<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 28, 1997
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-3698
SILICONIX INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 94-1527868
(State or other jurisdiction (I.R.S. Employer
of incorporation Identification No.)
or organization)
2201 Laurelwood Road, Santa Clara, California 95054
(Address of principal executive offices)
Registrant's telephone number including area code (408) 988-8000
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 the number of shares outstanding of each of the registrant's
classes of common stock:
Common stock, $0.01 par value -- 9,959,680 outstanding shares as
of November 1, 1997.
1
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SILICONIX INCORPORATED
TABLE OF CONTENTS TO FORM 10-Q
Part I. Financial Information Page No.
Item 1 Financial Statements (Unaudited)
Consolidated statements of operations for the three
months and nine months ended September 28, 1997 3
and September 29, 1996
Consolidated balance sheets as of September 28, 1997
and December 31, 1996 4
Consolidated statements of cash flows for the nine
months ended September 28, 1997 and September 29, 1996 5
Notes to consolidated financial statements 6-7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
Part II. Other Information
Item 6 Exhibits and Reports on Form 8-K 11
Signature 12
2
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PART 1
SILICONIX INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 28, September 29, September 28, September 29,
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 80,960 $ 62,033 $ 231,196 $ 196,173
Cost of sales 48,848 37,771 141,779 116,736
--------------------------------------------------------------------------
Gross profit 32,112 24,262 89,417 79,437
Research and development 4,026 5,095 12,549 16,131
Selling, marketing, and administration 16,748 11,847 45,546 40,308
--------------------------------------------------------------------------
Operating income 11,338 7,320 31,322 22,998
Interest expense 590 592 1,750 1,774
Other (income) expense - net 12 (158) (7) (350)
--------------------------------------------------------------------------
Income before taxes 10,736 6,886 29,579 21,574
Income taxes 2,362 998 6,232 2,613
--------------------------------------------------------------------------
Net income $ 8,374 $ 5,888 $ 23,347 $ 18,961
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Net income per share $ 0.84 $ 0.59 $ 2.34 $ 1.90
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Shares used to compute earnings per share 9,960 9,960 9,960 9,960
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
3
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SILICONIX INCORPORATED
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
September 28, December 31,
(IN THOUSANDS) 1997 1996
- --------------------------------------------------------------------------------
(UNAUDITED)
Assets
- --------------------------------------------------------------------------------
Current assets:
Cash and equivalents $ 10,577 $ 12,201
Short term investment with affiliate 6,044 12,136
Accounts receivable, less allowances 42,809 37,044
Accounts receivable from affiliates 16,593 14,802
Inventories 35,986 30,162
Other current assets 17,502 8,044
Deferred income taxes 7,314 5,314
---------------------------
Total current assets 136,825 119,703
---------------------------
Property, plant and equipment, at cost:
Land 1,174 1,183
Buildings and improvements 43,765 42,672
Machinery and equipment 208,193 187,791
---------------------------
253,132 231,646
Accumulated depreciation (136,307) (124,524)
---------------------------
Net property, plant and equipment 116,825 107,122
Other assets 14,849 11,844
---------------------------
Total assets $ 268,499 $ 238,669
---------------------------
---------------------------
Liabilities and Shareholders' Equity
- --------------------------------------------------------------------------------
Current liabilities:
Current portion of debt obligations $ - $ 1,041
Accounts payable 30,365 26,286
Accounts payable to affiliates 9,875 11,115
Accrued payroll and related compensation 13,909 13,614
Accrued liabilities 31,902 29,418
---------------------------
Total current liabilities 86,051 81,474
Long-term related party debt 34,570 34,570
Long-term debt, less current portion 3,879 4,859
Deferred income taxes 4,148 1,148
---------------------------
Total liabilities 128,648 122,051
---------------------------
Shareholders' equity:
Common stock 100 100
Additional paid-in-capital 59,458 59,440
Retained earnings 80,882 57,535
Accumulated translation adjustments (589) (457)
---------------------------
Total shareholders' equity 139,851 116,618
---------------------------
Total liabilities and shareholders' equity $ 268,499 $ 238,669
---------------------------
---------------------------
See accompanying notes to consolidated financial statements.
4
<PAGE>
SILICONIX INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
- --------------------------------------------------------------------------------
Nine Months Ended Nine Months Ended
September 28, September 29,
(IN THOUSANDS) 1997 1996
- --------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 23,347 $ 18,961
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 16,676 12,865
Deferred income taxes 1,000 (1,900)
Undistributed earnings from joint venture (2,265) (1,514)
Payment of pension benefits (1,394) (23)
Other non-cash expenses 481 377
Changes in:
Accounts receivable (5,438) 8,245
Accounts receivable from affiliates (1,791) (1,684)
Inventories (5,822) (5,180)
Other current assets (8,326) (1,469)
Accounts payable 4,036 (8,399)
Accounts payable to affiliates (1,240) (1,445)
Accrued liabilities 2,707 183
----------------------------
Net cash provided by operating activities 21,971 19,017
----------------------------
Cash flows from investing activities:
Purchase of property, plant and equipment (24,610) (31,829)
Investment in joint venture - (2,053)
Short term investment with affiliate 6,092 12,768
Purchase of other assets (3,750) (2,340)
----------------------------
Net cash used in investing activities (22,268) (23,454)
----------------------------
Cash flows from financing activities:
Repayment of short term debt (999) -
Effect of exchange rate changes on
cash and equivalents (328) 123
----------------------------
Net decrease in cash and equivalents (1,624) (4,314)
Cash and equivalents:
Beginning of period 12,201 10,513
----------------------------
End of period $ 10,577 $ 6,199
----------------------------
----------------------------
See accompanying notes to consolidated financial statements.
5
<PAGE>
SILICONIX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
In the opinion of the management of the Company, the consolidated financial
statements appearing herein contain all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of the results for, and as
of the end of, the periods indicated therein. These statements should be read
in conjunction with the Company's December 31, 1996 consolidated financial
statements and notes thereto. The results of operations for the first nine
months of 1997 are not necessarily indicative of the results to be expected for
the full year.
NOTE 2. INVENTORIES
The components of inventory consist of the following:
September 28, December 31,
1997 1996
---- ----
(In thousands)
Finished goods $ 4,715 $ 6,105
Work-in-process 24,686 18,838
Raw materials 6,585 5,219
----------- -----------
$ 35,986 $ 30,162
----------- -----------
----------- -----------
NOTE 3. CONTINGENCIES
The Company is party to two environmental proceedings. The first involves
property that the Company vacated in 1972. The California Regional Water Quality
Control Board (RWQCB) 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
RWQCB issued a cleanup and abatement order based on the discovery of
contamination of both the soil and the groundwater on the property by certain
chemical solvents. The Company is currently engaged in certain remedial action
and has accrued $750,000 for the estimated future costs related to this matter.
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 condition
or results of operations.
The Company is engaged in discussions with various 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
Company's consolidated financial condition or overall trends in the results of
operations.
6
<PAGE>
SILICONIX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4. RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." SFAS
No. 128 requires the presentation of basic earnings per share ("EPS") and, for
companies with complex capital structures, diluted EPS. SFAS No. 128 is
effective for annual and interim periods ending after December 15, 1997. The
Company expects that basic EPS will not differ materially from net income per
share as presented in the accompanying consolidated financial statements.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," and SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." SFAS No. 130 establishes standards
for reporting and presentation of comprehensive income and its components and is
effective for fiscal years beginning after December 15, 1997. SFAS No. 131,
effective for fiscal years beginning after December 15, 1997, establishes
standards for an enterprise to report information about operating segments in
annual financial statements and interim financial reports. The Company is
presently analyzing these statements and has not yet determined the impact on
the Company's financial statements.
7
<PAGE>
ITEM 2.
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 in the third quarter of 1997 increased to a record $81.0
million, compared with $62.0 million in the third quarter of 1996. For the
first nine months of 1997, revenues were $231.2 million, compared with $196.2
million for the first nine months of 1996. Increased demand from the
telecommunications market for power MOSFET products accounted for much of the
revenue growth in the third quarter and first nine months of fiscal 1997.
Sales of power MOSFETs grew by 39% from the third quarter of last year and
again achieved record quarterly revenues. Power MOSFET sales for the first
nine months of 1997 increased 25% from the first nine months of 1996. Sales
in Europe and North America were up 32% and 37%, respectively, from the third
quarter of 1996. Revenues in Asia Pacific, excluding Japan, were up 53% with
revenues in Japan down somewhat from the third quarter of 1996. Sales in
Europe and North America were up 31% and 21%, respectively, from the first
nine months of 1996. Revenues in Asia Pacific, excluding Japan, were up 39%
with revenues in Japan down somewhat from the first nine months of 1997. The
revenue decrease in Japan is primarily due to intense pricing competition,
caused in part by excess DRAM capacity in Japan which has been converted to
PowerMOS production. In addition, the weakness of the yen against the dollar
during 1997 has also contributed to the revenue decrease in Japan.
Gross margin increased to 40% in the third quarter of 1997 from 39% in
the third quarter of 1996. Gross margin for the first nine months of 1997
decreased to 39% from 40% for the same period in 1996. The decrease in
year-to-date margins is primarily due to pricing pressures worldwide, but
especially in Japan, as well as start-up costs associated with the leased
fabrication facility in Itzehoe, Germany. As production at the leased
fabrication facility in Itzehoe, Germany, reaches its planned capacity by
mid-1998, we anticipate a favorable impact on manufacturing costs, resulting
in an increase in gross margin related to this area.
Research and development as a percentage of revenues decreased to 5% for
the third quarter of 1997 from 8% for the third quarter of 1996. Research and
development as a percentage of revenues was 5% and 8% for the first nine months
of 1997 and 1996, respectively. The Company remains committed to the
development of future products and continues to invest in power MOSFET and power
IC technology as well as product development. Planned research and development
expenditures for 1997 are expected to be below those of 1996.
Selling, marketing, and administration expenses as a percentage of
revenues increased to 21% for the third quarter of 1997 from 19% for the
third quarter of 1996. However, selling, marketing, and administration
expenses as a percentage of revenues for the first nine months of 1997
decreased to 20% from 21% for the same period of 1996. Continued economies
of scale and the Company's cost reduction programs will be offset in the
second half of the year by incremental spending in anticipation of 1998
growth. The Company anticipates 1997 selling, marketing, and administration
expenses as a percentage of revenues to be comparable to 1996 levels.
8
<PAGE>
Interest expense for the first nine months of 1997 remained flat at $1.8
million compared to the first nine months of 1996, as short-term market interest
rates have not fluctuated significantly over the past year.
Income tax expense increased in the third quarter of 1997 to $2.4 million
from $1.0 million for the third quarter of 1996. For the first nine months of
1997, income tax expense was $6.2 million as compared to $2.6 million for the
first nine months of 1996. This increase is due to the depletion of net
operating loss carryforwards at the end of 1996 and the increase in earnings
before taxes during the first nine months of 1997.
During its quarterly assessment of deferred income taxes, management
reduced the valuation allowance on deferred income tax assets. This decision
to recognize additional deferred income tax assets 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 ability
to realize the deferred income tax assets include positive earnings and
continued increases in gross profits for the past three years.
The expectations for the future are 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 is 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" in the Management's
Discussion and Analysis of Financial Condition and Results of Operations section
of the Company's 1996 Annual Report on Form 10-K, which is incorporated herein
by reference.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operations were $22.0 million for the nine-month period
ended September 28, 1997 as compared to $19.0 million for the nine-month period
ended September 29, 1996. Cash and equivalents decreased by $1.6 million and
the short term investment with affiliate decreased by $6.1 million from December
31, 1996 due to large expenditures in the first nine months of 1997. These
included capital expenditures, royalty payments, commissions, yearly management
and employee bonuses, the 401(k) company match, and profit sharing
contributions. Management expects 1997 cash flows from operations to be
sufficient to fund investments in capital expenditures and research and
development.
Accounts receivable increased $5.8 million or 16% from December 31, 1996.
This increase is a result of record revenues earned in the third quarter of
1997. Revenues for the third quarter of 1997 totaled $81.0 million, compared
with $72.8 million for the fourth quarter of 1996. In addition, there is
continuing revenue growth in Europe and longer payment terms are typically
afforded to European customers.
9
<PAGE>
Net affiliate receivables/payables increased $3.0 million from December 31,
1996 mainly due to timing differences of cash remitted to our unconsolidated
affiliates. In addition, there was an increase in selling and administrative
expenses incurred on behalf of our unconsolidated affiliates, which are
reimbursed at cost.
Inventories increased $5.8 million or 19% from December 31, 1996
primarily due to the addition of manufacturing capacity, including the leased
Itzehoe, Germany fabrication facility, in order to achieve 1997 planned
revenue.
Other current assets increased $9.5 million from December 31, 1996. The
majority of this increase is due to purchases of equipment and supplies on
behalf of our subcontractors in Taiwan and Germany, which are reimbursed at
cost.
Capital expenditures were $24.6 million in the first nine months of 1997,
compared to $31.8 million in the first nine months of 1996. These expenditures
were mainly related to additions for plant capacity expansion. Capital spending
in 1997, funded from cash provided by operating activities, is expected to
approximate the 1996 level.
Other assets increased $3.0 million or 25% from December 31, 1996 due to
an increase in the Company's 50% share in earnings in the investment in
Simconix, the Company's joint venture in The People's Republic of China.
Current liabilities increased $4.6 million or 6% from December 31, 1996.
This increase is mainly due to the increase in income taxes payable associated
with high revenue growth during the first nine months of 1997. In addition, the
difference is attributed to the timing of cash remittances made to our
subcontractors in Taiwan and Germany.
Long-term debt decreased $1.0 million or 20% from December 31, 1996 mainly
due to the payment of benefits under our Taiwan pension plan for employees
electing early retirement.
SAFE HARBOR STATEMENT
"Safe Harbor" Statement under the Private Securities Litigation Reform Act
of 1995: With the exception of historical information, the matters discussed in
this Form 10-Q are forward-looking statements that involve risks and
uncertainties including, but not limited to, economic conditions, product demand
and industry capacity, competitive products and pricing, manufacturing
efficiencies, new product development, availability of raw materials and
critical manufacturing equipment, the regulatory and trade environment, and
other risks indicated in filings with the Securities and Exchange Commission.
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed herewith:
10.13 Special Retention Bonus Plan (1998) of Siliconix
incorporated
10.14 Amendment No. 1 to Change-in-Control Severance
Plan of Siliconix incorporated
10.15 Amendment No. 1 to Siliconix Key Professional
Incentive Bonus Plan
10.16 Amendment No. 2 to Siliconix Key Professional
Incentive Bonus Plan
10.17 Amendment No. 1 to Siliconix Key Professional
Performance Unit Plan
10.18 Amendment No. 2 to Siliconix Key Professional
Performance Unit Plan
27.1 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended
September 28, 1997.
11
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SIGNATURES
Pursuant to the requirements 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.
SILICONIX INCORPORATED
Date: November 12, 1997 By: /s/Juergen F. Biehn
-------------------
Juergen F. Biehn
Senior Vice President and
Chief Financial Officer
12
<PAGE>
SPECIAL RETENTION BONUS PLAN
OF SILICONIX INCORPORATED
Effective as of January 1, 1998
INTRODUCTION
This Special Retention Bonus Plan was established by Siliconix incorporated
effective as of January 1, 1998. The purpose of the Plan is to provide one or
more retention bonuses to key employees who remain in employment in good
standing through June 30, 1998. A monthly bonus is payable and, for those who
remain employed in good standing at the end of the Plan's term, an additional
lump-sum deferred bonus.
SELECTION AS A PARTICIPANT IN THE SPECIAL RETENTION BONUS
You have been selected by the Siliconix Board of Directors to participate in the
Special Retention Bonus Plan.
Monthly bonuses are potentially payable for each month from January 1998 through
June 1998. To be eligible for a monthly bonus, you must be a Siliconix employee
for the entire month. You will be eligible to receive a deferred portion of
your bonus provided that you are a Siliconix employee on June 30, 1998.
WHO IS NOT ELIGIBLE TO RECEIVE A RETENTION BONUS
If you are not employed in good standing on the last day of a calendar month,
you will not receive a bonus for that month. Similarly, if you are not employed
in good standing on June 30, 1998, you will not receive the deferred portion of
your bonus. "In good standing" means that you are either actively at work or on
an approved vacation or leave of absence on the last scheduled workday on or
before the last day of the calendar month; provided, however, that you do not
have any pending written disciplinary actions in your personnel file.
Notwithstanding the foregoing, however, if your employment is terminated by the
Company without "Cause" (see next paragraph) after a "Change in Control" (see
OTHER INFORMATION below) has occurred and before June 30, 1998, you will be
considered employed through that date, for retention bonus calculation only.
In addition, if your employment is terminated by the Company for "Cause," you
will not receive any bonus payments that have not already been paid at the time
your employment ends. "Cause" means an employee's willful failure to
substantially perform the employee's job duties, other than a failure resulting
from the employee's complete or partial incapacity due to physical or mental
illness or impairment, a willful act by the employee that constitutes gross
misconduct and
13
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that is harmful to the Company or a material and willful violation of a federal
or state law or regulation applicable to the business of the Company.
AMOUNT OF THE RETENTION BONUS
All bonuses payable under this Plan are based on a percentage of your annual
base salary rate in effect as of January 1, 1998. See the attached Bonus
Payment Worksheet, which illustrates the percentage of your annual base salary
rate on which your bonuses are based, as well as a payment schedule.
TIME AND FORM OF PAYMENT
Each monthly bonus you earn will be paid to you in a single cash sum as soon as
reasonably practicable after the close of the month. If you earn the deferred
portion of your bonus, it will be paid to you as soon as reasonably practicable
after June 30, 1998.
DEATH
If you die before your employment terminates and before June 30, 1998, then you
will be deemed to have continued employment in good standing until the end of
the month in which your death occurs, so that you will earn a monthly bonus for
that month. In addition, you will be deemed to have earned a deferred bonus
equal to 100% of the total monthly bonuses you earned, including the monthly
bonus deemed earned for the month of your death.
All earned bonuses that had not been paid to you before your death will be paid
to your surviving spouse or, if you leave no surviving spouse, to your estate.
TAXES
Before paying bonuses, Siliconix will withhold all appropriate federal, state,
local and foreign income and employment taxes.
PARACHUTE PAYMENT LIMITATIONS
In the unlikely event that the Company determines that any payment of any type
to or for the benefit of an employee, under this Plan or otherwise, by the
Company or any of its subsidiaries, parent companies, affiliates or successors,
would be deemed an "excess parachute payment" under Internal Revenue Code
section 280G, then the Company (or any of its subsidiaries, parent companies,
affiliates or successors) may reduce such payments to the extent it deems
14
<PAGE>
necessary to avoid having payments characterized as excess parachute payments.
As a general rule, payments that are deemed to be contingent upon a change in
control are considered to be excess parachute payments once the sum of all
contingent payments reaches three times an employee's average annual
compensation.
BONUS RIGHTS CANNOT BE ASSIGNED
The rights of any person to bonus payments under this Plan may be not be made
subject to option or assignment, either by voluntary or involuntary assignment
or by operation of law, including bankruptcy, garnishment, attachment or other
creditor's process, and any act in violation of this rule shall be void.
OTHER INFORMATION
The Company has established the Plan for the benefit of eligible employees of
the Company. The Company reserves the right to modify, suspend or terminate
this Plan at any time; provided, however, that if a "Change in Control" is
consummated before June 30, 1998, the Plan may not be modified, suspended or
terminated in any respect whatsoever after the consummation of said Change in
Control. "Change in Control" is any corporate transaction that results in
Daimler-Benz AG owning, directly or indirectly, less than 50% of the voting
common stock of Siliconix incorporated.
All bonuses are paid from the general assets of the Company.
Nothing in the Plan may be deemed to give any individual a right to remain in
the employ of Siliconix or affect the right of Siliconix to terminate an
individual's employment at any time with or without cause.
Any dispute or controversy in connection with this Plan shall be settled
exclusively by arbitration in Santa Clara County, California, in accordance with
the rules of the American Arbitration Association. Judgment may be entered on
the arbitrator's award in any court having jurisdiction. Punitive damages shall
not be awarded.
This document is a complete statement of this Plan and supersedes all prior
plans, representations and proposals, written or oral, relating specifically to
this Plan. Neither the Company nor its subsidiaries, parent companies,
affiliates or successors shall be bound by or liable to any person for any
representation, promise or inducement made by any employee or agent that is not
embodied in this document. This document shall be construed and enforced in
accordance with California law.
15
<PAGE>
AMENDMENT NO. 1 TO
CHANGE-IN-CONTROL SEVERANCE PLAN
OF SILICONIX INCORPORATED
The Change-in-Control Severance Plan of Siliconix incorporated dated as of
February 1, 1997 is hereby amended as follows, effective as of September 15,
1997:
1. INTRODUCTION, PARAGRAPH 2. This paragraph is hereby amended to read
in full as follows:
"For purposes of this Plan, a "Change in Control" of Siliconix is any
corporate transaction that results in Daimler-Benz AG owning, directly
or indirectly, less than 50% of the voting common stock of Siliconix
incorporated. If no Change in Control occurs before June 30, 1998,
then the Plan automatically terminates on June 30, 1998. If a Change
in Control takes place before June 30, 1998, then the Plan will apply
to specified employment terminations that occur within the two-year
period following the date of the Change in Control."
Dated: September 15, 1997 SILICONIX INCORPORATED
By /s/ Richard J. Kulle
-----------------------
Richard J. Kulle
President & CEO
16
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AMENDMENT NO. 1 TO
SILICONIX KEY PROFESSIONAL INCENTIVE BONUS PLAN
The Siliconix Key Professional Incentive Bonus Plan is hereby amended as
follows, effective as of January 1, 1996:
1. The fifth sentence of Article VIII on page 5 of the Plan is deleted
and the following provisions are inserted in its place:
"The deferral amounts shall be recorded by the Company in an account in the
name of the participant which account also shall be credited with interest
monthly from the date the bonus award is credited to the participant's
account until final distribution of the account at a rate equivalent to the
six-month United States Treasury Bill rate on the last business day of the
preceding Plan Year. The Company may establish a Rabbi Trust for the
purpose of retaining assets set aside for payment of all or a portion of
the deferred amounts and credited interest ("benefits"). Any benefits not
paid from the Rabbi Trust shall be paid from the Company's general funds,
and any benefits paid from the Rabbi Trust shall be credited against and
reduce by a corresponding amount the Company's liability under the Plan.
If the participant dies prior to receiving his/her entire account balance,
the balance of his/her account as of the participant's date of death shall
be paid to the person(s) designated as the participant's beneficiary under
the Siliconix incorporated Retirement Plan, and if there is none, to the
participant's estate."
2. The last sentence of Paragraph B of Article IX on page 6 of the Plan
is amended in its entirety to read as follows:
"If a participant's employment terminates by reason of death, payment of
the award shall be made to the person(s) designated as the participant's
beneficiary under the Siliconix incorporated Retirement Plan, and if there
is none, to the participant's estate."
This Amendment No. 1 is executed effectively as of January 1, 1996.
SILICONIX INCORPORATED
By/s/ Richard J. Kulle
-----------------------
Richard J. Kulle
President & CEO
17
<PAGE>
AMENDMENT NO. 2 TO
SILICONIX KEY PROFESSIONAL INCENTIVE BONUS PLAN
The Siliconix Key Professional Incentive Bonus Plan is hereby amended as
follows, effective as of September 15, 1997:
1. A new Article X is hereby added to the Siliconix Key Professional
Incentive Bonus Plan, to read in full as follows:
"X. CHANGE IN CONTROL
A. DEFINITION
"Change in Control" is any corporate transaction that results in
Daimler-Benz AG owning, directly or indirectly, less than 50% of
the voting common stock of Siliconix incorporated.
B. CHANGE IN CONTROL IN 1997
If a change in control is consummated in 1997, bonuses for the
1997 calendar year will be paid in full as soon as practicable
after the consummation of the change in control. Bonuses will be
computed on the assumption that the latest Siliconix Forecast for
1997 represents the actual results for 1997, and the
participants' personal goals will be evaluated as of the date of
consummation of the change in control. In no event, however,
will an employee receive a larger bonus in the event of a change
in control than he or she would have received had there been no
change in control and bonuses had been paid as usual in February
1998.
C. CHANGE IN CONTROL IN 1998
If a change in control is consummated in 1998, participants will
be paid a pro rata share of their 1998 bonus for the period from
January 1, 1998 to the date of consummation of the change in
control. The pro rata portion of the participants' bonuses will
be paid as soon as practicable after the consummation of the
change in control. Bonuses will be computed on the assumption
that the latest Siliconix Forecast for 1998 represents the actual
results for 1998, and the participants' personal goals will be
evaluated as of the date of consummation of the change in
control. The remaining share of the participants' bonuses (from
the date of consummation of the change in control to December 31,
1998) will be paid in the same manner and at the same time as if
there had been no change in control. Bonuses will be computed in
the usual way, and the amounts previously paid after consummation
of the change in control will be deducted from the payments to be
made in February 1999.
18
<PAGE>
D. AMENDMENT OR TERMINATION OF PLAN IN 1998
Notwithstanding any other provision hereof, if a change in
control is consummated in 1998, this Siliconix Key Professional
Incentive Bonus Plan may not, prior to January 1, 1999, be (i)
terminated or (ii) amended in such a way that any participant's
bonus hereunder is adversely affected in any manner whatsoever by
such amendment."
2. The foregoing Article X will apply to all participants in the
Siliconix Key Professional Incentive Bonus Plan, regardless of whether they are
participating as part of a functional unit, part of a product unit, or
otherwise.
3. The foregoing Article X supersedes and is controlling over all other
provisions of the Siliconix Key Professional Incentive Bonus Plan. To the
extent that any other provision of the Siliconix Key Professional Incentive
Bonus Plan may be inconsistent with any provision of the foregoing Article X,
the said provision of Article X will prevail and will be controlling over said
inconsistent other provision.
Dated: September 15, 1997 SILICONIX INCORPORATED
By /s/ Richard J. Kulle
--------------------------
Richard J. Kulle
President & CEO
19
<PAGE>
AMENDMENT NO. 1 TO
SILICONIX KEY PROFESSIONAL PERFORMANCE UNIT PLAN
The Siliconix Key Professional Performance Unit Plan is hereby amended as
follows, effective as of January 1, 1996:
1. Paragraph E of Article II on page 3 of the Plan is amended in its
entirety to read as follows:
"Payments may be paid out as earned as the Chairman of the Board in his
discretion deems appropriate. A participant may elect to defer up to 100%
of his/her award. The election to defer must be made in writing prior to
the start of the performance cycle in which the award is to be earned. The
deferral amounts shall be recorded by the Company in an account in the name
of the participant which account also shall be credited with interest
monthly from the date the bonus award is credited to the participant's
account until final distribution of the account at a rate equivalent to the
six-month United States Treasury Bill rate on the last business day of the
preceding calendar year. The Company may establish a Rabbi Trust for the
purpose of retaining assets set aside for payment of all or a portion of
the deferred amounts and credited interest ("benefits"). Any benefits not
paid from the Rabbi Trust shall be paid from the Company's general funds,
and any benefits paid from the Rabbi Trust shall be credited against and
reduce by a corresponding amount the Company's liability under the Plan.
If the participant dies prior to receiving his/her entire account balance,
the balance of his/her account as of the participant's date of death shall
be paid to the person(s) designated as the participant's beneficiary under
the Siliconix incorporated Retirement Plan, and if there is none, the
participant's estate. The deferral election, made prior to each
performance cycle, may be in one-year increments up to five years, cannot
be changed once elected, and will be paid in one lump sum at the end of the
specified period."
2. The first sentence of Paragraph A of Article III on page 4 of the Plan
is amended in its entirety to read as follows:
"The Chairman of the Board of Directors and the Board Compensation
Committee shall have 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 they deem necessary or advisable to carry out the provisions
of the plan."
3. The second sentence of Paragraph B of Article III on page 4 of the
Plan is amended in its entirety to read as follows:
"If a participant's employment terminates by reason of death, payment of
the award shall be made to the person(s) designated as the participant's
beneficiary
20
<PAGE>
under the Siliconix incorporated Retirement Plan, and if there is none, the
participant's estate."
This Amendment No. 1 is executed effective as of January 1, 1996.
SILICONIX INCORPORATED
By/s/ Richard J. Kulle
------------------------------
Richard J. Kulle
President & CEO
21
<PAGE>
AMENDMENT NO. 2 TO
SILICONIX KEY PROFESSIONAL PERFORMANCE UNIT PLAN
The Siliconix Key Professional Performance Unit Plan is hereby amended as
follows, effective as of September 15, 1997:
1. A new Article III is hereby added to the Siliconix Key Professional
Performance Unit Plan, to read in full as follows:
"III. CHANGE IN CONTROL
A. DEFINITION
"Change in Control" is any corporate transaction that
results in Daimler-Benz AG owning, directly or indirectly,
less than 50% of the voting common stock of Siliconix
incorporated.
B. CHANGE IN CONTROL IN 1997
If a change in control is consummated in 1997, bonuses under
the Plan for the 1995-1997 period will be paid in full as
soon as practicable after the consummation of the change in
control. Bonuses will be computed on the assumption that
the latest Siliconix Forecast for 1997 represents the actual
results for 1997. In no event, however, will an employee
receive a larger bonus in the event of a change of control
than he or she would have received had there been no change
in control and bonuses had been paid as usual in February
1998.
C. CHANGE IN CONTROL IN 1998
If a change in control is consummated in 1998, participants
will be paid a pro rata share of specified percentages of
their bonuses to be received under the Plan, for the period
from January 1, 1998 to the date of consummation of the
change in control. The following percentages of the bonuses
for the respective three-year periods will be paid:
- 100% of the bonus for the 1996-1998 period
- 66-2/3% of the bonus for the 1997-1999 period
- 33-1/3% of the bonus for the 1998-2000 period
The pro rata portion of the participants' bonuses will be
paid as soon as practicable after the consummation of the
change in control. Bonuses will be computed on the
assumption that the latest Siliconix Forecast for 1998
represents the actual results for 1998, and that Siliconix
achieved 100% of its corporate goals for 1999 and 2000. The
remaining share of the
22
<PAGE>
participants' bonuses (from the date of consummation of the
change in control to December 31, 1998) will be paid in the
same manner and at the same time as if there had been no
change in control. Bonuses will be computed in the usual
way, and the portions of the amounts previously paid after
consummation of the change in control that were allocable to
the 1996-1998, 1997-1999 and 1998-2000 periods,
respectively, will be deducted from the payments to be made
in February 1999, February 2000 and February 2001.
D. AMENDMENT OR TERMINATION OF PLAN IN 1998
Notwithstanding any other provision hereof, if a change in
control is consummated in 1998, this Siliconix Key
Professional Performance Unit Plan may not, prior to January
1, 1999, be (i) terminated or (ii) amended in such a way
that any participant's bonus hereunder is adversely affected
in any manner whatsoever by such amendment."
2. The foregoing Article III supersedes and is controlling over all other
provisions of the Siliconix Key Professional Performance Unit Plan. To the
extent that any other provision of the Siliconix Key Professional Performance
Unit Plan may be inconsistent with any provision of the foregoing Article III,
the said provision of Article III will prevail and will be controlling over said
inconsistent other provision.
Dated: September 15, 1997 SILICONIX INCORPORATED
By /s/ Richard J. Kulle
-----------------------
Richard J. Kulle
President & CEO
23
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<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-28-1997
<CASH> 10,577
<SECURITIES> 0
<RECEIVABLES> 50,595
<ALLOWANCES> (7,786)
<INVENTORY> 35,986
<CURRENT-ASSETS> 136,825
<PP&E> 253,132
<DEPRECIATION> (136,307)
<TOTAL-ASSETS> 268,499
<CURRENT-LIABILITIES> 86,051
<BONDS> 0
0
0
<COMMON> 100
<OTHER-SE> 139,751
<TOTAL-LIABILITY-AND-EQUITY> 268,499
<SALES> 231,196
<TOTAL-REVENUES> 231,196
<CGS> 141,779
<TOTAL-COSTS> 58,095
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<INTEREST-EXPENSE> 1,750
<INCOME-PRETAX> 29,579
<INCOME-TAX> 6,232
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<NET-INCOME> 23,347
<EPS-PRIMARY> 2.34
<EPS-DILUTED> 2.34
</TABLE>
