<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
[NO FEE REQUIRED]
For the fiscal year ended December 31, 1997
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
$81,400,000, based upon the closing price for the registrant's Common Stock
on March 20, 1998 ($41.875).
The number of shares of the registrant's Common Stock, $0.01 par value,
outstanding at March 20, 1998 was 9,959,680.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Siliconix incorporated 1997 Annual Report to
Shareholders: Parts I, II, and IV.
2. Portions of the definitive Proxy Statement dated April 30, 1998 to be
filed with the Securities and Exchange Commission on or about April 30,
1998, pursuant to Section 14 of the Securities Exchange Act of 1934, in
connection with the 1998 Annual Meeting of Shareholders of Siliconix
incorporated: Part III.
<PAGE>
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
communications, computer, and automotive markets; additionally, many of the
Company's products are also used in instrumentation and industrial
applications.
Founded in 1962, Siliconix uses its advanced technology and applications
expertise to develop value-added products for power management and
conversion. These products serve two types of markets. The first type,
represented by the communications and computer markets, exhibits 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
other type, represented by the automotive market, exhibits 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.
Siliconix was a member of TEMIC Semiconductors, a division of the
Daimler-Benz microelectronics consortium, for several years. On December 16,
1997, Daimler-Benz announced that it had agreed to sell the Semiconductor
Division of TEMIC, which included its 80.4% interest in Siliconix, to Vishay
Intertechnology, Inc. ("Vishay") of Malvern, Pennsylvania. The acquisition
was completed on March 2, 1998, and on that date, Vishay became the Company's
largest shareholder. The Company's products will continue to be marketed
with the Siliconix brand name under the Vishay umbrella.
Coincident with the acquisition of the majority interest in Siliconix by
Vishay, Richard J. Kulle stepped down as Siliconix President and CEO and was
replaced by Dr. King Owyang, formerly Executive Vice President, Technology &
Silicon Operations. Dr. Owyang has been employed by Siliconix for ten years
and served in his previous position for approximately six years. From the
beginning of his employment, Dr. Owyang led the technology advances which are
the foundation of Siliconix's growth and profitability.
PRODUCTS
All of the analog and power products produced by Siliconix 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, passive 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 power MOSFETs (an acronym for "metal oxide
semiconductor field effect transistor") and power ICs are designed for
similar applications and can often be used together as chip sets with
complementary performance characteristics optimized for a specific
application.
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 advances in
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- power MOSFETs, that
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provide customers with size and performance benefits as well as manufacturing
compatibility with digital integrated circuits.
Siliconix power ICs include power conversion and interface ICs, and motor
control 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 (E.G., printers and copy machines).
The Company's mature product lines include discrete small-signal
transistors and signal processing ICs (I.E., analog switches and
multiplexers). The small-signal transistors range from junction field-effect
transistors ("JFETs"), Siliconix's original product line, which remain critical
for some applications, to newer transistor processes, such as the Company's
lateral DMOS process, which offer performance advantages over competitors'
similar product lines. The analog switches and multiplexers are primarily
used in instrumentation and industrial equipment that receives and/or outputs
real-world analog signals.
The following table shows net sales and the percentage of the Company's
net sales attributable to the product categories for the periods indicated
(dollars in thousands).
<TABLE>
<CAPTION>
Years ended December 31
-----------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Integrated Circuits $ 66,509 21% $ 65,135 24% $ 64,179 26%
Discrete Devices,
LITTLE FOOT and
LITE FOOT-Registered
Trademark- 255,042 79% 203,799 76% 186,112 74%
-------- ---- -------- ---- -------- ----
$321,551 100% $268,934 100% $250,291 100%
-------- ---- -------- ---- -------- ----
-------- ---- -------- ---- -------- ----
</TABLE>
MANUFACTURING
The Company's manufacturing operations are strategically located to support
customer manufacturing locations, to cultivate growth markets, and to access
cost-effective engineering talent. All of the Company's manufacturing sites
use Statistical Process Control methods of total quality control and have ISO
9000 certification.
Siliconix fabricates wafers for its advanced power products at its Santa
Clara, California manufacturing headquarters, where the Company maintains a
Class 1 (clean room classification) six-inch wafer fab. Further capacity for
wafer fabrication of power products was added during 1997 in a Class 1
facility in Itzehoe, Germany. Wafers for analog switches and multiplexers are
fabricated in the Company's four-inch wafer fab in Santa Clara. In 1997,
fabrication of the Company's JFETs was transferred to a foundry in Beijing,
China.
Assembly and testing of the Company's products are performed in Company
facilities in Taiwan and Shanghai, China, and by subcontractors in the
Philippines and India. The Shanghai facility is a joint venture between
Siliconix and the Shanghai Institute of Metallurgy.
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
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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.
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 groundwater 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
From 1993 until the change of ownership, Siliconix sales were handled by
the sales organization of TEMIC Semiconductors, the semiconductor division of
the Daimler-Benz microelectronics group, which included Siliconix, Telefunken
Semiconductors, Matra MHS, and Dialog Semiconductor. Unifying the sales
activities for these four companies brought value to customers by allowing
them to deal with one entity for a broader range of their semiconductor
needs. Today, the Company's products are sold by the Vishay worldwide sales
organization, which consists of much of the same worldwide structure of sales
representatives and distributors that was established for TEMIC
Semiconductors.
The sales organizations are regionally based, functioning as agents that
earn a commission at a fixed percentage of sales and performing all
sales-related activities. 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
-----------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
North America $113,890 36% $ 89,596 33% $ 93,613 37%
Europe 90,480 28% 71,739 27% 64,897 26%
Japan 33,359 10% 51,065 19% 31,944 13%
Asia Pacific 83,822 26% 56,534 21% 59,837 24%
-------- ---- -------- ---- -------- ----
$321,551 100% $268,934 100% $250,291 100%
-------- ---- -------- ---- -------- ----
-------- ---- -------- ---- -------- ----
</TABLE>
In 1997, a Japanese distributor accounted for 10% of the Company's net
sales. The Company markets its products in different geographic areas as
follows.
NORTH AMERICA: Sales are made by the North American field sales force and
manufacturer's representative organizations, the latter being compensated by
commissions only. Area sales managers coordinate these representatives and
the North American sales force. North American sales offices are located in
or near Santa Clara, California; Troy, Michigan; Basking Ridge, New Jersey;
and Dallas, Texas.
Sales not made directly to original equipment manufacturers are made
through distributors, which currently have approximately 200 locations
throughout the United States and Canada. Certain distributors are provided
with contractual protection for their inventory against reductions in
published prices and against product obsolescence.
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EUROPE: Sales are made by the European 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 the Asia Pacific sales force.
ASIA PACIFIC: Sales are made in Hong Kong, Korea, Taiwan, The People's
Republic of China, and in Southeast Asia by the Asia Pacific sales force,
headquartered in Singapore. In these locations, as in the United States,
sales are made directly to original equipment manufacturers through field
sales engineers or through manufacturer's representatives. Direct 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 Consolidated Financial
Statements, which is incorporated herein by reference.
ORDER BACKLOG
As of December 31, 1997, the backlog of orders booked was $74.1 million.
The backlog as of December 31, 1996 was $77.2 million. The Company includes
in backlog only open orders which have been released by the customer for
shipment in the calendar year 1998. 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 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 $17.8 million in
1997, $20.8 million in 1996, and $19.1 million in 1995. Significant effort
has been expended on new power products and ICs where continued rapid market
growth is expected.
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PATENTS AND LICENSES
Siliconix protects its technology leadership by securing patents on
proprietary products and processes. As of December 31, 1997, Siliconix owned
130 U.S. patents, covering primarily semiconductor device structures,
processes, and circuitry. Expiration dates for these patents range from 1998
to 2016. An additional eight patents have been allowed but not yet issued.
There were also 64 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 Consolidated Financial Statements.
EMPLOYEES
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, 1997, the Company employed 1,266 people, of whom 847
were employed in the United States, 402 in East Asia, and 17 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>
King Owyang President and Chief Executive Officer
Juergen F. Biehn Senior Vice President and Chief Financial Officer
John Cox Vice President, Worldwide Environmental, Health & Safety Affairs
</TABLE>
Dr. Owyang, age 52, 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; Executive Vice President, Technology
and Silicon Operations in April 1992; and President and Chief Executive
Officer in March 1998. 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 56, joined the Company in March 1991 as Vice President and
Corporate Controller. He became Chief Financial Officer in October 1991 and
Senior Vice President in October 1996. He also became Chief Financial
Officer of the TEMIC Semiconductor Discrete Components Division in April 1996
and served as such until March 1998. Prior to joining the Company, he was
employed by AEG Aktiengesellschaft (a former affiliate of the Company which
was subsequently merged into Daimler-Benz AG, the former parent corporation
of the Company), a German company which then had 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. Cox, age 49, joined the Company in April 1997 as Vice President,
Worldwide Environmental, Health & Safety Affairs. He devotes approximately
one-half of his time to the Company's affairs. Since September 1995, he has
also been Executive Vice President and Principal Consultant of
EnviroBusiness, Inc., an environmental consulting firm to high-technology
industries, specializing in semiconductor and semiconductor equipment
manufacturers. For more than the previous five years, he served as Corporate
Director of Safety, Health & Environmental Affairs of Shipley Company.
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ITEM 2. PROPERTIES.
The Company owns its principal manufacturing plant and general offices
which are located in four two-story buildings totaling 234,600 square feet on
a 13-acre site in Santa Clara, California. TEMIC Semiconductor North
America, Inc., a subsidiary of the Company, leases approximately 11,700
square feet of office space in Basking Ridge, New Jersey, where the Company's
North American Sales Headquarters are located. Siliconix Limited, a
subsidiary of the Company, currently occupies, under an agreement with TEMIC
UK Limited, a subsidiary of Matra MHS (formerly an affiliated company),
approximately 2,000 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
17,300 square feet of administrative space in premises in Singapore, where
the Company's Far East Administrative Headquarters are located. TEMIC (S)
Pte. Ltd. also leases approximately 22,100 square feet of manufacturing and
general office space in Manila from TEMIC TELEFUNKEN microelectronics
(Philippines) Inc., formerly an affiliated company. Siliconix (Taiwan)
Limited, an indirect subsidiary of the Company, 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 2,700 square feet
of general office space in Tokyo from Mercedes-Benz Japan. Shanghai Simconix
Co. Ltd., a joint venture between the Company and the Shanghai Institute of
Metallurgy (the "SIM"), leases 35,000 square feet of manufacturing and
general office space in Shanghai from the SIM.
ITEM 3. LEGAL PROCEEDINGS.
The Company is 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 is
complying with the RWQCB's orders.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
As of March 20, 1998, there were 770 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 1996 and 1997 is
incorporated by reference from the Company's 1997 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 1997 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 1997 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, 1997, 1996, and 1995 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 1997 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, 1997 and 1996, 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, 1997. 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, 1997 and 1996, and the results of their
operations and their cash flows for each of the years in the three-year
period ended December 31, 1997, in conformity with generally accepted
accounting principles.
KPMG PEAT MARWICK LLP
Mountain View, California
January 21, 1998
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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 30, 1998 to be mailed
to shareholders in connection with the 1998 Annual Shareholders Meeting and
filed with the Securities and Exchange Commission on or about April 30, 1998
(the "Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION.
Incorporated by reference from the "Compensation of Officers and Directors"
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, 1997, 1996, and 1995 (see page 10 hereof)
The remainder of the Financial Statements are incorporated by
reference from the Company's 1997 Annual Report to Shareholders,
portions of which are filed as Exhibit 13 hereto.
Consolidated Statements of Operations for the years ended
December 31, 1997, 1996, and 1995
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Shareholders' Equity for the years
ended December 31, 1997, 1996, and 1995
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996, and 1995
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(2)
10.2 One-Year Key Professional Incentive Bonus Plan(1)
10.3 Key Professional Performance Unit Plan(2)
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(3)
10.11 Special Retention Bonus Plan of Siliconix incorporated(4)
10.12 Change-in-Control Severance Plan of Siliconix
incorporated(4)
10.13 Special Retention Bonus Plan (1998) of Siliconix
incorporated(5)
10.14 Amendment No. 1 to Change-in-Control Severance Plan of
Siliconix incorporated(5)
10.15 Amendment No. 1 to Siliconix One-Year Key Professional
Incentive Bonus Plan(5)
10.16 Amendment No. 2 to Siliconix One-Year Key Professional
Incentive Bonus Plan(5)
10.17 Amendment No. 1 to Siliconix Key Professional Performance
Unit Plan(5)
10.18 Amendment No. 2 to Siliconix Key Professional Performance
Unit Plan(5)
10.19 Employment Agreement dated April 1, 1997 between the
Company and John Cox
13 Portions of Siliconix incorporated 1997 Annual Report to
Shareholders
21 Subsidiaries of the Company
27 Financial Data Schedule
- -----------------
(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, 1995, filed with the
SEC on April 1, 1996.
(FOOTNOTES CONTINUED ON NEXT PAGE)
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(FOOTNOTES CONTINUED FROM PREVIOUS PAGE)
(3) 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.
(4) Incorporated by reference to Exhibits to the Company's Quarterly Report
on Form 10-Q for the quarter ended March 30, 1997, filed with the SEC on
May 14, 1997.
(5) Incorporated by reference to Exhibits to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 28, 1997, filed with the
SEC on November 12, 1997.
(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, 1997.
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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 21, 1998, we reported on the consolidated balance sheets
of Siliconix incorporated as of December 31, 1997 and 1996, 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, 1997, as
contained in the annual report on Form 10-K for the year ended December 31,
1997. In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related consolidated financial
statement schedule listed in item 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
Mountain View, California
January 21, 1998
15
<PAGE>
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>
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
1996:
Allowance for Doubtful Accounts $1,841 $ 329 $ - $ 69 $ 2,101
Allowance for Price Adjustments 443 - 3,945 4,288 100
Allowance for Returned Parts and
Distributor Adjustments 3,242 - 18,636 15,474 6,404
------ ------ ------- ------- -------
$5,526 $ 329 $22,581 $19,831 $ 8,605
1997:
Allowance for Doubtful Accounts $2,101 $ 545 $ - $ 458 $ 2,188
Allowance for Price Adjustments 100 - 4,712 4,421 391
Allowance for Returned Parts and
Distributor Adjustments 6,404 - 24,818 21,878 9,344
------ ------ ------- ------- -------
$8,605 $ 545 $29,530 $26,757 $11,923
</TABLE>
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 30, 1998
SILICONIX INCORPORATED
By: /s/ King Owyang
--------------------------------------
King Owyang
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/ King Owyang President and Chief Executive
- ------------------------- Officer March 30, 1998
King Owyang
Principal Financial and
Accounting Officer
/s/ Juergen Biehn Senior Vice President and
- ------------------------- Chief Financial Officer March 30, 1998
Juergen Biehn
/s/ Everett Arndt
- ------------------------- Director March 30, 1998
Everett Arndt
/s/ Lori Lipcaman
- ------------------------- Director March 30, 1998
Lori Lipcaman
/s/ Frank Maier
- ------------------------- Director March 30, 1998
Frank Maier
/s/ Glyndwr Smith
- ------------------------- Director March 30, 1998
Glyndwr Smith
/s/ Robert L. Wehrli
- ------------------------- Director March 30, 1998
Robert L. Wehrli
</TABLE>
17
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
3.1 Restated Certificate of Incorporation(1)
3.2 Bylaws(2)
10.2 One-Year Key Professional Incentive Bonus Plan(1)
10.3 Key Professional Performance Unit Plan(2)
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(3)
10.11 Special Retention Bonus Plan of Siliconix incorporated(4)
10.12 Change-in-Control Severance Plan of Siliconix incorporated(4)
10.13 Special Retention Bonus Plan (1998) of Siliconix incorporated(5)
10.14 Amendment No. 1 to Change-in-Control Severance Plan of Siliconix
incorporated(5)
10.15 Amendment No. 1 to Siliconix One-Year Key Professional Incentive
Bonus Plan(5)
10.16 Amendment No. 2 to Siliconix One-Year Key Professional Incentive
Bonus Plan(5)
10.17 Amendment No. 1 to Siliconix Key Professional Performance Unit Plan(5)
10.18 Amendment No. 2 to Siliconix Key Professional Performance Unit Plan(5)
10.19 Employment Agreement dated April 1, 1998 between the Company and John
Cox
13 Portions of Siliconix incorporated 1997 Annual Report to Shareholders
21 Subsidiaries of the Company
27 Financial Data Schedule
- ---------------------------
(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.
(FOOTNOTES CONTINUED ON NEXT PAGE)
18
<PAGE>
(FOOTNOTES CONTINUED FROM PREVIOUS PAGE)
(2) Incorporated by reference from Exhibits to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995, filed with the
SEC on April 1, 1996.
(3) 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.
(4) Incorporated by reference to Exhibits to the Company's Quarterly Report
on Form 10-Q for the quarter ended March 30, 1997, filed with the SEC on
May 14, 1997.
(5) Incorporated by reference to Exhibits to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 28, 1997, filed with the
SEC on November 12, 1997.
<PAGE>
Exhibit 10.19
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into by and between JOHN COX (hereinafter
referred to as "Employee") and SILICONIX INCORPORATED, a Delaware corporation
(hereinafter referred to as the "Company"), on the 1st day of April, 1997.
In consideration of the mutual obligations herein contained, the parties
hereto hereby agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ Employee and
Employee agrees to be employed by the Company upon the terms and conditions
hereinafter set forth.
2. TERM.
2.1 The initial term of employment under this Agreement shall be
three years, commencing on April 1, 1997 and ending on March 31, 2000. In
the event that neither party notifies the other of its intention not to
extend this Agreement prior to January 31 of each year, starting in 1998, the
term of this Agreement shall be automatically extended for one year. This
process shall continue until (i) such notice is timely given, in which case
the Agreement shall terminate on the March 31 that is 26 months after the
January 31 next occurring after said notice shall have been given or (ii) a
new employment agreement is executed by the parties.
2.2 Prior to the expiration of this Agreement, the Company has the
right to terminate the employment of Employee for cause by delivering to him
written notice specifying such cause, at which time its obligations under
this Agreement will cease. "Cause" means:
(1) Misappropriating any funds or property of (a) the Company, or
(b) any employee of the Company, or (c) any corporation
affiliated with the Company, or (d) any employee of any
corporation affiliated with the Company, or (e) any customer;
(2) Attempting to obtain any personal profit from any transaction
in which Employee has an interest which is adverse to the
interest of the Company, unless Employee has first obtained
the consent of management and approval of the Chairman of the
Board of the Company;
(3) Conviction of a felony; or
<PAGE>
(4) Breach of any material provision of this Agreement.
2.3 If the Company should terminate Employee's employment for a
reason not specified in this Agreement, Employee's final check will include
an amount covering his salary for the period ending on the date on which this
Agreement would otherwise have terminated.
3. COMPENSATION.
3.1 The Company agrees to pay Employee at the rate of $1,500 per
day in accordance with its usual payroll practices. Employee shall advise
the Company in accordance with its usual payroll practices as to his days
worked.
3.2 Employee shall be entitled to participate, as long as he is an
employee of the Company, in any and all of the Company's present or future
employee benefit plans; provided, however, that the provisions of any such
plan permit Employee's participation, after considering the number of hours
per week that Employee works for the Company.
3.3 The Company shall reimburse Employee for all expenses
reasonably and necessarily incurred by Employee in the performance of his
duties hereunder, including but not limited to Employee's transportation and
lodging expenses relating to travel to Santa Clara, California from his home
in Massachusetts and the international travel referred to in section 4.2
hereof.
4. DUTIES.
4.1 Employee agrees to serve the Company and the Company agrees to
employ Employee in the capacity of Vice President, Worldwide Environmental,
Health & Safety Affairs. The Company and Employee acknowledge and agree that
Employee will be a part-time employee of the Company, working that number of
days per month as shall be mutually agreed upon from time to time by Employee
and the President of the Company, but no fewer than ten (10) calendar days
per month, which shall consist of five to seven days on assignments away from
Massachusetts and three to five days on assignments in Massachusetts.
Employee agrees that at all times during his employment by the Company he
will faithfully and diligently endeavor to promote the business and business
interests of the Company.
4.2 Employee acknowledges and agrees that as a part of his duties,
at least one international trip in each of Q2, Q3 and
-2-
<PAGE>
Q4 1997 shall be required. Thereafter, the traveling schedule shall be
mutually agreed by the President of the Company and Employee, but shall be
not less than two international trips per year. Locations to be visited and
evaluated shall include, but not be limited to, Shanghai; Kaohsiung, Taiwan;
Manila; and Bangalore, India.
5. COMPANY AUTOMOBILE. The Company agrees to provide Employee
throughout the term hereof with a Company automobile in accordance with the
Company's usual policies. The Company shall be responsible for maintenance,
insurance and gasoline for said automobile.
6. TRADE SECRETS.
6.1 Employee recognizes that the nature of his employment by the
Company is such that he will have access to and that there will be disclosed
to him during the course of his employment, information of a proprietary
nature owned by the Company including but not limited to records, data,
formulae, specifications, inventions, processes, methods and customer lists,
which are of a confidential information or trade secret nature, and all of
which have great value to the Company and are a substantial basis and
foundation upon which the Company's business is predicated. Employee
acknowledges that except for his employment and the duties assigned to him
which he will be fulfilling, that he would not otherwise have access to the
foregoing information. Employee agrees that any and all confidential
knowledge or information which may be obtained by him in the course of his
employment, including but not limited to, the information hereinabove set
forth, will be held inviolate by him and that he will conceal the same from
any and all other persons, including but not limited to, competitors of the
Company, and that he will not impart any such knowledge acquired by him as an
employee of the Company to any such other persons either during his
employment or after his employment by the Company has terminated.
6.2 Employee agrees that upon termination of his employment
hereunder he will immediately surrender and turn over to the Company all
books, records, forms, specifications, formulae, data, processes, customer
lists and all papers and writing relating to the business of the Company and
all other property belonging to the Company, it being understood and agreed
that the same are the sole property of the Company and that Employee will not
make any copies thereof.
7. INVENTIONS. Employee agrees that all ideas, concepts, processes,
discoveries, devices, machines, tools, materials,
-3-
<PAGE>
designs, improvements, inventions and other things of value that relate to
the Company's business (hereinafter collectively referred to as "intangible
rights"), whether patentable or not, which are conceived, made, invented or
suggested either by him alone or in collaboration with others affiliated with
the Company during the term of his employment, and whether or not during
regular working hours, shall be promptly disclosed in writing to the Company
and shall be the sole and exclusive property of the Company. Employee hereby
assigns all of his right, title and interest in and to all such intangible
rights to the Company, its successors or assigns. In the event that any of
said intangible rights shall be deemed by Employee to be patentable or
otherwise registerable under any federal, state or foreign law, Employee
further agrees at the expense of the Company to execute all documents and to
do all things necessary, advisable or proper to obtain patents or
registration and to vest the Company with full title thereto.
8. ARBITRATION. Any dispute, controversy or claim arising under or in
connection with this Agreement, or the breach thereof, shall be settled
exclusively by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association then in effect. Judgment upon
the award rendered by the Arbitrator(s) may be entered in any court having
jurisdiction thereof. Any arbitration held pursuant to this section 8 shall
be held in Santa Clara County, California.
9. NOTICES. Any notices or other communications required or permitted
hereunder shall be sufficiently given if delivered personally or sent by
registered or certified mail, postage prepaid, to Employee at 9 Simon
Atherton Row, Harvard, Massachusetts 01451, or to the Company at 2201
Laurelwood Road, Santa Clara, California 95054, or at such other address as
may be furnished in writing by either party to the other; such notice or
communication shall be deemed to have been given as of the date so deposited
in the United States mail or as of the date delivered if delivered in person.
10. INTEGRATED AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto relating to the employment of Employee,
and there are no agreements or understandings relating to the subject matter
hereof between the parties other than those set forth herein or herein
provided for.
11. CHOICE OF LAW. It is the intention of the parties that the laws of
California should govern the validity of this Agreement, the construction of
its terms and the interpretation of the rights and duties of the parties.
-4-
<PAGE>
12. COUNTERPART EXECUTION. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute but one and the same instrument.
13. PARTIES IN INTEREST. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of the Company, but no
interest herein or right hereunder shall be transferable by Employee.
14. SECTION HEADINGS. Section and other headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
15. SEVERABILITY. Should any provision hereof be deemed illegal or
unenforceable, all other provisions hereof shall be given effect separately
therefrom and shall not be affected thereby.
IN WITNESS WHEREOF, Employee has executed this Agreement and the Company
has caused this Agreement to be duly executed on its behalf by an officer
thereunto duly authorized, all as of the date first above written.
SILICONIX INCORPORATED EMPLOYEE
By /s/ Richard J. Kulle /s/ John Cox
----------------------- ----------------------
Richard J. Kulle John Cox
President & CEO
-5-
<PAGE>
EXHIBIT 13
FINANCIAL
HIGHLIGHTS
<TABLE>
<CAPTION>
(In thousands, except per share and employment data) 1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net sales $321,551 $268,934 $250,291
Gross profit $127,115 $107,109 $ 98,186
Research and development expense $ 17,813 $ 20,823 $ 19,067
Selling, marketing, and administration expense $ 65,322 $ 54,475 $ 50,280
Interest expense $ 2,383 $ 2,390 $ 2,572
Other (income) expense, net $ 78 $ (335) $ (267)
Income before income taxes $ 41,519 $ 29,756 $ 26,534
Income taxes $ 8,507 $ 3,779 $ 2,313
Net income $ 33,012 $ 25,977 $ 24,221
-------- -------- --------
Net income per share (basic and diluted) $ 3.31 $ 2.61 $ 2.43
-------- -------- --------
Total assets $281,509 $238,669 $207,962
-------- -------- --------
Shareholders' equity $149,550 $116,618 $ 90,276
-------- -------- --------
Year-end worldwide employment 1,266 1,228 1,269
-------- -------- --------
</TABLE>
<PAGE>
FIVE-YEAR SUMMARY
OF SELECTED
FINANCIAL DATA
<TABLE>
<CAPTION>
Siliconix incorporated
(In thousands, except per share and employment data) 1997 1996 1995 1994 1993
--------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales $ 321,551 $ 268,934 $ 250,291 $ 196,453 $ 170,282
Operating income $ 43,980 $ 31,811 $ 28,839 $ 14,148 $ 9,283
Income before extraordinary gain $ 33,012 $ 25,977 $ 24,221 $ 10,623 $ 6,359
Extraordinary gain - - - - 863
Net income $ 33,012 $ 25,977 $ 24,221 $ 10,623 $ 7,222
--------- --------- ---------- --------- ---------
Per share data:
Income before extraordinary gain $ 3.31 $ 2.61 $ 2.43 $ 1.07 $ 0.64
Extraordinary gain - - - - 0.09
Net income (basic and diluted) $ 3.31 $ 2.61 $ 2.43 $ 1.07 $ 0.73
--------- --------- ---------- --------- ---------
Shares used to compute basic and diluted
net income per share 9,960 9,960 9,960 9,960 9,960
Total assets $ 281,509 $ 238,669 $ 207,962 $ 155,035 $ 130,256
Capital expenditures $ 40,244 $ 39,511 $ 28,196 $ 25,030 $ 18,454
Total long-term debt, including related party $ 38,457 $ 39,429 $ 40,652 $ 40,834 $ 41,523
Year-end worldwide employment 1,266 1,228 1,269 1,172 1,211
--------- --------- ---------- --------- ---------
</TABLE>
An extraordinary gain was recognized in 1993 as a result of the repurchase of
guaranteed floating rate subordinated notes.
<PAGE>
QUARTERLY
FINANCIAL
DATA
<TABLE>
<CAPTION>
Unaudited
(In thousands, except per share data)
1997 1996
Fourth Third Second First Fourth Third Second First
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $90,355 $80,960 $80,024 $70,212 $72,761 $62,033 $64,079 $70,061
Gross profit $37,698 $32,112 $30,209 $27,096 $28,065 $24,262 $26,100 $28,682
Net income $ 9,665 $ 8,374 $ 8,033 $ 6,940 $ 7,016 $ 5,888 $ 6,254 $ 6,819
Net income per share
(basic and diluted) $ 0.97 $ 0.84 $ 0.81 $ 0.70 $ 0.70 $ 0.59 $ 0.63 $ 0.68
</TABLE>
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview
Siliconix (the "Company") is engaged in designing, manufacturing, and
marketing power and analog semiconductor products. The Company is organized
into three business units: Power MOSFET, Power IC, and Signal Processing.
Power MOSFET is the producer of low-voltage, surface-mount Power MOSFET
products primarily used for the communication, computer, and automotive
markets. Power IC focuses on Power Integrated Circuits used in
communication and data storage applications. Signal Processing manufactures
a wide array of commodity products such as Analog Switches, Low Power
MOSFETs, and JFETs for industrial and consumer markets.
The Company's 1997 results represent the eighth consecutive year of
record revenues and the fourth consecutive year of record earnings. Fiscal
1997 net income of $33.0 million represents a growth of 27% and 36% over
fiscal 1996 and fiscal 1995, respectively.
During 1997, the Company responded to the increasing demand for Power
MOSFET products by starting a new six-inch wafer fabrication facility ("FAB")
in Itzehoe, Germany. The FAB, leased by TEMIC Semiconductor GmbH, a German
corporation and related party, is operated and managed by the Company (see
Note 2 of Notes to Consolidated Financial Statements).
The Company further expanded its product offering in surface mount Power
MOSFET products during 1997 and increased this business by 27%. This
increase was driven by strong demand for the Company's proprietary
TrenchFETs-Registered Trademark- for the worldwide communication and computer
markets. These market segments are subject to demand fluctuations which may
adversely impact the Company's future business performance.
Subsequent to year end, the 80.4% interest in Siliconix owned by
Daimler-Benz was sold to a wholly-owned subsidiary of Vishay Intertechnology,
Inc. ("Vishay") of Malvern, Pennsylvania. The Company's products will
continue to be marketed with the Siliconix brand name under the Vishay
umbrella.
Revenues
Fiscal 1997 revenue of $321.6 million increased 20% over 1996 and 28%
over 1995. This growth is attributable to the strong demand for the
Company's Power MOSFET LITTLE FOOT product family used primarily in power
management of portable communication and computer equipment. These market
segments showed strong bookings during the first three quarters of fiscal
1997; however, during the fourth quarter of 1997, bookings slowed down due to
market uncertainties. This slowdown in bookings resulted in a decline in
backlog by the end of the fourth quarter of 1997 and will impact revenues
negatively in at least the first quarter of 1998 in comparison to the fourth
quarter of 1997 and perhaps thereafter. In addition, it appears that earnings
per share in the first quarter of 1998 will decline sharply in comparison to
the fourth quarter and first quarter of 1997.
Revenues for the commodity product lines increased 6% during 1997 to
$74.6 million despite significant price erosion, especially for Low Power
MOSFETs. Revenues for these commodity products are expected to remain flat
during 1998 due to the maturity of the product offering.
The Company operates in all major geographic regions of the
semiconductor industry. The following is a summary of the Company's revenue
by region:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
North America 36% 33% 37%
Europe 28% 27% 26%
Japan 10% 19% 13%
Asia Pacific 26% 21% 24%
</TABLE>
<PAGE>
During 1997, revenues in all regions, except Japan, experienced strong
year to year growth. Asia Pacific was the fastest growing region with a 48%
revenue increase over 1996 and 40% increase over 1995. Europe had revenue
growth of 26% and 39% over 1996 and 1995, respectively. North America
experienced a revenue increase of 27% over 1996 and 22% over 1995. The
growth in these regions was driven by the communication and portable computer
markets. Japan experienced a decline in revenues of 35% from 1996 and an
increase in revenues of 4% over 1995. The decline in Japan during 1997 is
attributable to substantial price pressure from local competitors due to
leveraging of underutilized DRAM capacities for the production of Power
MOSFET products and the prolonged weakness of the yen against the dollar
throughout 1997. The Company does not anticipate any change in the
competitiveness of the Japanese market during 1998.
Gross Profit
Gross profit as a percentage of net sales was 40% in 1997 and 1996, and
39% in 1995. The Company continued to face substantial price pressures
worldwide during 1997, especially in Japan. A strong U.S. dollar against
all Asian and European currencies contributed to this pressure, especially in
the last half of 1997. The Company also incurred start-up expenses of $9.2
million for the FAB in Itzehoe, Germany. The Company was able to fully
offset these effects through introduction of new leading edge products, its
large-scale manufacturing content in low cost countries, a strong technology
position, and economies of scale.
During 1997, the Company executed its strategy of increasing capacity
for its planar Power MOSFET technology through the FAB in Germany, while
increasing the production volume for its proprietary Trench and BICDMOS
technologies by 88% over 1996. This increase in production volume was
realized by capital investments in additional capacity and, more importantly,
by utilizing higher cell density TrenchFET technology to further reduce
die size by up to 30%, yielding more output and cost reductions. The Company
was also able to reduce mask steps in various manufacturing processes
resulting in further cost reductions.
The Company continued its strategy of a strong manufacturing presence in
various low cost locations in Asia during 1997. The Company successfully
transferred its JFET wafer production from its four-inch wafer fab in Santa
Clara to a third-party foundry in Beijing, China. The Company will continue
to produce the remaining processes in the four-inch fab until a suitable
alternative is identified.
Royalty expense as a percentage of revenues declined slightly during the
last three years as the Company continues to shift new products to its
proprietary technologies. This trend is expected to continue during 1998 and
beyond.
Research and Development
Research and development expenses decreased 14% in 1997 to $17.8 million
compared to $20.8 million in 1996 and $19.1 million in 1995. This decrease
was due to agreements in which the Company was reimbursed for certain
expenses by a related party (see Note 2 of Notes to Consolidated Financial
Statements). Additionally, there was a reduction in spending during 1997 due
to cost controls. Research and development expense is expected to increase
in 1998 from 1997 as the Company continues to commit significant resources to
the further development of higher cell density TrenchFET technology.
Selling, Marketing, and Administration
Selling, marketing, and administration expenses increased 20% over last
year to $65.3 million as compared to $54.5 million in 1996 and $50.3
million in 1995. The increase in 1997 of $10.8 million was
<PAGE>
driven by an increased focus on key customer account management, primarily in
the marketing and sales functions, as well as overall employee retention
programs in the highly competitive California job market.
Interest expense for 1997 remained flat at $2.4 million compared to 1996,
as short-term market rates have not fluctuated significantly over the past
year. Interest expense for 1996 decreased 7% from 1995 as short-term
interest rates in 1996 were lower than rates during 1995.
Income Tax
Income tax expense increased to $8.5 million for fiscal 1997 as compared
to $3.8 million for fiscal 1996 and $2.3 million for fiscal 1995 primarily
due to the increase in earnings before taxes. In addition, the increase in
1997 from 1996 is due to the depletion of net operating loss carryforwards at
the end of 1996.
Financial Condition, Liquidity, and Capital Resources
Cash and cash equivalents and short-term investment with an affiliate were
$18.8 million at the end of 1997 as compared to $24.3 million at the end of
1996, a decrease of $5.5 million or 23%. This decrease is attributable to
cash used in investing and financing activities exceeding cash provided by
operating activities. The Company continues to fund all of its investing and
financing activities from cash flows from operations.
Accounts receivable increased $15.3 million or 41% compared to 1996
primarily due to the overall increase in sales for 1997 as well as an
increase in international sales which typically allow for longer payment
terms than domestic sales.
Net affiliate accounts receivable/payable decreased $6.8 million from
1996 mainly due to timing of cash received from unconsolidated affiliates.
Inventories increased $12.2 million or 40% over 1996 primarily due to the
addition of manufacturing capacity, including the FAB in Itzehoe, Germany, to
support 1998 expected revenue growth. In addition, inventory increased as
the Company satisfied contractual requirements with key customers to maintain
certain levels of safety stock.
Other current assets increased $3.5 million or 44% over 1996 due to
purchases of equipment and supplies on behalf of the Company's
subcontractors in Taiwan and Germany, which are reimbursed at cost.
Capital expenditures were $40.2 million in 1997 as compared to $39.5
million in 1996. These related mostly to additions for plant capacity
expansion, new technology, and regulatory compliance. Capital spending in
1998, funded from cash provided by operating activities, is expected to
exceed the 1997 level.
Other assets increased $3.4 million over 1996 mainly due to the
recognition of earnings under the equity method of accounting for the
investment in Simconix, the Company's joint venture in The People's Republic
of China (see Note 3 of Notes to Consolidated Financial Statements).
Current liabilities increased $8.1 million or 10% over 1996 mainly due to
the increase in accounts payable for capital equipment received before the
close of the fiscal year. In addition, the difference is attributed to the
timing of cash remittances made to subcontractors in Taiwan and Germany.
<PAGE>
Although the Company has available cash and cash equivalents and
short-term investment with affiliate of $18.8 million at the end of 1997,
cash and short-term investments with affiliate will decrease in the first
quarter of 1998 to fund capital expenditures, royalty payments, commissions,
and yearly management and employee bonuses. Management expects 1998 cash
flows from operations to be sufficient to fund investments in capital
expenditures and research and development.
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." This statement establishes standards for reporting
and presentation of comprehensive income and its components in the financial
statements. It requires that a company classify items or other comprehensive
income, as defined by accounting standards, by their nature in a financial
statement. This statement is effective for fiscal years beginning after
December 15, 1997. The effect of SFAS No. 130 will not be material to the
Company's financial statement disclosure.
In June 1997, FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This statement, 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 segment information required to
be disclosed under SFAS No. 131 is expected to be more comprehensive than
previously provided, including expanded disclosure of income statement and
balance sheet items for each of its reportable operating segments. However,
the Company has not yet determined the impact of this statement on the
Company's financial statement disclosure.
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. The Company experienced a slowdown in bookings in the fourth
quarter of 1997 attributable to market uncertainties. This slowdown will
negatively impact revenues in the first quarter of 1998 in comparison to the
fourth quarter of 1997 and perhaps thereafter. In addition, it appears that
earnings per share in the first quarter of 1998 will decline sharply in
comparison to the fourth quarter and first quarter of 1997.
<PAGE>
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. In
Asia Pacific, 1997 revenues were not materially impacted by the widespread
weakness in Asian currencies and it is not certain what the long-term effect
of the weakness of Asian currencies and the liquidity situation will be on
our business.
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.
Year 2000 Compliance
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. These date code
fields will need to accept four digit entries to distinguish 21st century
dates from 20th century dates. As a result, many companies' software and
computer systems may need to be upgraded or replaced in order to comply with
such "Year 2000" requirements. Although the Company believes that its
products and systems are Year 2000 compliant, the Company utilizes
third-party equipment and software that may not be Year 2000 compliant.
Failure of such third-party equipment or software to operate properly with
regard to the Year 2000 and thereafter could require the Company to incur
unanticipated expenses to remedy any problems, which could have a material
adverse effect on the Company's business and operating results. Furthermore,
the purchasing patterns of customers or potential customers may be affected
by Year 2000 issues as companies expend significant resources to correct
their current systems for Year 2000 compliance. These expenditures may
result in reduced funds available to purchase products and services such as
those offered by the Company, which could have a material adverse effect on
the Company's business and operating results.
<PAGE>
CONSOLIDATED
FINANCIAL
STATEMENTS
STATEMENTS OF OPERATIONS
Siliconix incorporated
<TABLE>
<CAPTION>
Years ended December 31
(In thousands, except per share data) 1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net sales $ 321,551 $ 268,934 $ 250,291
Cost of sales 194,436 161,825 152,105
---------- ---------- ----------
Gross profit 127,115 107,109 98,186
Operating expenses:
Research and development 17,813 20,823 19,067
Selling, marketing, and administration 65,322 54,475 50,280
---------- ---------- ----------
Operating income 43,980 31,811 28,839
Interest expense 2,383 2,390 2,572
Other (income) expense, net 78 (335) (267)
---------- ---------- ----------
Income before income taxes 41,519 29,756 26,534
Income taxes 8,507 3,779 2,313
---------- ---------- ----------
Net income $ 33,012 $ 25,977 $ 24,221
---------- ---------- ----------
Net income per share (basic and diluted) $ 3.31 $ 2.61 $ 2.43
---------- ---------- ----------
Shares used to compute basic and diluted
earnings per share 9,960 9,960 9,960
---------- ---------- ----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
BALANCE SHEETS
Siliconix incorporated
<TABLE>
<CAPTION>
As of December 31
(In thousands, except share data) 1997 1996
---------- ----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 10,249 $ 12,201
Short-term investment with affiliate 8,586 12,136
Accounts receivable, less allowances of
$11,923 in 1997 and $8,605 in 1996 52,310 37,044
Accounts receivable from affiliates 8,247 14,802
Inventories 42,356 30,162
Other current assets 11,592 8,044
Deferred income taxes 6,481 5,314
--------- ---------
Total current assets 139,821 119,703
--------- ---------
Property, plant, and equipment, at cost:
Land 1,174 1,183
Buildings and improvements 45,724 42,672
Machinery and equipment 221,014 187,791
--------- ---------
267,912 231,646
Less accumulated depreciation 141,514 124,524
--------- ---------
Net property, plant, and equipment 126,398 107,122
Other assets 15,290 11,844
--------- ---------
Total assets $ 281,509 $ 238,669
--------- ---------
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of debt obligations $ - $ 1,041
Accounts payable 31,421 26,286
Accounts payable to affiliates 11,334 11,115
Accrued payroll and related compensation 13,970 13,614
Accrued liabilities 32,877 29,418
--------- ---------
Total current liabilities 89,602 81,474
Long-term related party debt 34,570 34,570
Long-term debt, less current portion 3,887 4,859
Deferred income taxes 3,900 1,148
--------- ---------
Total liabilities 131,959 122,051
--------- ---------
Shareholders' equity:
Common stock, par value $0.01; 10,000,000 shares
authorized; 9,959,680 shares issued and outstanding
in 1997 and 1996 100 100
Additional paid-in-capital 59,482 59,440
Retained earnings 90,547 57,535
Accumulated translation adjustments (579) (457)
--------- ---------
Total shareholders' equity 149,550 116,618
--------- ---------
Total liabilities and shareholders' equity $ 281,509 $ 238,669
--------- ---------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Siliconix incorporated
Years ended December 31, 1997
(In thousands) Additional Accumulated Total
Common Stock at Par Paid-in- Retained Translation Shareholders'
Shares Amount Capital Earnings Adjustments Equity
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
Net income - - - 25,977 - 25,977
Proceeds from restricted
common stock - - 17 - - 17
Currency translation adjustments - - - - 348 348
--------------------------------------------------------------------------------------
Balances at December 31, 1996 9,960 100 59,440 57,535 (457) 116,618
Net income - - - 33,012 - 33,012
Proceeds from restricted
common stock - - 42 - - 42
Currency translation adjustments - - - - (122) (122)
--------------------------------------------------------------------------------------
Balance at December 31, 1997 9,960 $ 100 $ 59,482 $ 90,547 $ (579) $ 149,550
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
STATEMENTS OF CASH FLOWS
Siliconix incorporated
<TABLE>
<CAPTION>
Years ended December 31
(In thousands) 1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 33,012 $ 25,977 $ 24,221
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 23,437 17,976 13,319
Deferred income taxes 1,585 (2,142) (2,024)
Payment of pension benefits (1,467) (77) (38)
Undistributed earnings from joint venture (3,542) (2,188) (472)
Other non-cash (income) and expenses 706 (135) 219
Changes in operating assets and liabilities:
Accounts receivable (14,972) 3,274 (10,678)
Accounts receivable from affiliates 6,555 (3,709) (5,781)
Inventories (12,192) (3,453) 4,326
Other current assets (1,497) 291 (3,039)
Accounts payable 5,123 2,027 9,134
Accounts payable to affiliates 219 (1,350) 7,485
Accrued liabilities 3,762 3,582 12,070
--------- --------- ---------
Net cash provided by operating activities 40,729 40,073 48,742
--------- --------- ---------
Cash flows from investing activities:
Purchase of property, plant, and equipment (40,244) (39,511) (28,196)
Proceeds from sale of property, plant, and equipment 347 81 35
Investment in joint venture - (2,053) (1,200)
Purchase of other assets (4,982) (2,410) (1,708)
Short-term investment with affiliate 3,550 5,059 (17,195)
--------- --------- ---------
Net cash used in investing activities (41,329) (38,834) (48,264)
--------- --------- ---------
Cash flows from financing activities:
Repayment of long-term debt - (556) (646)
Repayment of short-term debt (1,041) - -
Repurchase of subordinated notes - - (110)
Proceeds from restricted common stock 42 17 230
--------- --------- ---------
Net cash used in financing activities (999) (539) (526)
--------- --------- ---------
Effect of exchange rate changes on cash and cash equivalents (353) 988 (182)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents (1,952) 1,688 (230)
Cash and cash equivalents:
Beginning of year 12,201 10,513 10,743
--------- --------- ---------
End of year $ 10,249 $ 12,201 $ 10,513
--------- --------- ---------
- ----------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Interest paid $ 2,263 $ 1,988 $ 2,322
Income taxes paid $ 3,893 $ 1,470 $ 2,583
- ----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS
Note 1 Organization and Significant Accounting Policies
Organization
The Company was founded in 1962 and subsequently reincorporated on March
5, 1987 in Delaware. AEG Capital Corporation is the record holder of 80.4%
of the Company's outstanding common stock as of December 31, 1997 (see Note
12 of Notes to Consolidated Financial Statements).
Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
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 Cash Equivalents
Cash equivalents consist of short-term financial instruments which are
readily convertible to cash and have 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 ("DBCI"), an affiliated company as of December 31, 1997, within
its cash concentration system, whereby cash is pooled and invested on a
short-term basis (see Note 12 of Notes to Consolidated Financial Statements).
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.
Long-Lived Assets
During 1996, the Company adopted SFAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of."
The provisions of SFAS No. 121 did not have a material effect on the
Company's consolidated financial condition or results of operations.
Research and Development
Expenditures for research and development are charged to expense in the
year incurred.
<PAGE>
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 cash equivalents,
short-term investments, accounts receivable, debt obligations, accounts
payable, and accrued liabilities, the carrying amounts approximate the fair
value of the instruments.
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 1997, 1996, and 1995 were
derived from the worldwide communication and 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 consolidated financial position
and results of operations.
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.
The Company has not provided for U.S. federal income taxes on $50.3
million of non-U.S. subsidiaries' undistributed earnings as of December 31,
1997, because such earnings are intended to be reinvested outside the United
States indefinitely. The deferred tax on this undistributed amount has not
been determined as it is not practicable.
At December 31, 1997, 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 consolidated 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 (see Note 12 of Notes to Consolidated Financial
Statements).
Net Income per Share
In 1997, the Company adopted 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. The Company has
presented the accompanying consolidated financial statements under the
provisions of SFAS No. 128. The effect of SFAS No. 128 was not material to
the Company's financial statements.
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.
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 consolidated financial
statements in conformity with generally accepted accounting principles.
Actual results could differ from these estimates.
New Accounting Pronouncements
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." This statement establishes standards for reporting and presentation
of comprehensive income and its components in the financial statements. It
requires that a company classify items or other comprehensive income, as
defined by accounting standards, by their nature in a financial statement.
This statement is effective for fiscal years beginning after December 15,
1997. The effect of SFAS No. 130 will not be material to the Company's
financial statement disclosure.
<PAGE>
In June 1997, FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This statement, 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 segment information required to
be disclosed under SFAS No. 131 is expected to be more comprehensive than
previously provided, including expanded disclosure of income statement and
balance sheet items for each of its reportable operating segments. However,
the Company has not yet determined the impact of this statement on the
Company's financial statement disclosure.
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.
Reclassification
Certain reclassifications were made to the 1995 and 1996 balances to
conform with the 1997 presentation.
<PAGE>
Note 2 Related Party Transactions
At December 31, 1997, 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 at 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.
TEMIC Semiconductors business unit is organized into two operating product
divisions, Discrete Components and Integrated Circuits. The operating
structure is based on product groups and market segments and this allows
TEMIC to manage the market's requirements more effectively. The Discrete
Components division headquarters are located in Santa Clara, California, USA
and the Integrated Circuits division is located in Heilbronn, Germany. The
legally and financially autonomous subsidiaries of the TEMIC Semiconductors
business unit remain intact.
Several significant transactions and agreements entered into between the
Company and these affiliates are disclosed elsewhere in these consolidated
financial statements and related notes. In addition, the following are other
transactions between the Company and its affiliates during 1997, 1996, and
1995.
Under the TEMIC sales structure, commissions received pertaining to the
sale of affiliate products in the North America and Asia Pacific regions were
$15,017,000, $16,040,000 and $15,191,000 in 1997, 1996, and 1995,
respectively, while commissions paid pertaining to the sale of the Company's
products in Europe were $5,472,000, $4,361,000, and $4,232,000 in 1997, 1996,
and 1995, respectively. In 1997, the Company also paid $2,497,000 in
commissions to affiliates of Daimler-Benz for the sale of the Company's
products. These commission amounts are included in selling, marketing, and
administration expenses in the accompanying Statements of Operations.
The Company participated in a 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 DBCI, an affiliate of DBNA, to
obtain a higher rate of return. At December 31, 1997 and 1996, cash balances
of $8,586,000 and $12,136,000, respectively, were invested with DBCI. There
are no restrictions related to the usage or withdrawal of these funds.
Interest rates on the investment are based on the one-month LIBOR. Interest
income earned for 1997, 1996, and 1995 totaled $480,000, $421,000, and
$410,000, respectively. These interest income amounts are included in other
income in the accompanying Statements of Operations.
During 1997, the Company received $1,127,000 from a related party for
research and development contracts. Significant terms of these agreements
included, but were not limited to, project coordination by the Company,
project inspection by the related party, and assurance to the related party
concerning the confidentiality of the technical information. This amount is
included in research and development expenses in the accompanying Statements
of Operations.
During 1997, 1996, and 1995, a related party was engaged to provide
subcontract manufacturing services to the Company. Fees for these services
were $9,020,000, $4,467,000, and $4,591,000, respectively. The amount paid
in 1997 includes subcontract manufacturing fees for the Itzehoe fabrication
facility which began production during the third quarter of 1997. During
1997, the Company also paid $9,226,000 to a related party for operating costs
incurred by the Itzehoe facility during the pre-production period. These
subcontract fees and operating costs are included in cost of sales in the
accompanying Statements of Operations. The Company is committed to pay for
operating costs, regardless of the extent of actual manufacturing output,
until December 31, 2007.
The Company entered into certain arrangements with related parties whereby
the Company or the related party paid certain selling and administration
expenses. These expenses were then billed back on a periodic basis. During
1997, 1996, and 1995, the Company was reimbursed at cost, $11,113,000,
$14,740,000, and $12,214,000, respectively, for selling and administrative
expenses for related parties. During the same periods, the Company
reimbursed related parties at cost, $1,636,000, $2,256,000, and $2,223,000,
respectively, for selling and administrative expenses. These selling and
administrative amounts are included in selling, marketing, and administration
expenses in the accompanying Statements of Operations. Management fee
arrangements have been entered into by the Company and related parties to
cover occupancy and administrative costs. During 1997, 1996, and 1995,
management fees received by the Company were $343,000, $712,000, and
$555,000, respectively, and fees paid by the Company were $183,000,
$1,853,000, and $139,000, respectively. The management fee paid by the
Company in 1996 included $1,670,000 related to legal, patent and licensing,
and setup costs related to the Itzehoe plant in Germany. These management
fees are included in selling, marketing, and administration expenses in the
accompanying Statements of Operations.
During 1996, the Company incurred costs in connection with the set-up of
the new Discrete Components division pertaining to the product lines of a
related party. Costs for 1996 which were billed back to a related party
totaled $1,768,000. This amount is included in selling, marketing, and
administration expenses in the accompanying Statements of Operations.
The Discrete Components and Integrated Circuits Divisions incur certain
selling, marketing, and administration costs on behalf of the entire TEMIC
<PAGE>
Semiconductors business unit. In 1997, the Company entered into an
arrangement whereby the Company paid certain selling, marketing, and
administration expenses for the Discrete Components Division and a related
party paid these expenses for the Integrated Circuits Division. The Company
and the related party agreed upon fixed fees for these expenses which were
then billed back on a periodic basis. During 1997, the Company received
$4,839,000 for selling, marketing, and administration expenses for the
Discrete Components Division. During the same period, the Company paid
$1,130,000 to a related party for selling, marketing, and administration
expenses for the Integrated Circuits Division. These amounts are included in
selling, marketing, and administration expenses in the accompanying Statements
of Operations.
Product sales to unconsolidated affiliates were $10,692,000, $15,527,000,
and $8,358,000 during 1997, 1996, and 1995, respectively. These amounts are
included in net sales in the accompanying Statements of Operations.
Long-term debt includes a related party note of $34,570,000 with DBCI (see
Note 6 of Notes to Consolidated Financial Statements). Interest expense
relating to this debt for 1997, 1996, and 1995 was $2,119,000, $2,005,000,
and $2,076,000, respectively, and these amounts are included in interest
expense in the accompanying Statements of Operations.
<PAGE>
Note 3 Simconix Joint Venture
The Company continued to maintain the equal partnership with the Shanghai
Institute of Metallurgy involving the assembly and test of the LITTLE FOOT
product in The People's Republic of China. Simconix exclusively provides
back-end manufacturing on die provided by the Company. In accordance with
the joint venture agreement, which expires in 2003, the Company recognized
$3,542,000, $2,188,000, and $472,000, as its share of profits in Simconix in
1997, 1996, and 1995, respectively, under the equity method of accounting.
The carrying amount of the joint venture was $10,888,000 and $7,346,000 at
December 31, 1997 and 1996, respectively. In order to obtain the best
pricing, the Company acts as the purchasing agent of manufacturing equipment
for Simconix and pays the vendors directly, with full reimbursement from
Simconix.
<PAGE>
Note 4 Inventories
<TABLE>
<CAPTION>
Inventories consisted of the following:
December 31
(In thousands) 1997 1996
------- -------
<S> <C> <C>
Finished goods $11,758 $ 6,105
Work-in-process 26,432 18,838
Raw materials 4,166 5,219
------- -------
$42,356 $30,162
------- -------
</TABLE>
<PAGE>
Note 5 Income Taxes
Income taxes for the years ended December 31, 1997, 1996, and 1995
consisted of the following:
<TABLE>
<CAPTION>
Years ended December 31 1997 1996 1995
(In thousands) -------- -------- --------
<S> <C> <C> <C>
Current:
Federal $ 5,276 $ 5,847 $ 5,670
State and local 152 54 148
Foreign 1,494 719 1,542
Less benefit of net operating losses - (699) (3,023)
-------- -------- --------
6,922 5,921 4,337
Deferred:
Federal 4,272 2,138 (2,024)
State and local (1,219) (3,394) -
Foreign (1,468) (886) -
-------- -------- --------
1,585 (2,142) (2,024)
$ 8,507 $ 3,779 $ 2,313
-------- -------- --------
-------- -------- --------
</TABLE>
Income tax expense differs from the amounts computed by applying the federal
income tax rate to pretax income as a result of the following:
<TABLE>
<CAPTION>
Years ended December 31 1997 1996 1995
(In thousands) -------- -------- --------
<S> <C> <C> <C>
Computed "expected" tax expense $ 14,532 $10,415 $ 9,287
Reduction in beginning of the year valuation allowance (3,780) (3,743) (4,345)
Foreign income taxable at different tax rate (1,138) (291) (2,743)
Income tax benefit attributable to foreign sales
corporation (720) (614) (675)
State taxes, net of federal benefit (693) (2,171) -
Other 306 183 789
-------- -------- --------
$ 8,507 $ 3,779 $ 2,313
-------- -------- --------
-------- -------- --------
</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 1997 1996
(In thousands) -------- ---------
<S> <C> <C>
Deferred tax assets:
Accrued expenses and reserves $ 5,026 $ 10,284
Tax credit carryforwards 10,500 8,900
-------- ---------
Total gross deferred tax assets 15,526 19,184
Less valuation allowance - (3,780)
-------- ---------
Net deferred tax assets $ 15,526 $ 15,404
Deferred tax liabilities:
Plant and equipment, principally due
to differences in depreciation $(10,774) $ (10,227)
Investment in joint venture (2,171) (1,011)
-------- ---------
Total gross deferred tax liabilities (12,945) (11,238)
-------- ---------
Net deferred tax asset $ 2,581 $ 4,166
-------- ---------
-------- ---------
</TABLE>
As of December 31, 1997, management believes that it is more likely than not
that the deferred tax assets will be realized. Thus, the valuation allowance
was completely eliminated in 1997. The primary factor assessed by management
in reaching its conclusion about the Company's net deferred income tax asset
was the continued increases in earnings for the past seven years.
<PAGE>
At December 31, 1997, the Company had the following carryforwards for tax
purposes:
<TABLE>
<CAPTION>
Expires
(In thousands) -------------
<S> <C> <C>
Credits:
Federal research and other business credits $ 3,350 1998-2011
California research and other business credits $ 5,700 No Expiration
Alternative minimum tax credits $ 1,450 No Expiration
</TABLE>
Utilization of the federal credit carryforwards incurred prior to 1991 is
limited to $940,000 on an annual basis under the Tax Reform Act of 1986 as a
result of the ownership change in 1990.
The Company has not provided for U.S. federal income taxes on $50.3 million
of non-U.S. subsidiaries' undistributed earnings as of December 31, 1997,
because such earnings are intended to be reinvested outside the United States
indefinitely.
The Company's U.S. income tax returns for the years ended 1993, 1994 and 1995
are presently under examination by the Internal Revenue Service. Management
believes that any potential tax assessment plus related interest and penalty,
if any, have been sufficiently provided for in the financial statements.
<PAGE>
Note 6 Debt Obligations
The Company's debt obligations were as follows:
<TABLE>
<CAPTION>
December 31
(In thousands) 1997 1996
--------- ---------
<S> <C> <C>
Related party borrowings $ 34,570 $ 34,570
Trade deferrals - 1,041
Guaranteed floating rate subordinated notes 3,117 3,117
Unfunded retirement costs 770 1,742
--------- ---------
Total debt 38,457 40,470
Less current portion - 1,041
--------- ---------
Long-term portion 38,457 39,429
Related party borrowings 34,570 34,570
--------- ---------
Amounts due to third parties $ 3,887 $ 4,859
--------- ---------
</TABLE>
Borrowings from a related party are at a floating interest rate based on
DBCI's cost of securing commercial paper, 6.04% at December 31, 1997.
Subsequent to year end, Vishay Intertechnology, Inc. ("Vishay") purchased the
80.4% interest in the Company (see Note 12 of Notes to Consolidated Financial
Statements). As part of the acquisition, Vishay paid off the loan and
established a new loan to the Company. Although interest rates were not
determined at the date of this transaction, Vishay intends to observe the
same due date in 2001. Therefore, the debt will continue to be classified as
long-term.
The Company issued $3,601,000 long-term trade deferral notes bearing
interest at the 12-month London Interbank Offered Rate ("LIBOR") plus 0.5%.
These notes were issued as partial compensation for trade claims. Principal
payments commenced in 1992, and the remaining trade deferral notes were paid
off in 1997.
The guaranteed floating rate subordinated notes bear interest at the
three-month LIBOR plus 0.5% and are due in 2005. The interest rate is fixed
annually (6.21% at December 31, 1997). The notes are guaranteed by an
affiliated party, are subordinated to all other obligations of the Company,
and are redeemable at the Company's option.
Debt (excluding unfunded retirement costs) at December 31, 1997, matures
according to the following schedule: (In thousands)
<TABLE>
<S> <C>
1998 $ -
1999 -
2000 -
2001 34,570
2002 -
Thereafter 3,117
-------
Total $37,687
-------
</TABLE>
<PAGE>
Note 7 Geographic and Industry Segment Reporting
The Company is engaged primarily in the designing, marketing, and
manufacturing 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 14% of net
sales in 1997, 16% in 1996, and 24% in 1995. Sales to the communication
market increased to 23% of net sales in 1997, compared with 13% in 1996 and
12% in 1995. A Japanese distributor accounted for 10% of net sales in fiscal
1997. The same distributor accounted for 19% of net sales in fiscal 1996 and
13% in fiscal 1995. Accounts receivable from this distributor totaled
$3,999,000 and $8,187,000 at December 31, 1997 and 1996, respectively.
The Company maintains manufacturing operations in the United States,
Germany, Hong Kong (through subcontractors), and Taiwan as well as a joint
venture in China and subsidiaries in the United Kingdom, Singapore, and Japan.
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 cash 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) 1997 1996 1995
---------- --------- ---------
<S> <C> <C> <C>
Sales to external customers:
North America $ 113,890 $ 89,596 $ 93,613
Europe 90,480 71,739 64,897
Japan 33,359 51,065 31,944
Asia Pacific 83,822 56,534 59,837
---------- --------- ---------
$ 321,551 $ 268,934 $ 250,291
---------- --------- ---------
Intercompany sales (eliminated in consolidation):
North America $ 163,615 $ 141,390 $ 134,764
Europe 93 2,716 1,398
Japan 2,056 2,587 2,613
Asia Pacific 54,242 103,318 100,234
---------- --------- ---------
$ 220,006 $ 250,011 $ 239,009
---------- ---------- ----------
Operating income (loss):
North America $ 30,116 $ 14,571 $ 18,019
Europe 4,332 2,274 1,716
Japan (267) (194) 97
Asia Pacific 14,182 12,073 10,413
Eliminations and adjustments (4,383) 3,087 (1,406)
---------- --------- ---------
$ 43,980 $ 31,811 $ 28,839
---------- ---------- ----------
Identifiable assets at December 31:
North America $ 214,580 $ 155,213 $ 133,232
Europe 18,278 14,929 18,679
Japan 263 351 342
Asia Pacific 87,589 64,639 58,063
---------- ---------- ----------
320,710 235,132 210,316
Eliminations and adjustments (65,726) (24,343) (36,343)
Corporate assets 26,525 27,880 33,989
---------- ---------- ----------
Total assets $ 281,509 $ 238,669 $ 207,962
---------- ---------- ----------
</TABLE>
<PAGE>
Note 8 Leases and Commitments
At December 31, 1997, the future minimum commitments for all non-cancelable
operating leases are as follows:
(In thousands)
<TABLE>
<S> <C>
1998 $ 6,387
1999 5,519
2000 3,144
2001 1,494
2002 1,495
Thereafter 1,303
-------
Total minimum lease payments $19,342
-------
</TABLE>
The Company leases land, office facilities, and equipment under operating
leases. Operating rent expense was $6,488,000, $4,599,000, and $4,511,000 in
1997, 1996, and 1995, 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 agreements. 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 $6,600,000, $7,692,000, and $7,467,000 in
1997, 1996, and 1995, respectively. Included in accrued liabilities are
royalties payable of $2,705,000 and $2,454,000 at December 31, 1997 and 1996,
respectively.
<PAGE>
Note 9 Employee Benefit Plans
The profit sharing element of the Siliconix incorporated Retirement Plan
Trust (the "Plan") provides for annual contributions by the Company of up to
10% of consolidated income before taxes (as defined). Vesting in the profit
sharing element of 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 were $3,330,000, $2,525,000, and $2,242,000, in 1997, 1996, and
1995, 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 matching contributions were $1,277,000, $1,266,000, and $1,112,000,
in 1997, 1996, and 1995, respectively.
The Company maintains defined benefit pension plans in the United States
and Taiwan. The Company's U.S. 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.
The following table sets forth the funded status and amounts of the defined
benefit pension plans recognized in the Company's balance sheets:
<TABLE>
<CAPTION>
December 31
(In thousands) 1997 1996
-------- -------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits obligation $ (50) $ (590)
Accumulated benefit obligation (1,801) (1,954)
Projected benefit obligation ("PBO") $ (3,370) $ (3,458)
Plan assets at fair value 765 1,257
Plan assets less PBO (2,605) (2,201)
Unrecognized net loss 1,495 66
Adjustment to recognize minimum liability - (196)
Unrecognized net transition asset at:
January 1, 1987, recognized over 15 years - 181
January 1, 1989, recognized over 15 years 374 485
-------- ---------
Accrued pension cost $ (736) $ (1,665)
-------- ---------
</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) 1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Service cost benefits earned during the year $ 187 $ 209 $ 204
Interest cost on PBO 168 239 241
Actual (gain) loss on plan assets (46) (67) (68)
Net amortization and deferral 27 99 96
------ ------ ------
Net pension expense $ 336 $ 480 $ 473
------ ------ ------
Assumptions used were:
Discount rates 7% 6.5% - 7% 7 - 7.5%
Rates of increase in compensation levels 5% 5% 6%
Expected long-term rate of return on assets 7% 6.5% - 7% 7 - 7.5%
</TABLE>
<PAGE>
Note 10 Employee Stock Plan
From 1973 through the fourth quarter of 1990, the Company's 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, a fixed amount of $3.06 (the "delta") determined by the Company's
plan of reorganization is paid to the Company. Fully vested shares
outstanding under this plan at a delta of $3.06 per share at December 31,
1997, 1996, and 1995, were 83,038, 96,945 and 102,389, respectively. There
were no shares issued under this plan during 1997, 1996, and 1995. Vested
shares sold by employees during 1997, 1996, and 1995 were 13,907, 5,444, and
75,214, respectively, resulting in payments of $42,555, $16,659, and
$230,155, respectively, to the Company which are included in additional
paid-in-capital. During 1997, 1996, and 1995, no vested shares were sold to
the Company.
<PAGE>
Note 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 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 as its best estimate of
future costs related to this matter at December 31, 1997.
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 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 Company's consolidated financial condition or overall
trends in the results of operations.
<PAGE>
Note 12 Subsequent Event
On March 2, 1998, the 80.4% interest in Siliconix owned by Daimler-Benz
was sold to a wholly-owned subsidiary of Vishay Intertechnology, Inc. of
Malvern, Pennsylvania. The Company's products will continue to be marketed
with the Siliconix brand name under the Vishay umbrella.
<PAGE>
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>
1997 1996
High Low High Low
<S> <C> <C> <C> <C> <C>
4th Quarter $ 57 1/2 $ 37 1/2 4th Quarter $ 24 1/2 $ 17
3rd Quarter 46 1/2 27 3rd Quarter 23 1/2 14 3/4
2nd Quarter 30 21 2nd Quarter 34 1/2 21 1/2
1st Quarter 31 22 1/2 1st Quarter 45 29
</TABLE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF SILICONIX INCORPORATED
<TABLE>
<CAPTION>
Jurisdiction
of Incorporation Percent
Subsidiary or Organization Owned
---------- ---------------- -------
<C> <S> <C> <C>
1. Siliconix Limited United Kingdom 100%
2. Siliconix (Hong Kong) Hong Kong 100%
Limited
3. Siliconix (Taiwan) Taiwan 100%
Limited
4. TEMIC Japan K.K. Japan 100%
5. TEMIC (S) Pte. Ltd. Singapore 100%
6. TEMIC Semiconductor United States 100%
North America, Inc. (New Jersey)
7. Siliconix Technology C.V. Netherlands 100%
8. Shanghai Simconix The People's Republic 50%
Co. Ltd. of China
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 10,249
<SECURITIES> 0
<RECEIVABLES> 64,233
<ALLOWANCES> 11,923
<INVENTORY> 42,356
<CURRENT-ASSETS> 139,821
<PP&E> 267,912
<DEPRECIATION> 141,514
<TOTAL-ASSETS> 281,509
<CURRENT-LIABILITIES> 89,602
<BONDS> 0
0
0
<COMMON> 100
<OTHER-SE> 149,450
<TOTAL-LIABILITY-AND-EQUITY> 281,509
<SALES> 321,551
<TOTAL-REVENUES> 321,551
<CGS> 194,436
<TOTAL-COSTS> 194,436
<OTHER-EXPENSES> 83,213
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,383
<INCOME-PRETAX> 41,519
<INCOME-TAX> 8,507
<INCOME-CONTINUING> 33,012
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,012
<EPS-PRIMARY> 3.31
<EPS-DILUTED> 3.31
</TABLE>
