members of a
partnership, joint tenants, tenants in common, tenants by the entirety,
or otherwise, or if two (2) or more persons have the same fiduciary
relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the
instrument or order appointing them or creating the relationship
wherein it is so provided, their acts with respect to voting shall have the
following effect: (i) if only one (1) votes. his act binds all; (ii) if more
than one (1) vote, the act of the majority so voting binds all; or (iii) if more
than one (1) vote, but the vote is evenly split on any particular matter, each
faction may vote the securities in question proportionately, or may apply to the
Delaware Court of Chancery for relief as provided in the General Corporation Law
of Delaware, Section 217(b)(3). If the instrument filed with the Secretary shows
that any such tenancy is held in unequal interests, a majority or even-split for
the purpose of this subsection (iii) shall be a majority or even-split in
interest.
3
<PAGE>
Section 12. LIST OF STOCKHOLDERS.
The Secretary shall prepare and make, at least ten (10) days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at such meeting, arranged in alphabetical order, showing the address of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not specified, at the place where the meeting is
to be held. The list shall be produced and kept at the time and place of meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 13. ACTION WITHOUT MEETING.
Unless otherwise provided in the Certificate of Incorporation, any
action required by statute to be taken at any annual or special meeting of the
stockholders, or any action which may be taken at any annual or special meeting
of the stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
Section 14. ORGANIZATION.
At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, any Vice President, or in the absence of any
such officer, a chairman of the meeting chosen by a majority in interest of the
stockholders entitled to vote, present in person or by proxy, shall act as
chairman. The Secretary, or, in his absence, an Assistant Secretary directed to
do so by the President or the Secretary, shall act as secretary of the meeting.
4
<PAGE>
ARTICLE IV
DIRECTORS
Section 15. NUMBER AND TERM OF OFFICE.
The number of Directors which shall constitute the whole of the Board of
Directors shall be six (6). Except as provided in Section 17, the Directors
shall be elected by the stockholders at their annual meeting in each year and
shall hold office until the next annual meeting and until their successors shall
be duly elected and qualified. Directors need not be stockholders unless so
required by the Certificate of Incorporation. If for any cause the Directors
shall not have been elected at an annual meeting, they may be elected as soon
thereafter as convenient at a special meeting of the stockholders called for
that purpose in the manner provided in these Bylaws.
Section 16. POWERS.
The powers of the corporation shall be exercised, its business conducted
and its property controlled by the Board of Directors, except as may be
otherwise provided by statute or by the Certificate of Incorporation.
Section 17. VACANCIES.
Unless otherwise provided in the Certificate of Incorporation, vacancies
and newly created directorships resulting from any increase in the authorized
number of Directors may be filled by a majority of the Directors then in office,
although less than a quorum, or by a sole remaining Director, and each Director
so elected shall hold office for the unexpired portion of the term of the
Director whose place shall be vacant and until his successor shall have been
duly elected and qualified. A vacancy in the Board of Directors shall be deemed
to exist under this section in the case of the death, removal or resignation of
any Director, or if the stockholders fail at any meeting of stockholders at
which Directors are to be elected (including any meeting referred to in Section
19 below) to elect the number of Directors then constituting the whole Board.
Section 18. RESIGNATION.
Any Director may resign at any time by delivering his written
resignation to the Secretary, such resignation to specify whether it will be
effective at a particular time, upon receipt by the Secretary or at the pleasure
of the Board of Directors. If no such specification is made, it shall be deemed
effective at the pleasure of the Board of Directors. When one or more Directors
shall resign from the Board, effective at a future date, a majority of the
Directors then in office, including those who have so resigned, shall have power
to fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, and each Director so chosen
shall hold office for the unexpired portion of the term of the Director whose
place shall be vacated and until his successor shall have been duly elected and
qualified.
5
<PAGE>
Section 19. REMOVAL.
At a special meeting of stockholders called for the purpose and in the
manner hereinabove provided, the Board of Directors, or any individual Director,
may be removed from office, with or without cause, and a new Director or
Directors elected by a vote of stockholders holding a majority of the
outstanding shares entitled to vote at an election of Directors.
Section 20. MEETINGS.
(a) ANNUAL MEETINGS. The annual meeting of the Board of Directors shall
be held immediately after the annual meeting of stockholders and at the place
where such meeting is held. No notice of annual meeting of the Board of
Directors shall be necessary and such meeting shall be held for the purpose of
electing officers and transacting such other business as may lawfully come
before it.
(b) REGULAR MEETINGS. Unless otherwise restricted by the Certificate of
Incorporation, regular meetings of the Board of Directors shall be held at any
place within or without the State of Delaware which has been designated by
resolution of the Board of Directors or the written consent of all Directors.
(c) SPECIAL MEETINGS. Unless otherwise restricted by the Certificate of
Incorporation, special meetings of the Board of Directors may be held at any
time and place within or without the State of Delaware whenever called by the
President or a majority of the Directors.
(d) TELEPHONE MEETINGS. Any member of the Board of Directors, or of any
committee thereof, may participate in a meeting by means of conference telephone
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, and participation in a meeting by such means
shall constitute presence in person at such meeting.
(e) NOTICE OF MEETINGS. Written notice of the time and place of all
regular and special meetings of the Board of Directors shall be delivered
personally to each Director, or sent to each Director by mail, or by other form
of written communication, at least one (1) day before the date of the meeting.
Notice of any meeting may be waived in writing at any time before or after the
meeting and will be waived by any Director by attendance thereat, except when
the Director attends the meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
6
<PAGE>
(f) WAIVER OF NOTICE. The transaction of all business at any meeting of
the Board of Directors, or any committee thereof, however called or noticed, or
wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum be present and if, either before or after
the meeting, each of the Directors not present shall sign a written waiver of
notice, or a consent to holding such meeting, or an approval of the minutes
thereof. Neither the business to be transacted at, nor the purpose of any
regular or special meeting of the Board of Directors, or any committee thereof,
need be specified in any written waiver of notice. All such waivers, consents or
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
Section 21. QUORUM; VOTING REQUIRED FOR ACTION: ADJOURNMENT.
Except as otherwise required by law, the Certificate of Incorporation or
these Bylaws, a majority of the directors shall constitute a quorum for the
transaction of business at all meetings of the Board of Directors, and the
affirmative vote of a majority of the directors present shall be the act of the
Board of Directors. A meeting at which a quorum is initially present may
continue to transact business, notwithstanding the withdrawal of directors, if
any action taken is approved by at least a majority of the quorum required to
conduct that meeting. However, at any meeting, whether a quorum is present or
otherwise, the directors present may adjourn the meeting, from time to time,
without notice other than announcement at the meeting. At the adjourned meeting,
the Board of Directors may transact any business which might have been
transacted at the original meeting.
Section 22. ACTION WITHOUT MEETING.
Unless otherwise restricted by the Certificate of Incorporation or these
Bylaws, any action required or permitted to be taken at any meeting of the Board
of Directors or of any committee thereof may be taken without a meeting, if all
members of the Board or committee, as the case may be, consent thereto in
writing, and such writing or writings are filed with the minutes of proceedings
of the Board or committee.
Section 23. FEES AND COMPENSATION.
Unless otherwise restricted by the Certificate of Incorporation or these
Bylaws, the Board of Directors shall have the authority to fix the compensation
of directors. Nothing herein contained shall be construed to preclude any
Director from serving the corporation in any other capacity or as an officer
thereof.
7
<PAGE>
Section 24. COMMITTEES.
(a) EXECUTIVE COMMITTEE. The Board of Directors, may by resolution
passed by a majority of the whole Board, appoint an Executive Committee to
consist of one (1) or more members of the Board of Directors. The Executive
Committee, to the extent permitted by law and specifically granted by the Board,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the corporation,
including without limitation, the power to cause the seal of the corporation to
be affixed to all papers which may require it; to declare a dividend; to
authorize the issuance of stock; and to adopt a certificate of ownership and
merger pursuant to Section 253 of the Delaware General Corporation Law. In
addition, to the extent provided by law and authorized by resolution of the
Board providing for the issuance of shares of stock, the Executive Committee may
fix the preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for shares of any other class or classes or
any other series of the same or any other class or classes of stock of the
corporation, or to fix the number of shares of any series of stock or authorize
the increase or decrease of the shares of any series.
(b) OTHER COMMITTEES. The Board of Directors may, by resolution passed
by a majority of the whole Board, from time to time appoint such other
committees as may be permitted by law. Such other committees appointed by the
Board of Directors shall consist of one (1) or more members of the Board of
Directors, and shall have such powers and perform such duties as may be
prescribed by the resolution or resolutions creating such committees, but in no
event shall such committee have the powers denied to the Executive Committee in
these Bylaws.
(c) TERM. The members of all committees of the Board of Directors shall
serve a term coexistent with that of the Board of Directors which shall have
appointed such committee. The Board, subject to the provisions of subsections
(a) or (b) of this Section 24, may at any time increase or decrease the number
of members of a committee or terminate the existence of a committee. The
membership of a committee member shall terminate on the date of his death or
voluntary resignation. The Board may at any time for any reason remove any
individual committee member and the Board may fill any committee vacancy created
by death, resignation, removal or increase in the number of members of the
committee. The Board of Directors may designate one or more Directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee, and, in addition, in the absence or
disqualification of any member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
8
<PAGE>
(d) MEETINGS. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 24 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of
such regular meetings need be given thereafter. Special meetings of any such
committee shall be held at any place which has been designated from time to time
by resolution of such committee or by written consent of all members thereof,
and may be called by any Director who is a member of such committee, upon
written notice to the members of such committee of the time and place of such
special meeting given in the manner provided for the giving of written notice to
members of the Board of Directors of the time and place of special meetings of
the Board of Directors. Notice of any special meeting of any committee may be
waived in writing at any time before or after the meeting and will be waived by
any Director by attendance thereat, except when the Director attends such
special meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. A majority of the authorized number of members of any such
committee shall constitute a quorum for the transaction of business, and the act
of a majority of those present at any meeting at which a quorum is present shall
be the act of such committee.
Section 25. ORGANIZATION.
At every meeting of the Directors, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or if the President is absent, any Vice President, or, in the absence of any
such officer, a chairman of the meeting chosen by a majority of the Directors
present, shall preside over the meeting. The Secretary, or in his absence, an
Assistant Secretary directed to do so by the President or the Secretary, shall
act as secretary of the meeting.
ARTICLE V
OFFICERS
Section 26. OFFICERS DESIGNATED.
The officers of the corporation shall be the Chairman of the Board of
Directors, the President, one or more Vice Presidents, the Secretary and the
Treasurer, all of whom shall be elected at the annual meeting of the Board of
Directors. The Board of Directors may also appoint one or more Assistant
Secretaries, Assistant Treasurers, and such other officers and agents with such
powers and duties as it shall deem necessary. The Board of Directors may assign
such additional titles to one or more of the officers as it shall deem
appropriate. Any one person may hold any number of offices of the corporation at
any one time unless specifically prohibited therefrom by the Certificate of
Incorporation or these Bylaws. The salaries and other compensation of the
officers of the corporation shall be fixed by or in the manner designated by the
Board of Directors.
9
<PAGE>
Section 27. TENURE AND DUTIES OF OFFICERS.
(a) GENERAL. All officers shall hold office at the pleasure of the Board
of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the Board
of Directors may be removed at any time by the Board of Directors. If the office
of any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors.
(b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the
Board of Directors shall perform such duties commonly incident to his office and
shall perform such other duties and have such other powers as the Board of
Directors shall designate from time to time.
(c) DUTIES OF PRESIDENT. The President shall be the chief executive
officer of the corporation and shall, subject to the control of the Board of
Directors, have general supervision, direction, and control of the business and
officers of the corporation. The President shall perform such other duties
commonly incident to his office and shall perform such other duties and have
such other powers as the Board of Directors shall designate from time to time.
(d) DUTIES OF VICE PRESIDENTS. The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform such other duties commonly incident to their office and shall
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(e) DUTIES OF SECRETARY. The Secretary shall attend all meetings of the
stockholders and of the Board of Directors, and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders,
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall keep the seal of the corporation in safe
custody and see that the seal is affixed to all documents authorized to be
executed on behalf of the corporation under its seal. The Secretary shall act as
custodian of the records of the corporation. The Secretary shall keep a record
of stock owned by the corporation in all subsidiary and other companies. The
Secretary shall perform all other duties given him in these Bylaws and shall
perform such other duties commonly incident to his office and shall perform such
other duties and have such other powers as the Board of Directors or the
President or the Vice President-Finance shall designate from time to time. The
President or the Vice President-Finance may direct any Assistant Secretary to
assume and perform the duties of the Secretary in the absence or disability of
the Secretary, and each Assistant Secretary shall perform such other duties
commonly incident to his office and shall perform such other duties and have
such other powers as the Board of Directors or the President or the Vice
President-Finance or the Secretary shall designate from time to time.
10
<PAGE>
(f) DUTIES OF TREASURER. The Treasurer, subject to the order of the
Board of Directors, shall have the custody of all funds and securities of the
corporation. The Treasurer shall perform all other duties commonly incident to
his office and shall perform such other duties and have such other powers as the
Board of Directors or the President or the Vice President-Finance shall
designate from time to time. The President or the Vice President-Finance may
direct any Assistant Treasurer to assume and perform the duties of the Treasurer
in the absence or disability of the Treasurer, and each Assistant Treasurer
shall perform such other duties commonly incident to his office and shall
perform such other duties and have such other powers as the Board of Directors
or the President or the Vice President-Finance or the Treasurer shall designate
from time to time.
Section 28. RESIGNATIONS.
Any officer may resign at any time by giving written notice to the Board
of Directors or to the President or to the Secretary. Any such resignation shall
be effective when received by the person or persons to whom such notice is
given, unless a later time is specified therein, in which event the resignation
shall become effective at such later time. Unless otherwise specified in such
notice, the acceptance of any such resignation shall not be necessary to make it
effective.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND
VOTING OF SECURITIES OWNED BY THE CORPORATION
Section 30. EXECUTION OF CORPORATE INSTRUMENTS.
The Board of Directors may, in its discretion, determine the method and
designate the signatory officer or officers, or other person or persons, to
execute on behalf of the corporation any corporate instrument or document, or to
sign on behalf of the corporation the corporate name without limitation, or to
enter into contracts on behalf of the corporation, except where otherwise
provided by law or these Bylaws, and such execution or signature shall be
binding upon the corporation.
Unless otherwise determined by the Board of Directors or otherwise
permitted or required by law, promissory notes, deeds of trust, mortgages and
other evidences of indebtedness of the corporation, and other corporate
instruments or documents requiring the corporate seal, and certificates of
shares of stock owned by the corporation, shall be executed, signed or endorsed
by the Chairman of the Board of Directors, or the President or any Vice
President, and by the Secretary or any Assistant Secretary. All other
instruments and documents requiring the corporate signature, but not requiring
the corporate seal, may be executed as aforesaid or in such other manner as may
be directed by the Board of Directors.
All checks and drafts drawn on banks or other depositories on funds to
the credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
11
<PAGE>
Section 31. VOTING OF SECURITIES OWNED BY THE CORPORATION.
All stock and other securities of other corporations owned or held by
the corporation for itself, or for other parties in any capacity, shall be
voted, and all proxies with respect thereto shall be executed, by the person
authorized so to do by resolution of the Board of Directors, or, in the absence
of such authorization, by the Chairman of the Board of Directors, the President,
or any Vice President.
ARTICLE VII
SHARES OF STOCK
Section 32. FORM AND EXECUTION OF CERTIFICATES.
Certificates for the shares of stock of the corporation shall be in such
form as is consistent with the Certificate of Incorporation and applicable law.
Every holder of stock in the corporation shall be entitled to have a certificate
signed by or in the name of the corporation by the Chairman or Vice Chairman of
the Board of Directors, or the President or any Vice President and (i) the
Treasurer or Assistant Treasurer or (ii) the Secretary or any Assistant
Secretary, certifying the number of shares owned by him in the corporation. Any
or all of the signatures on the certificate may be a facsimile. Where such
certificate is countersigned by a transfer agent other than the corporation or
its employee, or by a registrar other than the corporation or its employee, any
other signature on the certificate may be a facsimile. In case any officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent, or registrar before such certificate is issued, it may be issued with the
same effect as if he were such officer, transfer agent, or registrar at the date
of issue. Each certificate shall state upon the face or back thereof, in full
or in summary, all of the designations, preferences, limitations, restrictions
on transfer and relative rights of the shares authorized to be issued.
Section 33. LOST CERTIFICATES.
The corporation may issue a new certificate in place of any certificate
or certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen, or destroyed. The
corporation may require, as a condition precedent to the issuance of a new
certificate or certificates, the owner of such lost, stolen, or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require or to give the corporation a surety bond in
such form and amount as it may direct to indemnify it against any claim that may
be made against the corporation (including any expense or liability) with
respect to the certificate alleged to have been lost, stolen, or destroyed.
12
<PAGE>
Section 34. TRANSFERS.
Stock of the corporation shall be transferable in the manner prescribed
by law and in these Bylaws or in any agreement with the shareholder making the
transfer. Transfers of stock shall be made on the books only by the person named
in the certificate or by attorney duly authorized, and upon the surrender of a
properly endorsed certificate or certificates, which shall be canceled before a
new certificate shall be issued.
Section 35. FIXING RECORD DATES.
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment-of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix, in advance, a record date, which shall not be
more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action. If no record
date is fixed: (i) the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held; (ii) the record date for determining stockholders
entitled to express consent to corporate action in writing without a meeting,
when no prior action by the Board of Directors is necessary, shall be the day on
which the first written consent is expressed; and (iii) the record date for
determining stockholders for any other purpose shall be at the close of business
on the date on which the Board of Directors adopts the resolution relating
thereto. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 36. REGISTERED STOCKHOLDERS.
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends, and
to vote as such owner, and shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.
13
<PAGE>
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
Section 37. EXECUTION OF OTHER SECURITIES.
All bonds, debentures and other corporate securities of the corporation,
other than stock certificates, may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature of a trustee under an indenture pursuant to which such bond, debenture
or other corporate security shall be issued, the signatures of the persons
signing and attesting the corporate seal on such bond, debenture or other
corporate security may be the imprinted facsimile of the signatures of such
persons. Interest coupons appertaining to-any such bond, debenture or other
corporate security, authenticated by a trustee as aforesaid, shall be signed by
the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary or such other person as may be authorized by the Board of Directors,
or bear imprinted thereon the facsimile signature of such person. In case any
officer who shall have signed or attested any bond, debenture or other corporate
security, or whose facsimile signature shall appear thereon or on any such
interest coupon, shall have ceased to be such officer before the bond, debenture
or other corporate security so signed or attested shall have been delivered,
such bond, debenture or other corporate security nevertheless may be adopted by
the corporation and issued and delivered as though the person who signed the
same or whose facsimile signature shall have been used thereon had not ceased to
be such officer of the corporation.
ARTICLE IX
DIVIDENDS
Section 38. DECLARATION OF DIVIDENDS.
Dividends upon the capital stock of the corporation, subject to the
provisions of the Certificate of Incorporation, may be declared by the Board of
Directors pursuant to law at any regular or special meeting. Dividends may be
paid in cash, in property, or in shares of the capital stock, subject to the
provisions of the Certificate of Incorporation.
ARTICLE X
FISCAL YEAR
Section 39. FISCAL YEAR.
The fiscal year of the corporation shall end on December 31 of every
year.
14
<PAGE>
ARTICLE XI
INDEMNIFICATION OF OFFICERS,
DIRECTORS AND EMPLOYEES
Section 40. ACTION OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION.
Subject to Section 42 of this Article XI, the corporation shall
indemnify any Director, to the full extent authorized by Section 145 of the
Delaware General Corporation Law, as the same is now in effect and attached to
these Bylaws, and shall indemnify all other persons, to the full extent of said
Section 145, as it may be amended from time to time, with respect to any civil,
criminal, administrative or investigative action or proceeding, instituted or
threatened by reason of the fact that such person (hereinafter referred to as
"Agent") (i) is or was a director, officer or employee of the corporation or any
predecessor corporation merged into the corporation; or (ii) is or was serving
at the request of the corporation or any such predecessor corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise. Such Agent shall be indemnified against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Section 41. DERIVATIVE ACTIONS.
To the full extent authorized by law, the corporation shall indemnify
any person who was or is a party to any threatened, pending or completed
judicial action or suit brought by or in the right of the corporation to procure
a judgment in its favor by reason of the fact that he is or was an Agent,
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation. However, no indemnification
shall be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all of the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or other such court shall deem proper.
15
<PAGE>
Section 42. DETERMINATION OF RIGHT OF INDEMNIFICATION.
Any indemnification under Sections 40 or 41 (unless ordered by a court)
shall be made by the corporation unless a determination is reasonably and
promptly made (i) by the Board by a majority vote of a quorum of disinterested
directors or (ii) if such a quorum is not obtainable, or, even if obtainable, if
a quorum of disinterested directors so directs, by independent legal counsel in
a written opinion, or (iii) by the stockholders, that such person acted in bad
faith and in a manner that such person did not believe to be in or not opposed
to the best interests of the corporation, or, with respect to any criminal
proceeding, that such person believed or had reasonable cause to believe that
his conduct was unlawful.
Section 43. INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY.
Notwithstanding the other provisions of this Article, to the extent that
an Agent has been successful on the merits or otherwise, including the dismissal
of an action without prejudice or the settlement of an action without admission
of liability, in defense of any proceeding or in defense of any claim, issue or
matter therein, such Agent shall be indemnified against all expenses incurred in
connection therewith.
Section 44. ADVANCES OF EXPENSES.
Except as limited by Section 45 of this Article XI, expenses incurred in
defending or investigating any action, suit, proceeding or investigation shall
be paid by the corporation in advance of the final disposition of such matter,
if the Agent shall undertake to repay such amount in the event that it is
ultimately determined, as provided herein, that such person is not entitled to
indemnification. However, no advance shall be made by the corporation if a
determination is reasonably and promptly made by the Board of Directors by (i) a
majority vote of a quorum of disinterested directors, or (ii) if such a quorum
is not obtainable, or, even if obtainable, a quorum of disinterested directors
so directs by independent legal counsel in a written opinion that, based upon
the facts known to the Board or counsel at the time such determination is made,
such person acted in bad faith and in a manner that such person did not believe
to be in or not opposed to the best interests of the corporation, or, with
respect to any criminal proceeding, that such person believed or had reasonable
cause to believe his conduct was unlawful. In no event shall any advance be made
in instances where the Board or independent legal counsel reasonably determines
that such person deliberately breached his duty to the corporation or its
stockholders.
16
<PAGE>
Section 45. RIGHT OF AGENT TO INDEMNIFICATION UPON APPLICATION; PROCEDURE UPON
APPLICATION.
Any indemnification under Sections 41, 42 or 43 or advance under Section
44 of this Article XI shall be made promptly, and in any event within ninety
days, upon the written request of the Agent, unless with respect to applications
under Sections 41, 42 or 44, a determination is reasonably and promptly made
that such Agent acted in a manner set forth in such Sections as to justify the
corporation's not indemnifying or making an advance to the Agent. Such a
determination shall be made by (i) the Board of Directors by a majority vote of
a quorum of disinterested directors; or (ii) if no quorum of disinterested
directors is obtainable or, even if obtainable, a quorum of disinterested
directors so directs by independent legal counsel in a written opinion. The
right to indemnification or advances as granted by this Article XI shall be
enforceable by the Agent in any court of competent jurisdiction if the Board or
independent legal counsel denies the claim, in whole or in part, or if no
disposition of such claim is made within ninety days. The Agent's expenses
incurred in connection with successfully establishing his right to
indemnification, in whole or in part, in any such proceeding shall also be
indemnified by the corporation.
Section 46. OTHER RIGHTS AND REMEDIES.
The indemnification and advancement of expenses provided by this Article
shall not be deemed exclusive of any other rights to which an Agent seeking
indemnification or advancement of expenses may be entitled under any Bylaw,
agreement, vote of stockholders or disinterested directors, court order or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, since it is the policy of the
corporation that indemnification of Agents shall be made to the fullest extent
permitted by law. The indemnification provided by this Article shall continue as
to a person who has ceased to be an Agent and shall inure to the benefit of the
heirs, executors and administrators of such a person. In the event of any
changes, after the date of these Bylaws, in any applicable law, statute or rule
which expand the right of a Delaware corporation to indemnify an Agent, other
than a Director, such changes shall be, ipso facto, within the provisions of
this Article. In the event of any changes in any applicable law, statute or rule
which narrow the right of a Delaware corporation to indemnify an Agent, such
changes, to the extent not otherwise required by such law, statute or rule to be
applied to this Article, shall have no effect on this Article or the rights and
obligations of the corporation or its Agents hereunder.
Section 47. INSURANCE.
Upon resolution passed by the Board, the corporation may purchase and
maintain insurance on behalf of any person who is or was an Agent against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the corporation would have the
power to indemnify him against such liability under the provisions of this
Article.
17
<PAGE>
Section 48. INDEMNITY FUND.
Upon resolution passed by the Board, the corporation may establish a
trust or other designated account, grant a security interest or use other means
(including, without limitation, a letter of credit), to ensure the payment of
certain of its obligations arising under this Article and/or agreements which
may be entered into between the corporation and its officers and directors from
time to time.
Section 49. PREDECESSOR CORPORATION.
For the purposes of this Article, references to "the corporation"
include all predecessor corporations absorbed in a consolidation or merger as
well as the resulting or surviving corporation, so that any person who is or was
a director or officer of such a predecessor corporation or is or was serving at
the request of such predecessor corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise shall stand
in the same position under the provisions of this Article with respect to the
resulting or surviving corporation as he would had he served the resulting or
surviving corporation in the same capacity.
Section 50. OTHER ENTERPRISES FINES, AND SERVING AT CORPORATION'S REQUEST.
For purposes of this Article, references to "other enterprise" in
Section 40 and 49 shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed against a person with respect to any
employee benefit plan; and references to "serving at the request of the
corporation" shall include any service as a director or officer of the
corporation which imposes duties on, or involves services by, such director or
officer with respect to any employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
Article.
Section 51. INDEMNIFICATION OF OTHER PERSONS.
The provisions of this Article XI shall not be deemed to preclude the
indemnification of any person who is not an Agent (as defined in Section 40),
but whom the corporation has the power or obligation to indemnify under the
provisions of the General Corporation Law of the State of Delaware or otherwise.
The corporation may, in its sole discretion, indemnify an employee, trustee or
other agent as permitted by the General Corporation Law of the State of
Delaware. The corporation shall indemnify an employee, trustee or other agent
where required by law.
18
<PAGE>
Section 52. SAVINGS CLAUSE.
If this Article or any portion thereof shall be invalidated on any
ground by any court of competent jurisdiction, then the corporation shall
nevertheless indemnify each Agent against expenses (including attorneys' fees),
judgments, fines and amounts paid in each settlement with respect to any action,
suit, proceeding or investigation, whether civil, criminal or administrative,
and whether internal or external, including a grand jury proceeding and an
action or suit brought by or in the right of the corporation, to the full extent
permitted by any applicable portion of this Article that shall not have been
invalidated, or by any other applicable law.
ARTICLE XII
NOTICES
Section 53. NOTICES.
(a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of these
Bylaws, notice is required to be given to any stockholder, it shall be given in
writing, timely and duly deposited in the United States mail, postage prepaid,
and addressed to his last known post office address as shown by the stock record
of the corporation or its transfer agent.
(b) NOTICE TO DIRECTORS. Any notice required to be given to any Director
may be given by the method stated in subsection (a), or by telegram, except that
such notice other than one which is delivered personally shall be sent to such
address as such Director shall have filed in writing with the Secretary, or, in
the absence of such filing to the last known post office address of such
Director.
(c) ADDRESS UNKNOWN. If no address of a stockholder or Director be
known, notice may be sent to such place as the Board of Directors shall
determine.
(d) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by the
Secretary or Assistant Secretary of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
Director or Directors, to whom any notice or notices was or were given, and the
time and method of giving the same, shall be conclusive evidence of the
statements therein contained.
(e) TIME NOTICES DEEMED GIVEN. All notices given by mail, as above
provided, shall be deemed to have been given as at the time of mailing and all
notices given by telegram shall be deemed to have been given as at the sending
time recorded by the telegraph company transmitting the notices.
(f) METHODS OF NOTICE. It shall not be necessary that the same method of
giving notice be employed in respect of all Directors, but one permissible
method may be employed in respect of any one or more, and any other permissible
method or methods may be employed in respect of any other or others.
19
<PAGE>
ARTICLE XIII
AMENDMENTS
Section 54. AMENDMENTS.
These Bylaws may be repealed, altered or amended or new Bylaws adopted
by the stockholders. The Board of Directors shall also have the authority, if
such authority is conferred upon the Board of Directors by the Certificate of
Incorporation, to repeal, alter or amend these Bylaws or adopt new Bylaws,
subject to the power of the stockholders to change or repeal such Bylaws.
20
<PAGE>
SILICONIX INCORPORATED/A MEMBER OF THE TEMIC GROUP
KEY PROFESSIONAL
PERFORMANCE UNIT PLAN
<PAGE>
SILICONIX INCORPORATED/A MEMBER OF THE TEMIC GROUP
KEY PROFESSIONAL
PERFORMANCE UNIT PLAN
I. PURPOSE
To further the successes of SILICONIX incorporated/A Member of the
TEMIC Group, hereinafter referred to as the Company, and equate
management and owner interests by providing an incentive, in addition
to current compensation (base salary and annual incentive), to those
key executives of the Company who will have a substantial opportunity
to influence the long-term growth of the Company. This will (1) more
closely associate the personal interests of such key executives with
the owners of the Company and (2) encourage such key executives to
continue as employees of the Company.
II. PLAN DESCRIPTION AND COMPONENTS
Each eligible executive will be contingently awarded a number of
performance units at the beginning of each three-year performance
cycle. Each unit will be assigned a dollar value of $100 per unit.
The degree of accomplishment of the plan's objectives will determine
the number of the contingent performance units actually paid to
eligible executives.
1
<PAGE>
A. ELIGIBILITY
Participation is limited to those key employees who have a substantial
opportunity to influence the long-term growth of the Company as
designated by the Compensation Committee of the Board of Directors of
Siliconix incorporated (the "Compensation Committee").
B. PERFORMANCE CYCLE
The duration of the performance cycle is three years, with a new
performance cycle beginning every year. The interaction of the
proposed performance grants and award cycle is graphically illustrated
below:
PERFORMANCE CYCLE
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
O-----------------------x
O-----------------------x
O-----------------------x
</TABLE>
C. AWARD LEVELS
The size of the contingent grant will be reflective of the executive
level and competitive practices. The contingent grant level as a
multiple of base salary are provided to individual participants.
2
<PAGE>
The number of performance units allocated to each plan participant for any
given performance cycle is then determined by multiplying each
participant's base salary at the beginning of that performance cycle by his
or her corresponding multiple of base salary and dividing by $100 (the
value of a contingent performance unit).
D. PERFORMANCE MEASURE
The performance measure that will be utilized in determining long-term
performance is to be determined reflecting the key financial
indicators in the five-year plan. Awards will be based on cumulative
financial results over the three-year performance cycle and will be
payable to the executive at the end of the third year. Performance
measures for any given year may be different in different performance
cycles since the targets may change with the beginning of each
performance cycle. The target performance measures for the current
performance cycle (1996-98) are set forth in ATTACHMENT A.
E. PAYMENT
All payments, or a portion thereof, under the plan may be deferred at
the election of the executive to a specific future date; provided,
however, that the election to defer a payment with respect to any
performance cycle must be made PRIOR to the beginning of that
performance cycle. If payments are deferred,
3
<PAGE>
they will be held in a rabbi trust established by the Company. The
Company is under no obligation to secure any amount credited to a
participant by any specific asset of the Company or any other assets
in which the Company has an interest. Neither the participant nor his
or her estate shall have any rights against the Company with respect
to any portion of his or her deferred account except as a general
unsecured creditor. No participant has an interest in his or her
deferred account until the participant actually receives the deferred
payment.
F. PERFORMANCE UNIT AWARD CALCULATION
<TABLE>
<CAPTION>
------------------ -------------------
Results % off Contingent
Units Paid
------------------ -------------------
<S> <C>
75% of goal 50%
100% of goal 100%
125% of goal 150%
</TABLE>
For results in between those shown, numbers will be interpolated. For
results higher than 125% of goal, the Compensation Committee will use
its discretion in determining any additional incentive payments.
4
<PAGE>
III. MISCELLANEOUS PROVISIONS
A. ADMINISTRATION
The Compensation Committee shall have the full power and authority to
administer and interpret the plan and to adopt such rules and
regulations consistent with the terms of the plan as it deems
necessary or advisable to carry out the provisions of the plan.
B. TERMINATION OF EMPLOYMENT
If prior to the end of any performance cycle a participant's
employment terminates by reason of his/her retirement at his/her
normal retirement date, death, or his/her total and permanent
disability (as determined under the applicable Company insurance
plan), and the participant would have been entitled to the payment of
the award if his/her employment had not so terminated, payment of the
award shall be made but shall be prorated based on the number of
months of the performance cycle during which the participant was an
employee. If a participant's employment terminates by reason of
death, payment of the award shall be made to the beneficiary of his or
her estate.
If an employee terminates employment, except for the reasons stated
above, his award shall be forfeited unless the Compensation Committee
deems otherwise.
5
<PAGE>
C. SALE OF COMPANY
If the Company is sold, all contingent awards outstanding will be
deemed to have been earned in full for the current performance period
and then paid to the applicable executives and all deferred amounts
shall also be paid to such executives.
D. TRANSFER OF RIGHTS
The rights and interests of a participant under the plan may not be
assigned or transferred except by the laws of descent or distribution.
E. RIGHTS TO PLAN
No employee or other person shall have any claim or right to
participate in the plan or be granted an award under the plan.
F. WITHHOLDING
The Company shall have the right to deduct, from all awards hereunder
paid any federal, state, local or foreign taxes required by law to be
withheld with respect to such awards.
G. AMENDMENT AND TERMINATION
The Compensation Committee may amend or suspend the plan, in whole or
in part, at any time, but may not affect earned credits up to the time
of amendment or suspension.
6
<PAGE>
FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
Siliconix incorporated
(In thousands, except per
share and employment data) 1995 1994 1993 1992 1991
- ------------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales $ 250,291 $ 196,453 $ 170,282 $ 156,197 $ 140,223
Operating income (loss) 28,839 14,148 9,283 8,245 (1,069)
Income (loss) before extraordinary
gain and cumulative effect of
accounting change 24,221 10,623 6,359 4,612 (4,399)
Extraordinary gain - - 863 - 2,155
Cumulative effect of accounting change - - - - 2,382
Net income $ 24,221 $ 10,623 $ 7,222 $ 4,612 $ 138
----------- ----------- ----------- ----------- -----------
Per share data:
Income (loss) before extraordinary
gains and cumulative effect of
accounting change $ 2.43 $ 1.07 $ 0.64 $ 0.46 $ (0.44)
Extraordinary gains - - 0.09 - 0.21
Cumulative effect of accounting change - - - - 0.24
Net income $ 2.43 $ 1.07 $ 0.73 $ 0.46 $ 0.01
----------- ----------- ----------- ----------- -----------
Shares used to compute net income
per share 9,960 9,960 9,960 9,972 9,998
Total assets $ 207,962 $ 155,035 $ 130,256 $ 115,675 $ 112,812
Capital expenditures $ 28,196 $ 25,030 $ 18,454 $ 12,945 $ 6,930
Total long-term debt, including related party $ 40,652 $ 40,834 $ 41,523 $ 46,090 $ 46,107
Year-end worldwide employment 1,269 1,172 1,211 1,202 1,247
----------- ----------- ----------- ----------- -----------
</TABLE>
AN EXTRAORDINARY GAIN WAS RECOGNIZED IN 1993 AS A RESULT OF THE REPURCHASE OF
GUARANTEED FLOATING RATE SUBORDINATED NOTES. EXTRAORDINARY GAINS WERE RECOGNIZED
IN 1991 AS A RESULT OF THE REPURCHASE OF GUARANTEED FLOATING RATE SUBORDINATED
NOTES, SETTLEMENT OF DISPUTED CLAIMS, AND A DISCOUNT ON AN EARLY REPAYMENT OF A
NOTE PAYABLE.
IN 1991, THE COMPANY CHANGED ITS ACCOUNTING POLICY TO INCLUDE IN INVENTORY
CERTAIN PRODUCTION-RELATED ENGINEERING COSTS PREVIOUSLY CHARGED TO ENGINEERING
AND DEVELOPMENT EXPENSE AND RECORDED A CUMULATIVE EFFECT ON PRIOR YEARS.
<PAGE>
QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Unaudited
(In thousands,
except per share data) 1995 1994
- --------------------------------------------------------------------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fourth Third Second First Fourth Third Second First
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net sales $ 71,802 $ 66,015 $ 61,125 $ 51,349 $ 50,632 $ 51,626 $ 51,725 $ 42,470
Gross profit 29,668 26,333 22,909 19,276 19,657 18,782 18,945 17,292
Net income $ 9,841 $ 7,304 $ 4,542 $ 2,534 $ 3,268 $ 2,879 $ 2,849 $ 1,627
Earnings per share:
Net income $ 0.99 $ 0.73 $ 0.46 $ 0.25 $ 0.33 $ 0.29 $ 0.29 $ 0.16
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Siliconix designs, markets, and manufactures power and analog semiconductor
products. The company focuses on technologies and products for the computer,
data storage, communications, and automotive markets.
REVENUES AND EARNINGS Fiscal 1995 results represent the sixth consecutive year
of record revenues and the second consecutive year of record earnings for
Siliconix. Net sales in fiscal 1995 of $250.3 million increased 27% from fiscal
1994 and 47% from fiscal 1993. In fiscal 1995, net income was $24.2 million
versus $10.6 million in fiscal 1994 and $7.2 million in fiscal 1993. Fiscal 1995
net income increased 128% versus fiscal 1994 and 235% versus fiscal 1993. Return
on average shareholders' equity jumped to 31% in fiscal 1995 as compared to 18%
in fiscal 1994 and 14% in fiscal 1993.
Revenue growth was driven by strong demand across all product lines and
regions. Power MOSFET and power IC products grew by over 37% and represented 70%
of total revenues for fiscal 1995. In fiscal 1994 and 1993, these products
represented 65% and 59% of total revenues, respectively. The remaining 30% of
fiscal 1995 revenue is comprised of analog switches and low power discrete
devices. Siliconix is the leader in power MOSFET discrete products and continues
to set the performance standard for the industry in low-voltage surface-mount
power devices. Power MOSFET products in LITTLE FOOT-Registered Trademark- and
LITE FOOT-Registered Trademark- packages are used in portable computers,
cellular phones, automotive anti-lock braking (ABS) and airbag systems, and
other high growth applications. The Company continues to expand the breadth of
this product line and its manufacturing capacity to produce significantly larger
quantities of both its LITTLE FOOT and LITE FOOT packages. The Company's
proprietary Trench technology is the most advanced power MOSFET technology in
the industry. Demand is very strong for the Company's power MOSFETS made with
this technology and the number of product offerings based on this technology
continues to grow. In the power IC product line, the Company continues to
experience strong demand and design wins for applications such as dc-to-dc
conversion and motor control. The other older product lines also grew but at a
more modest 9% in fiscal 1995.
Siliconix operates in all major geographic regions of the semiconductor
industry. Sales outside of North America in fiscal 1995 accounted for 63% of
total revenues versus 59% in fiscal 1994 and 54% in fiscal 1993. Japan was the
fastest growing region with a 65% increase fueled by products used in the
telecommunications and computing markets. Japan grew to 13% of total revenues
compared to 10% in 1994 and 6% in 1993. Europe and Southeast Asia followed with
32% and 29% annual growth, respectively, for fiscal 1995 as compared to 1994.
Each of these regions represent approximately 25% of worldwide sales for fiscal
1995, 1994, and 1993. Domestic revenues grew 15% over 1994 and represent 37% of
total revenues for fiscal 1995 as compared to 41% and 46% for fiscal 1994 and
1993, respectively, reflecting a shift to overseas markets during the past three
years.
GROSS PROFIT Gross profit as a percentage of net sales was 39% in fiscal 1995,
38% in fiscal 1994, and 36% in fiscal 1993. Margin improvement was driven by
economies of scale in manufacturing operations, improved yields in the 6-inch
wafer fab, transfer of assembly and test operations to Asia, and favorable
pricing due to robust market demand for power MOSFET products. By the end of
fiscal 1995, Siliconix had increased the capacity of its 6-inch wafer fab by
over 50% compared to the end of fiscal 1994 and plans to continue manufacturing
expansion in Santa Clara, China, Taiwan, and India. In fiscal 1995, the Company
finalized plans to transfer its 4 -inch fab production from Santa Clara to a
third party foundry in Asia. Royalty expense as a percentage of sales declined
slightly due to a shift to newer proprietary technologies and processes, and
this trend is expected to continue into 1996.
RESEARCH AND DEVELOPMENT, SM & A, AND OTHER Research and development
investment increased 21% in fiscal 1995 to $19.1 million versus $15.8 million in
fiscal 1994 and $13.4 million in fiscal 1993. Siliconix has continued to invest
in power MOSFET and power IC technology and product development. Fiscal 1994
investment grew 18% versus fiscal 1993. This growing investment has resulted in
the most advanced power MOSFET technology in the industry which is anticipated
to fuel future growth.
Selling, marketing, and administration increased 12% to $50.3 million. As a
percentage of net sales, these were 20% in fiscal 1995 versus 23% in fiscal 1994
and 22% in fiscal 1993. Economies of scale and cost controls have resulted in
the declining percentage.
Interest expense increased by 28% from fiscal 1994 and 42% from fiscal 1993 as
a result of increased interest rates over the past two years.
The components of other (income)/expense include interest income, gain/loss on
sale of fixed assets, bank charges, and other (income)/expense which are outside
the normal scope of operations. The most significant change in the components of
other (income)/expense for fiscal 1995 occurred in interest income. Interest
income increased to $0.9 million in fiscal 1995 as compared to $0.2 million in
fiscal 1994. This increase in interest income can be attributed to higher cash
balances which the Company maintains directly and also due to cash which the
Company pools with an affiliate, for investment purposes, to obtain a higher
rate
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
of return. In 1993, the major components included $0.9 million of proceeds from
a favorable settlement of a lawsuit offset by a $0.7 million writedown of the
Company's Swansea, Wales manufacturing facility which was later sold in the
first quarter of 1994. Interest income for 1993 was minimal.
INCOME TAX Income tax expense for fiscal 1995 increased $1.4 million over
fiscal 1994 and $2.0 million over fiscal 1993 as a result of reductions in
available net operating loss carryforwards and increased earnings before taxes.
During 1995, management reduced the valuation allowance on deferred income tax
assets to realize a $2 million net deferred income tax asset. This decision to
recognize a net deferred income tax asset was based on management's belief that,
it is more likely than not, the Company will realize benefit from a portion of
its deferred income taxes. The primary positive factors assessed by management
in reaching its conclusion about the Company's net deferred income tax asset
include:
Positive net earnings and continued increases in gross profits for the past
three years.
A 41% increase in backlog from the previous year.
A 27% growth in sales in 1995 and 15% growth in sales in 1994.
The expectation for the future is that, even with the extremely volatile
environment in which the Company competes, operating income of the Company will
more than likely be sufficient to realize a portion of the deferred income tax
asset; however, due to certain factors beyond management's control, there can be
no assurance that sufficient taxable income will be generated in each of
the Company's taxing jurisdictions to realize recorded tax benefits. In
addition, there can be no assurance that the Company will generate any earnings
or any specific level of continuing earnings in future years. The primary
negative factors assessed by management in reaching its conclusion about the
Company's ability to realize the net deferred income tax asset are discussed in
the section titled "Certain Factors."
OTHER AREAS The impact of inflation on the Company's business during the past
three years was not significant.
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed of." SFAS No. 121 will be effective for fiscal years beginning after
December 15, 1995, and requires long-lived assets to be evaluated for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. The Company will adopt SFAS No. 121 in fiscal
1996 and does not expect its provisions to have a material effect on the
Company's consolidated results of operations in the year of adoption.
FINANCIAL CONDITION
Cash and equivalents and short-term investment with affiliate were $27.7
million at the end of 1995 as compared to $10.7 million for 1994, an increase of
158% due to cash provided by operating activities of $48.7 million significantly
exceeding cash used in investing and financing activities, excluding the short-
term investment with affiliate. Beginning in the third quarter of 1995, the
Company began to participate in the cash concentration system established by
Daimler-Benz North America (DBNA), an affiliated company, whereby excess cash is
pooled and invested on a short term basis with Daimler-Benz Capital
Incorporated, an affiliate of DBNA, to obtain a higher rate of return. This
event resulted in a short-term investment on the balance sheet of $17.2 million.
Accounts receivable increased 35% or $10.7 million over 1994 primarily due to
the overall increase in sales for 1995 as well as to an increase in
international sales which typically allow for longer payment terms than domestic
sales.
Inventories decreased 14% over 1994 due to the higher sales volume and certain
capacity constraints experienced during fiscal 1995.
Capital expenditures were $28.2 million in 1995 and $25.0 million in 1994.
These related mostly to additions for plant capacity expansion, new technology,
and regulatory compliance. Capital spending in 1996, funded from cash provided
by operating activities, is expected to exceed the 1995 level.
Current liabilities increased $28.7 million or 59% over fiscal 1994 mainly due
to increases in accounts payable of $9.1 million for capital equipment received
before the close of the fiscal year, increases in accrued liabilities of $12.1
million due mainly to increases in commissions which are a function of increased
sales and to increases in employee related accruals for profit sharing, which is
a function of increased net income.
Although the Company has available cash and equivalents and short-term
investment with affiliate of $27.7 million at the end of fiscal 1995, cash and
short-term investment with affiliate will decrease in the first quarter of 1996
to fund capital expenditures, royalty payments, commissions, yearly management
and employee bonuses, the 401(k) Company match, and profit sharing
contributions. Management expects 1996 cash flows from operations to be
sufficient to fund investments in capital expenditures and research and
development.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CERTAIN FACTORS
The Company has in the past and may in the future make forward looking
statements. These statements are subject to risks and uncertainties that could
cause actual results to differ materially from those predicted. Such risks and
uncertainties include, but are not limited to, the following:
TECHNOLOGICAL CHANGE AND COMPETITION The markets for the Company's products
are characterized by rapidly changing technology, frequent new product
introductions, and declining average selling prices over product life cycles.
The Company's future success is highly dependent upon the timely completion and
introduction of new products at competitive prices and performance levels, and
upon having them selected for design into products of leading manufacturers. In
addition, the Company must respond to competitors in the Company's markets. If
the Company is not able to make timely introduction of new products or to
respond effectively to competition, its business and operating results could be
adversely affected.
VARIABLE DEMAND The semiconductor industry has historically been highly
cyclical and has been subject to significant downturns at various times that
have been characterized by diminished product demand. Reduced demand for the
Company's products could have an adverse effect on the Company's business and
operating results.
AVAILABILITY OF RAW MATERIALS The semiconductor industry has been increasing
its manufacturing capacity over the past several years and is expected to
continue to do so in the future. The Company anticipates that this environment
may make it difficult for semiconductor companies generally to ensure the
required supply of silicon wafers from time to time. The Company's results of
operations could be adversely affected if its wafer suppliers are unwilling or
unable to supply a timely and sufficient supply of product to the Company.
INTELLECTUAL PROPERTY MATTERS The semiconductor industry is characterized by
litigation regarding patent and other intellectual property rights. The Company
has on occasion been notified that it may be infringing patent and other
intellectual property rights of others. In addition, customers purchasing
components from the Company have rights to indemnification under certain
circumstances if such components violate the intellectual property rights of
others. Although licenses are generally offered in such situations, and the
Company has successfully resolved these situations in the past, there can be no
assurance that the Company will not be subject to future litigation alleging
intellectual property rights infringement, or that the Company will be able to
obtain licenses on acceptable terms. An unfavorable outcome regarding one of
these matters could have an adverse effect on the Company's business and
operating results.
POLITICAL AND ECONOMIC CONSIDERATIONS In recent years, a large and increasing
portion of the Company's net sales, operating profits, manufacturing production,
and growth have come from its international operations. As a result, the
Company's business activities and its results could be significantly affected by
the policies of foreign governments and prevailing political, social, and
economic conditions.
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
OPERATIONS
- -----------------------------------------------------
Siliconix incorporated
Years ended December 31
(In thousands, except per share data) 1995 1994 1993
- ----------------------------------------------------- --------- ---------
<S> <C> <C> <C>
Net sales $ 250,291 $ 196,453 $ 170,282
Cost of sales 152,105 121,777 109,580
--------- --------- ---------
Gross profit 98,186 74,676 60,702
--------- --------- ---------
Operating expenses:
Research and development 19,067 15,777 13,366
Selling, marketing, and administration 50,280 44,751 37,421
Restructuring - - 632
--------- --------- ---------
Operating income 28,839 14,148 9,283
Interest expense 2,572 2,008 1,807
Other (income) expense, net (267) 617 825
--------- --------- ---------
Income before income taxes and
extraordinary gain 26,534 11,523 6,651
Income taxes 2,313 900 292
--------- --------- ---------
Income before extraordinary gain 24,221 10,623 6,359
Extraordinary gain - - 863
--------- --------- ---------
Net income $ 24,221 $ 10,623 $ 7,222
--------- --------- ---------
Earnings per share:
Income before extraordinary gain $ 2.43 $ 1.07 $ 0.64
Extraordinary gain - - 0.09
--------- --------- ---------
Net income $ 2.43 $ 1.07 $ 0.73
--------- --------- ---------
Shares used to compute earnings per share 9,960 9,960 9,960
--------- --------- ---------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SHAREHOLDERS' EQUITY
- ---------------------------------------------------------------------------------------------------------------------------------
Additional Retained Accumulated Total
Three years ended December 31, 1995 Common Stock at Par Paid-in- Earnings Translation Shareholders'
(In thousands) Shares Amount Capital (Deficit) Adjustments Equity
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1992 9,960 $ 100 $ 58,755 $ (10,508) $ (846) $ 47,501
Net income - - - 7,222 - 7,222
Proceeds from restricted
common stock - - 258 - - 258
Currency translation adjustments - - - - (250) (250)
------- ------- --------- --------- --------- ---------
Balances at December 31, 1993 9,960 100 59,013 (3,286) (1,096) 54,731
Net income - - - 10,623 - 10,623
Proceeds from restricted
common stock - - 180 - - 180
Currency translation adjustments - - - - 348 348
------- ------- --------- --------- --------- ---------
Balances at December 31, 1994 9,960 100 59,193 7,337 (748) 65,882
Net income - - - 24,221 - 24,221
Proceeds from restricted
common stock - - 230 - - 230
Currency translation adjustments - - - - (57) (57)
------- ------- --------- --------- --------- ---------
Balances at December 31, 1995 9,960 $ 100 $ 59,423 $ 31,558 $ (805) $ 90,276
-------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
BALANCE SHEETS
- --------------------------------------------------------
Siliconix incorporated
As of December 31
(In thousands, except share data) 1995 1994
- -------------------------------------------------------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 10,513 $ 10,743
Short term investment with affiliate 17,195 -
Accounts receivable, less allowances
of $5,526 in 1995 and $5,157 in 1994 41,201 30,379
Accounts receivable from affiliates 11,093 5,312
Inventories 26,740 31,033
Other current assets 9,033 5,456
Deferred income taxes, net 2,024 -
--------- ---------
Total current assets 117,799 82,923
--------- ---------
Property, plant, and equipment, at cost:
Land 279 279
Buildings and improvements 40,474 34,633
Machinery and equipment 160,421 142,641
--------- ---------
201,174 177,553
Less accumulated depreciation 117,324 109,641
--------- ---------
Net property, plant, and equipment 83,850 67,912
Other assets 6,313 4,200
--------- ---------
Total assets $ 207,962 $ 155,035
- -------------------------------------------------------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of debt obligations $ 586 $ 612
Accounts payable 24,347 15,194
Accounts payable to affiliates 12,465 4,980
Accrued payroll and related compensation 11,613 7,752
Accrued liabilities 28,023 19,781
--------- ---------
Total current liabilities 77,034 48,319
Long-term related party debt 34,570 34,570
Long-term debt, less current portion 6,082 6,264
--------- ---------
Total liabilities 117,686 89,153
--------- ---------
Shareholders' equity:
Common stock, par value $0.01;
Authorized 10,000,000 shares;
issued and outstanding 9,959,680
in 1995 and 1994 100 100
Additional paid-in-capital 59,423 59,193
Retained earnings 31,558 7,337
Accumulated translation adjustments (805) (748)
--------- ---------
Total shareholders' equity 90,276 65,882
--------- ---------
Total liabilities and shareholders' equity $ 207,962 $ 155,035
--------- ---------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CASH FLOWS
- -----------------------------------------------------
Siliconix incorporated
Years ended December 31
(In thousands) 1995 1994 1993
- ----------------------------------------------------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 24,221 $ 10,623 $ 7,222
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 13,319 11,895 11,170
Deferred income taxes (2,024) - -
Loss on disposal of property, plant,
and equipment - 314 217
Extraordinary gains - - (863)
Other non-cash (income) and expenses 181 - (9)
Changes in:
Accounts receivable (10,678) (5,370) (350)
Accounts receivable from affiliates (5,781) (1,385) (2,316)
Inventories 4,326 387 277
Other current assets (3,511) (1,345) (638)
Accounts payable 9,134 2,499 6,023
Accounts payable to affiliates 7,485 1,899 1,951
Accrued liabilities 12,070 10,004 3,967
--------- -------- --------
Net cash provided by operating activities 48,742 29,521 26,651
--------- -------- --------
Cash flows from investing activities:
Purchase of property, plant, and
equipment (28,196) (25,030) (18,454)
Proceeds from sale of property, plant,
and equipment 35 182 142
Investment in joint venture (1,200) - (1,433)
Purchase of other assets (1,708) (1,581) (741)
Short term investment with affiliate (17,195) - -
--------- -------- --------
Net cash used in investing activities (48,264) (26,429) (20,486)
--------- -------- --------
Cash flows from financing activities:
Repayment of long-term debt (646) (893) (738)
Repurchase of subordinated notes (110) (150) (2,874)
Proceeds from restricted common stock 230 180 258
--------- -------- --------
Net cash used in financing activities (526) (863) (3,354)
--------- -------- --------
Effect of exchange rate changes on cash
and equivalents (182) (95) 70
--------- -------- --------
Net increase (decrease) in cash and
equivalents (230) 2,134 2,881
Cash and equivalents:
Beginning of year 10,743 8,609 5,728
--------- -------- --------
End of year $ 10,513 $ 10,743 $ 8,609
--------- -------- --------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION Siliconix incorporated (the "Company") was founded in 1962 and
subsequently reincorporated on March 5, 1987 in Delaware. AEG Capital
Corporation ("AEG") owns 80.4% of the Company's outstanding common stock.
CONSOLIDATION The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All significant intercompany
balances and transactions have been eliminated.
REVENUE RECOGNITION The Company records sales to original equipment
manufacturers and distributors at the time of shipment. The Company records
allowances against revenue for its standard distributor agreements which permit
stock rotation and which provide price protection for distributors' inventory on
hand when the Company reduces its published list prices.
CASH AND EQUIVALENTS Cash equivalents consist of short-term financial
instruments which are readily convertible to cash and have original maturities
of three months or less at the time of acquisition.
SHORT TERM INVESTMENTS Short term investments consist of cash invested with
Daimler-Benz Capital Incorporated, an affiliated company, within its cash
concentration system, whereby cash is pooled and invested on a short term basis.
INVENTORIES Inventories are stated at the lower of cost (first-in, first-
out) or market.
PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment are stated at
cost. Depreciation is computed for financial reporting purposes using primarily
the straight-line method over the estimated useful lives of the respective
assets. The estimated lives used are 10 to 30 years for buildings and
improvements and 3 to 10 years for machinery and equipment.
OTHER ASSETS The investment in Simconix (a 50% joint venture with the
Shanghai Institute of Metallurgy) is reported and presented under the equity
method of accounting.
RESEARCH AND DEVELOPMENT Expenditures for research and development are
charged to expense in the year incurred.
FINANCIAL INSTRUMENTS AND CREDIT RISK Due to the short maturities and/or
the variable interest rates of the Company's financial instruments, including
cash and equivalents, short-term investments, accounts receivable, debt
obligations, accounts payable, and accrued liabilities, the carrying amounts
approximate the fair value of the instruments. The investment in Simconix is
carried at cost since a reasonable estimate of the fair value could not be made
without incurring excessive costs.
The Company's financial instruments that are subject to concentrations of
credit risk consist primarily of trade receivables. The credit risk related to
the Company's trade receivables is mitigated by the Company's ongoing credit
evaluations of its customers' financial condition, reasonably short collection
terms, and the geographical dispersion of sales transactions. The Company
generally does not require any collateral from its domestic customers although
letters of credit are used frequently throughout Asia. Bad debt expense has not
been significant over the past three years.
A material portion of the Company's revenues in 1995, 1994, and 1993 were
derived from the hard disk drive and personal computer markets. These markets
have been historically somewhat volatile, as demand for the end-products in
these markets has varied widely from time to time. If demand for these
end-products should decrease significantly, the producers thereof could
reduce their purchase of the Company's products which in turn could have a
materially adverse effect on the Company's financial condition and results of
operation.
INCOME TAXES Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases as well as operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
Income taxes have not been provided on undistributed earnings of the
Company's foreign subsidiaries as it is intended that these earnings will be
indefinitely invested in operations outside the United States.
The Company is included in the consolidated federal and certain state tax
returns of an affiliated company. In accordance with the income tax allocation
policy of the affiliated company, federal and state taxes are determined as if
the Company was associated only with its wholly owned subsidiaries, taking into
account all tax credits and all carryback and carryforward items. For purposes
of these financial statements, federal, state, and foreign income taxes have
been allocated as if the Company's tax provision and related liability had been
calculated on a separate return basis.
FOREIGN CURRENCY TRANSLATION The financial statements for certain of the
Company's foreign subsidiaries are measured using the local currency as the
functional currency. Foreign assets and liabilities in the consolidated balance
sheet have been translated at the rate of exchange as of the balance sheet date.
Revenues and expenses are translated at the average exchange rate for the year.
Translation adjustments do not impact the results of operations and are reported
as a separate component of shareholders' equity. Foreign currency transaction
gains and losses are included in the results of operations.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USE OF ESTIMATES Management of the Company has made a number of estimates
and assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from these estimates.
COMMITMENTS AND CONTINGENCIES Liabilities for loss contingencies, including
environmental remediation costs, arising from claims, assessments, litigation,
fines and penalties, and other sources are recorded when it is probable that a
liability has been incurred and the amount of the assessment and/or remediation
can be reasonably estimated. The costs for a specific clean-up site are
discounted if the aggregate amount of the obligation and the amount and timing
of the cash payments for that site are fixed or reliably determinable generally
based upon information derived from the remediation plan for that site.
Recoveries from third parties which are probable of realization are separately
recorded, and are not offset against the related environmental liability.
2. RELATED PARTY TRANSACTIONS
The Company is a member of the semiconductor division of the Daimler-Benz
Microelectronics Group, a consortium of affiliated companies referred to as
TEMIC Semiconductors. In addition to the Company, the other members of TEMIC
Semiconductors are Telefunken Semiconductors, Matra MHS, and Dialog
Semiconductor. The aim of TEMIC Semiconductors is to unify the activities of the
member companies to provide efficiencies by eliminating the duplication of many
functions and to bring greater value to end customers by allowing them to deal
with one entity for their semiconductor purchasing needs. In order to achieve
these goals, four sales companies were established in 1995, TEMIC North America,
TEMIC Asia Pacific, TEMIC France, and TEMIC Germany. These companies were
established to fulfill all sales responsibilities for TEMIC Semiconductors
within their respective regions. TEMIC North America is a wholly owned
subsidiary of Siliconix incorporated; TEMIC Asia Pacific is a division of TEMIC
(S) Pte. Ltd., a wholly owned subsidiary of Siliconix incorporated; TEMIC France
is a wholly owned subsidiary of Matra MHS; and TEMIC Germany is a division of
Telefunken Semiconductors. The sales companies function as agents of the
manufacturing companies, namely Siliconix incorporated, Matra MHS, and
Telefunken Semiconductors, through commission arrangements as a fixed percentage
of sales. Under these agreements, the sales companies perform all sales related
functions under their legal names; however, the sales companies function only in
an agency role and the ownership of all sales, receivables, inventory, and risk
of loss remains with the manufacturing companies.
Several significant transactions and agreements entered into between the
Company and these affiliates are disclosed elsewhere in these financial
statements and related notes. In addition, the following are other transactions
between the Company and its affiliates during 1995, 1994, and 1993.
Under the new TEMIC sales structure established in 1995, commissions
received pertaining to the sale of affiliate products in the North America and
Asia Pacific regions were $15,191,000, while commissions paid pertaining to the
sale of the Company's products in Europe were $4,232,000. During 1994 and 1993,
the Company entered into selling arrangements of a similar nature with related
parties. Commissions received under these agreements were $10,944,000 and
$4,466,000 during 1994 and 1993, respectively, while commissions paid were
$3,777,000 and $3,273,000 during 1994 and 1993, respectively.
During 1995, the Company began to participate in the cash concentration
system established by Daimler-Benz North America (DBNA), an affiliated
company, whereby cash is pooled and invested on a short term basis with
Daimler-Benz Capital Incorporated, an affiliate of DBNA, to obtain a higher
rate of return. At December 31, 1995, a cash balance of $17,195,000 was
invested with Daimler-Benz Capital Incorporated. There are no restrictions
related to the usage or withdrawal of these funds. Interest rates on the
investment is based on the one-month LIBOR. Interest income earned for 1995
totaled $410,000.
During 1994 and 1993, the Company received $300,000 and $1,170,000,
respectively, from a related party under the terms of joint research and
development contracts which expired at the end of each respective calendar year.
For both 1994 and 1993, significant terms of the agreements included, but were
not limited to, inspection of the project by the related party, assurance to the
related party concerning the confidentiality of the technical information, and
assurance that the results of the work provided do not affect any intellectual
property rights of other third parties. There was no joint research and
development contract in 1995.
During 1995, 1994, and 1993, a related party was engaged to provide
subcontract manufacturing services to the Company. Fees for these services were
$4,591,000, $3,019,000, and $2,357,000, respectively.
During 1995, 1994, and 1993, the Company entered into certain
arrangements with related parties whereby the Company or the related party
paid certain selling and administrative expenses. These expenses were then
billed back on a periodic basis. During 1995, 1994, and 1993, the Company
was reimbursed at cost for $12,214,000, $6,400,000, and $4,999,000,
respectively, of selling and administrative expenses for related parties.
During the same period, the Company reimbursed related parties at cost
$2,223,000, $2,702,000, $2,231,000, respectively, for selling and
administrative expenses. Management fee arrangements have
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
been entered into by the Company and related parties to cover occupancy and
administrative costs. During 1995, 1994, and 1993, management fees received by
the Company were $555,000, $401,000, and $402,000, respectively, and fees paid
by the Company were $139,000, $125,000, and $125,000, respectively.
Product sales to unconsolidated affiliates were $8,358,000, $5,022,000, and
$3,803,000 during 1995, 1994, and 1993, respectively.
Long-term debt includes a related party note of $34,570,000 with AEG
Capital Corporation (see note 6). Interest expense for 1995, 1994, and 1993 was
$2,076,000, $1,550,000, and $1,242,000, respectively.
3. SIMCONIX JOINT VENTURE
The Company continued to maintain the equal partnership with the Shanghai
Institute of Metallurgy involving the assembly and test of LITTLE FOOT product
in The People's Republic of China. Simconix exclusively assembles and tests die
provided by the Company. In accordance with the joint venture agreement, which
has a ten-year duration, the Company recognized $472,000 as its share of profits
in Simconix in 1995 under the equity method of accounting. During the year, an
additional $1,200,000 was invested in the joint venture, increasing the total
investment in the joint venture to $3,105,000. In order to obtain the best
pricing, Siliconix acts as the purchasing agent of manufacturing equipment for
Simconix and pays the vendors directly, with full reimbursement from Simconix.
For 1996, the Company has committed to provide a minimum level of die per month
to Simconix for assembly and test.
4. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31
(In thousands) 1995 1994
- ---------------------------------------------------------------- ----------
<S> <C> <C>
Finished goods $ 5,931 $ 6,886
Work-in-process 17,449 20,625
Raw materials 3,360 3,522
---------- ---------
$ 26,740 $ 31,033
---------- ---------
</TABLE>
5. INCOME TAXES
Income before taxes for the years ended December 31, 1995, 1994, and 1993
included earnings from foreign operations of $12,242,000, $7,329,000, and
$4,838,000, respectively.
Income tax expense consists of the following:
<TABLE>
<CAPTION>
Years ended December 31
(In thousands) 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 6,618 $ 3,410 $ 1,994
State and local 148 1,031 398
Foreign 1,542 1,289 1,624
Benefit of net operating
losses (3,023) (4,830) (3,724)
Benefit of tax credits (948) - -
---------- ----------- ---------
$ 4,337 $ 900 $ 292
Deferred:
Federal $ (2,024) $ - $ -
---------- ----------- ----------
$ 2,313 $ 900 $ 292
---------- ----------- ----------
</TABLE>
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
Income tax expense differs from the amounts computed by applying the
federal statutory income tax rate to pretax income as a result of the following:
<TABLE>
<CAPTION>
Years ended December 31
(In thousands) 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed "expected" tax expense $ 9,287 $ 3,918 $ 2,261
Reduction in beginning of the year
valuation allowance (4,345) (2,046) (2,028)
Foreign income taxable at
different tax rate (2,743) (1,203) (21)
Income tax benefit attributable to
foreign sales corporation (675) - -
Other 789 231 80
---------- ----------- ----------
$ 2,313 $ 900 $ 292
---------- ----------- ----------
</TABLE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are presented below:
<TABLE>
<CAPTION>
December 31
(In thousands) 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Accrued expenses and reserves $ 10,409 $ 7,083
Net operating loss carryforwards 2,591 6,813
Tax credit carryforwards 7,000 4,063
----------- ----------
Total gross deferred tax assets 20,000 17,959
Less valuation allowance (10,242) (14,221)
----------- ----------
Net deferred tax assets $ 9,758 $ 3,738
----------- ----------
Deferred tax liability:
Plant and equipment, principally
due to differences in depreciation $ (7,734) $ (3,738)
----------- ----------
Total gross deferred tax liability (7,734) (3,738)
Net deferred tax asset $ 2,024 $ -
----------- ----------
</TABLE>
The net change in the total valuation allowance for the years ended December 31,
1995 and 1994 was a decrease of $3,979,000 and $6,604,000, respectively.
<TABLE>
<CAPTION>
At December 31, 1995, the Company had the following carryforwards for income tax
purposes:
(In thousands) Expires
- -------------------------------------------------------------------------------
<S> <C> <C>
Net operating loss:
Federal $ 1,000 2004-2005
State $ 3,400 1997
Foreign $ 9,900 No Expiration
Credits:
Federal research and other business credits $ 4,300 1998-2010
California research and other
business credits $ 2,000 No Expiration
Alternative minimum
tax credits $ 700 No Expiration
-------------------------
</TABLE>
Utilization of the federal net operating loss and credit carryforwards
incurred prior to 1991 is limited on an annual basis under the Tax Reform Act of
1986 as a result of the ownership change in 1990.
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
6. DEBT OBLIGATIONS
The Company's debt obligations are as follows:
<TABLE>
<CAPTION>
December 31
(In thousands) 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Related party borrowings $ 34,570 $ 34,570
Trade deferrals 1,597 2,177
Guaranteed floating rate
subordinated notes 3,117 3,248
Unfunded retirement costs 1,954 1,422
Capital lease obligations - 29
----------- ----------
Total debt 41,238 41,446
Less current portion 586 612
----------- ----------
Long-term portion $ 40,652 $ 40,834
Related party borrowings $ 34,570 $ 34,570
----------- ----------
Amounts due to other $ 6,082 $ 6,264
----------- ----------
</TABLE>
Borrowings from a related party are at a floating interest rate based on
AEG Capital Corporation's cost of securing commercial paper, 5.8% at December
31, 1995. The related party note is due in 1999.
The Company issued $3,601,000 long-term trade deferral notes bearing
interest at the 12-month London Interbank Offered Rate (LIBOR) plus .5% (6.00%
at December 31, 1995). The trade deferrals are guaranteed by AEG
Aktiengesellschaft (AEG AG), an affiliated company, principal payments commenced
in 1992, and the deferrals mature in 1997. These notes were issued as partial
compensation for trade claims.
The guaranteed floating rate subordinated notes bear interest at the
3-month LIBOR plus .5% and are due in 2005. The interest rate is fixed
annually (5.78% at December 31, 1995). The notes are guaranteed by AEG AG,
are subordinated to all other obligations of the Company, and are redeemable
at the Company's or AEG AG's option.
Debt (excluding unfunded retirement costs) at December 31, 1995,
matures according to the following schedule:
<TABLE>
<CAPTION>
(Dollars in thousands)
- -------------------------------------------------------------------------------
<S> <C>
1996 $ 586
1997 1,011
1998 -
1999 34,570
2000 -
Thereafter 3,117
----------
Total $ 39,284
----------
</TABLE>
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
7. GEOGRAPHIC AND INDUSTRY SEGMENT REPORTING
The Company is engaged primarily in the design, development, manufacture,
and sale of power and analog semiconductor products. No other separate class of
products or services constitutes more than 10% of net sales. Sales to the mass
storage and computer market represented approximately 24% of net sales in 1995,
29% in 1994, and 22% in 1993. Sales to the communication market increased to 12%
of net sales in 1995. One customer accounted for 13% of net sales in fiscal
1995. At December 31, 1995, accounts receivable from this customer totaled
$5,051,000.
The Company maintains manufacturing operations in the United States, Hong
Kong (through subcontractors), and Taiwan as well as a joint venture in China
and subsidiaries in the United Kingdom, Singapore, and Japan. Sales operations
in France and Italy were dissolved in 1994 due to synergies obtained within the
TEMIC Group.
Intercompany sales consist of products and services similar to those sold
to external customers. Such sales are accounted for at amounts that are above
cost and consistent with governing tax regulations. Identifiable assets are
those assets used in each geographic area. Corporate assets are principally cash
and equivalents and other miscellaneous corporate assets.
Information about the Company's operations
by geographic area is shown in the following table:
<TABLE>
<CAPTION>
Years ended December 31
(In thousands) 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales to External Customers:
North America $ 93,613 $ 81,383 $ 77,645
Europe and Africa 64,897 49,330 40,091
Japan 31,944 19,347 11,008
Asia Pacific 59,837 46,393 41,538
--------- ---------- ----------
$ 250,291 $ 196,453 $170,282
--------- ---------- ----------
Intercompany Sales (Eliminated in Consolidation):
North America $ 134,764 $ 117,300 $ 99,900
Europe 1,398 1,133 1,168
Japan 2,613 2,206 -
Asia Pacific 100,234 88,786 82,197
--------- ---------- ----------
$ 239,009 $ 209,425 $ 183,265
--------- ---------- ----------
Operating Income:
North America $ 18,019 $ 7,480 $ 5,739
Europe and Africa 1,716 1,120 763
Japan 97 105 -
Asia Pacific 10,413 6,647 5,941
Eliminations and adjustments (1,406) (1,204) (3,160)
--------- ---------- ----------
$ 28,839 $ 14,148 $ 9,283
--------- ---------- ----------
Identifiable Assets:
North America $ 133,232 $ 124,853 $ 119,001
Europe 18,679 13,875 9,280
Japan 342 646 -
Asia Pacific 58,063 44,596 50,897
--------- ---------- ----------
210,316 183,970 179,178
--------- ---------- ----------
Eliminations and adjustments (36,343) (42,095) (58,843)
Corporate assets 33,989 13,160 9,921
--------- ---------- ----------
Total assets $ 207,962 $ 155,035 $ 130,256
--------- ---------- ----------
</TABLE>
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
8. LEASES AND COMMITMENTS
At December 31, 1995, the future minimum commitments for
all non-cancelable operating leases are as follows:
<TABLE>
<CAPTION>
(In thousands)
- -------------------------------------------------------------------------------
<S> <C>
1996 $ 3,066
1997 919
1998 428
1999 94
2000 40
Thereafter 21
----------
Total minimum lease payments $ 4,568
----------
</TABLE>
The Company leases land, office facilities, and equipment under operating
leases. Operating rent expense was $4,511,000, $3,147,000, and $2,867,000 in
1995, 1994, and 1993, respectively.
The Company entered into product license agreements which provide, among
other things, that the Company make royalty payments based on sales of certain
products at royalty rates as specified in the agreement. The product license
agreements either have a fixed term or terminate upon expiration of the patents.
There is no contractual limit to royalty payments. Royalty expense under these
royalty agreements was $7,467,000, $6,208,000, and $6,528,000 in 1995, 1994, and
1993, respectively. Included in accrued liabilities are royalties payable of
$2.9 million and $2.8 million at December 31, 1995 and 1994, respectively.
9. EMPLOYEE BENEFIT PLANS
In 1991, the Company merged its United States Profit Sharing Plan with the
United States Tax Deferred Savings Plan. The new plan is called the Siliconix
incorporated Retirement Plan Trust (the "Plan").
The profit sharing element of the Plan provides for annual contributions by
the Company of up to 10% of consolidated income before taxes (as defined).
Vesting in the plan occurs ratably over a five-year period. Upon employee
termination, non-vested contributions are forfeited and reduce the Company's
current and/or future contributions to the plan. The Company's contributions for
1995, 1994, and 1993 were $2,242,000, $986,000, and $599,000, respectively. The
tax deferred savings element of the Plan allows eligible employees to contribute
up to 15% of their compensation. The Company matches a portion of each
participating employee's contribution. The Company's contributions were
$1,112,000, $967,000, and $863,000 in 1995, 1994, and 1993, respectively.
The Company maintains defined benefit pension plans in the United States
and Taiwan. The Company's United States defined benefit pension plan is for
employees who met specified age and service eligibility requirements on January
1, 1983. The Company's subsidiary in Taiwan has a defined benefit pension plan
that covers substantially all of its employees.
During 1994, the Europe Defined Benefit Plan was terminated. Per an
agreement with the participants of the Plan, all vested benefits as well as 40%
of the surplus (the amount by which Plan assets exceed the accumulated benefit
obligation) were paid out to the participants with the remainder remitted to the
Company, net of a 40% excise tax imposed by the UK's Inland Revenue Service.
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
The following table sets forth the plans' funded status and amounts recognized
in the Company's balance sheets:
<TABLE>
<CAPTION>
December 31
(In thousands) 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits obligation $ (659) $ (634)
Accumulated benefit obligation (1,955) (1,933)
Projected benefit obligation (PBO) $ (3,369) $ (3,792)
Plan assets at fair value 1,104 1,053
Plan assets less PBO (2,265) (2,739)
Unrecognized net loss 174 741
Adjustment to recognize minimum liability (450) (458)
Unrecognized net transition asset at:
January 1, 1987, recognized over 15 years 217 253
January 1, 1989, recognized over 15 years 532 593
----------- ----------
Accrued pension cost $ (1,792) $ (1,610)
- ----------------------------------------------------------------- ----------
</TABLE>
Plan assets consist primarily of guaranteed insurance contracts
and managed trusts. Net pension cost included the following components:
<TABLE>
<CAPTION>
Years ended December 31
(In thousands) 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost benefits earned
during the year $ 204 $ 229 $ 324
Interest cost on PBO 241 585 501
Actual (gain) loss on plan assets (68) 205 (1,588)
Net amortization and deferral 96 (832) 1,240
Loss on plan termination - 692 -
--------- ----------- ----------
Net pension expense $ 473 $ 879 $ 477
--------- ----------- ----------
Assumptions used were:
Discount rates 7 - 7.5% 6 - 7% 6 - 7%
Rates of increase in
compensation levels 6% 5 - 8% 5 - 8%
Expected long-term rate
of return on assets 7 - 7.5% 6 - 9% 6 - 9%
--------- ---------- ----------
</TABLE>
10. EMPLOYEE STOCK PLAN
From 1973 through the fourth quarter of 1990, the Board of Directors
authorized the sale of restricted common stock to certain key employees and
directors for initial payments below market values. Vested shares are subject to
the Company's lifetime right of first refusal to purchase the shares. In the
event the Company declines to purchase the shares, the difference between the
fair market value at the date of issue and the price paid by the employee or
director (the "delta") is paid to the Company. At December 31, 1995, 1994, and
1993, 102,389, 177,603, and 236,398, respectively, fully vested shares were
outstanding under this plan at a delta of $3.06 per share. During 1995, 1994,
and 1993, no shares were issued under this plan. During 1995, 1994, and 1993,
75,214, 58,795, and 84,167 vested shares were sold by employees resulting in
$230,155, $179,913, and $257,551 in payments, respectively, to the Company which
are included in additional paid-in-capital. During 1995, 1994, and 1993, no
vested shares were sold to the Company.
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
11. CONTINGENCIES
The Company is party to two environmental proceedings. The first involves
property that the Company vacated in 1972. The California Regional Water Quality
Board issued a cleanup and abatement order to both the Company and the current
owner of the property. The Company subsequently reached a settlement of this
matter with the current owner in which the current owner indemnifies the Company
against any liability that may arise out of any governmental agency actions
brought for environmental cleanup of the site, including liability arising out
of the current cleanup and abatement order. The second proceeding involves the
Company's current facility in Santa Clara. The Company is currently engaged in
certain remedial action and has accrued $400,000 for the estimated future costs
related to this matter at December 31, 1995.
In management's opinion, based on discussion with legal counsel and other
considerations, the ultimate resolution of the above-mentioned matters will not
have a material adverse effect on the Company's consolidated financial position
or results of operations.
The Company is engaged in discussions with various other parties regarding
patent licensing and cross patent licensing issues. In the opinion of
management, the outcome of these discussions will not have a material adverse
effect on the financial position or overall trends in the results of operations
of the Company.
12. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Years ended December 31
(In thousands) 1995 1994 1993
- ------------------------------------------------- ----------- ----------
<S> <C> <C> <C>
Cash flow information:
Interest paid $ 2,322 $ 1,691 $ 2,131
Income taxes paid 2,583 293 260
--------- ---------- ----------
</TABLE>
HISTORY OF STOCK PRICE RANGE
Siliconix incorporated common stock is traded on the NASDAQ Stock Market
under the symbol SILI. Presented below are the highest and lowest "last trade"
stock prices for the indicated quarters.
<TABLE>
<CAPTION>
High Low High Low
- ---------------------------------------------------- -------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
4th Quarter 1995 $ 40 1/2 $ 21 1/2 4th Quarter 1994 $ 13 1/2 $ 9
3rd Quarter 1995 34 1/2 18 3/4 3rd Quarter 1994 11 6 1/2
2nd Quarter 1995 19 1/4 12 2nd Quarter 1994 7 1/2 6 1/4
1st Quarter 1995 14 11 1/2 1st Quarter 1994 9 1/4 6 5/8
--------------------- ---------------------------
</TABLE>
<PAGE>
SUBSIDIARIES OF SILICONIX INCORPORATED
<TABLE>
<CAPTION>
Jurisdiction Percent
Subsidiary of Incorporation Owned
---------- ---------------- -----
<S> <C> <C>
1. Siliconix Limited United Kingdom 100%
2. Siliconix (Hong Kong) Limited Hong Kong 100%
3. Siliconix (Taiwan) Limited Taiwan 100%
4. TEMIC Japan K.K. Japan 100%
5. TEMIC (S) PTE. LTD. Singapore 100%
6. TEMIC North America, Inc. United States 100%
(New Jersey)
7. Shanghai Simconix Co. Ltd. The People's Republic of China 50%
</TABLE>
EXHIBIT 22
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 10,513
<SECURITIES> 0
<RECEIVABLES> 46,727
<ALLOWANCES> (5,526)
<INVENTORY> 26,740
<CURRENT-ASSETS> 117,799
<PP&E> 201,174
<DEPRECIATION> (117,324)
<TOTAL-ASSETS> 207,962
<CURRENT-LIABILITIES> 77,034
<BONDS> 0
0
0
<COMMON> 100
<OTHER-SE> 90,176
<TOTAL-LIABILITY-AND-EQUITY> 207,962
<SALES> 250,291
<TOTAL-REVENUES> 250,291
<CGS> 152,105
<TOTAL-COSTS> 69,347
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,572
<INCOME-PRETAX> 26,534
<INCOME-TAX> 2,313
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,221
<EPS-PRIMARY> 2.43
<EPS-DILUTED> 2.43
</TABLE>
