UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number 0-25236
M I C R E L, I N C O R P O R A T E D
(Exact name of Registrant as specified in its charter)
California 94-2526744
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1849 Fortune Drive, San Jose, CA 95131
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 944-0800
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 [ ]
As of April 30, 1997 there were 9,390,593 shares of common stock, no par value,
outstanding.
This Report on Form 10-Q includes 25 pages with the Index to Exhibits located on
page 14.
<PAGE>
MICREL, INCORPORATED
INDEX TO
REPORT ON FORM 10-Q
FOR QUARTER ENDED MARCH 31, 1997
Page
-----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets - March 31, 1997 and
December 31, 1996............................................ 3
Condensed Consolidated Income Statements - Three Months
Ended March 31, 1997 and 1996................................ 4
Condensed Consolidated Statements of Cash Flows - Three
Months Ended March 31, 1997 and 1996......................... 5
Notes to Condensed Consolidated Financial Statements......... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................ 14
Item 6. Exhibits and Reports on Form 8-K............................. 14
Signature.................................................... 15
2
<PAGE>
<TABLE>
ITEM 1. FINANCIAL STATEMENTS
MICREL, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
March 31, December 31,
1997 1996 (1)
---------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,665 $ 3,239
Short-term investments 14,222 13,334
Accounts receivable, net 11,982 8,748
Inventories 12,124 13,922
Other current assets 2,801 3,038
-------- --------
Total current assets 43,794 42,281
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET 22,131 17,476
OTHER ASSETS 119 251
-------- --------
TOTAL $ 66,044 $ 60,008
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,913 $ 2,409
Deferred income on shipments to distributors 1,564 1,180
Other current liabilities 6,502 5,714
-------- --------
Total current liabilities 11,979 9,303
LONG-TERM OBLIGATIONS 3,144 3,274
SHAREHOLDERS' EQUITY:
Preferred stock, no par value - authorized:
5,000,000 shares; issued and outstanding: none - -
Common stock, no par value - authorized:
50,000,000 shares; issued and outstanding:
1997 - 9,385,793; 1996 - 9,330,643 21,566 21,315
Net unrealized losses on short-term investments (4) (2)
Retained earnings 29,359 26,118
-------- --------
Total shareholders' equity 50,921 47,431
-------- --------
TOTAL $ 66,044 $ 60,008
======== ========
(1) Derived from the December 31, 1996 audited balance sheet included in the
1996 Annual Report on Form 10-K of Micrel, Incorporated.
See notes to condensed consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
MICREL, INCORPORATED
CONDENSED CONSOLIDATED INCOME STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
Three Months Ended
March 31,
---------------------
1997 1996
-------- --------
<S> <C> <C>
NET REVENUES $ 22,113 $ 13,910
COST OF REVENUES 10,731 6,858
-------- --------
GROSS MARGIN 11,382 7,052
-------- --------
OPERATING EXPENSES:
Research and development 3,181 1,865
Selling, general and administrative 3,512 2,510
-------- --------
Total operating expenses 6,693 4,375
-------- --------
INCOME FROM OPERATIONS 4,689 2,677
OTHER INCOME, NET 222 194
-------- --------
INCOME BEFORE INCOME TAXES 4,911 2,871
PROVISION FOR INCOME TAXES 1,670 978
-------- --------
NET INCOME $ 3,241 $ 1,893
======== ========
NET INCOME PER COMMON AND EQUIVALENT SHARE $ 0.32 $ 0.19
======== ========
SHARES USED IN COMPUTING PER SHARE AMOUNTS 10,259 9,944
======== ========
See notes to condensed consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
MICREL, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
------------------
1997 1996
------- -------
<S> <C> <C>
Net cash provided by operating activities $ 6,187 $ 3,548
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and leasehold improvements (5,891) (2,742)
Purchases of short-term investments (7,988) (5,162)
Proceeds from sales and maturities of
short-term investments 7,100 6,100
------- -------
Net cash used in investing activities (6,779) (1,804)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt (233) (332)
Proceeds from the issuance of common stock, net 251 121
------- -------
Net cash provided by (used in) financing activities 18 (211)
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (574) 1,533
CASH AND CASH EQUIVALENTS - Beginning of period 3,239 1,901
------- -------
CASH AND CASH EQUIVALENTS - End of period $ 2,665 $ 3,434
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 50 $ 87
======= =======
Cash paid for income taxes $ 127 $ 660
======= =======
See notes to condensed consolidated financial statements.
</TABLE>
5
<PAGE>
MICREL, INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Information - The accompanying condensed consolidated
financial statements of Micrel, Incorporated and its wholly-owned
subsidiaries ("Micrel" or the "Company") as of March 31, 1997 and for the
three months ended March 31, 1997 and 1996 are unaudited. In the opinion of
management, the condensed consolidated financial statements include all
adjustments (consisting only of normal recurring accruals) that management
considers necessary for a fair presentation of its financial position,
operating results and cash flows for the interim periods presented.
Operating results and cash flows for interim periods are not necessarily
indicative of results for the entire year.
This financial data should be read in conjunction with the audited financial
statements and notes thereto included in the Company's 1996 Annual Report on
Form 10-K for the year ended December 31, 1996.
Net Income per Common and Equivalent Share - Net income per share is based
on the weighted average number of common and common equivalent shares
outstanding during the period. Common equivalent shares include common stock
options using the treasury stock method.
2. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
March 31, December 31,
1997 1996
---------- ------------
<S> <C> <C>
Finished goods $ 1,778 $ 2,735
Work in process 7,608 8,313
Raw materials 2,738 2,874
-------- --------
$ 12,124 $ 13,922
======== ========
</TABLE>
3. BORROWING ARRANGEMENTS
Under a revolving line of credit and security agreement, expiring September
30, 1997, the Company can borrow up to 80% of its eligible accounts
receivable to a maximum of $3.0 million. Borrowings under the line of credit
agreement bear interest at prime (9.0% at March 31, 1997) and are
collateralized by substantially all of the assets of the Company. There were
no borrowings under this revolving line of credit at March 31, 1997.
Under the same loan agreement, the Company has a non-revolving bank line of
credit of $5.0 million for funding purchases of capital equipment under
which the Company may borrow up to 100% of the cost, excluding installation
charges, sales tax, freight and software charges. Amounts borrowed under
this credit line may be converted to four-year installment notes. All
equipment notes are collateralized by the equipment purchased, bear interest
at prime and are subject to the same restrictive covenants as the operating
line of credit. The Company has not borrowed against the line at March 31,
1997 and $5.0 million is available under this agreement through September
30, 1997.
6
<PAGE>
MICREL, INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Under another nonrevolving bank line of credit that expired, the Company has
$2.2 million outstanding at March 31, 1997. The notes are collateralized by
the equipment purchased.
The agreement contains certain restrictive covenants which include a
restriction on the declaration and payment of dividends without the lender's
consent. The Company was in compliance with all such covenants at March 31,
1997.
4. SIGNIFICANT CUSTOMERS
One customer, Qualcomm, accounted for $2.4 million (11%) of net revenues
during the three months ended March 31, 1997. During the comparable period
in 1996, a different customer, Lexmark, accounted for $1.6 million (11%) of
net revenues.
5. RECENTLY ISSUED ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS
128"). The Company is required to adopt SFAS 128 in the fourth quarter of
fiscal 1997 and will restate at that time earnings per share ("EPS") data
for prior periods to conform with SFAS 128. Earlier application is not
permitted.
SFAS 128 replaces current EPS reporting requirements and requires a dual
presentation of basic and diluted EPS. Basic EPS excludes dilution and is
computed by dividing net income available to common shareholders by the
weighted average common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common
stock.
Pro Forma amounts for basic and diluted EPS assuming SFAS 128 had been in
effect for the quarters are as follows:
<TABLE>
Three Months Ended March 31,
----------------------------
Pro Forma EPS 1997 1996
-------- --------
<S> <C> <C>
Basic $ 0.35 $ 0.21
Diluted $ 0.32 $ 0.19
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
Micrel was founded in 1978 and was initially engaged in the business of
providing semiconductor test services. In 1981, Micrel expanded its business
operations and began providing wafer fabrication services and manufacturing
custom integrated circuits. The Company has shifted its focus and revenue base
from custom and foundry products to standard products. Standard products sales
increased to 76% of net revenues for the quarter ended March 31, 1997 as
compared to 63% for the same period in the prior year. The Company believes that
a substantial portion of its net revenues in the future will depend upon
standard products sales.
The Company has experienced and expects to continue to experience significant
fluctuations in its results of operations. Factors that affect the Company's
results of operations include the volume and timing of orders received, changes
in the mix of products sold, competitive pricing pressures and the Company's
ability to meet increasing demand. As a result of the foregoing or other
factors, there can be no assurance that the Company will not experience material
fluctuations in future operating results on a quarterly or annual basis, which
would materially and adversely affect the Company's business, financial
condition and results of operations.
Results of Operations
The following table sets forth certain operating data as a percentage of total
net revenues for the periods indicated.
</TABLE>
<TABLE>
Three Months Ended
------------------
March 31,
------------------
1997 1996
-------- --------
<S> <C> <C>
Net revenues 100.0% 100.0%
Cost of revenues 48.5 49.3
------ ------
Gross margin 51.5 50.7
------ ------
Operating expenses:
Research and development 14.4 13.4
Selling, general and administrative 15.9 18.1
------ ------
Total operating expenses 30.3 31.5
------ ------
Income from operations 21.2 19.2
Other income, net 1.0 1.4
------ ------
Income before income taxes 22.2 20.6
Provision for income taxes 7.6 7.0
------ ------
Net income 14.6% 13.6%
====== ======
</TABLE>
Net Revenues. Net revenues increased 59% to $22.1 million for the quarter ended
March 31, 1997 from $13.9 million for the same period in 1996 due, in part, to
higher standard products revenues. Standard product revenues grew to 76% of net
revenues for the quarter ended March 31, 1997 from 63% for the comparable period
in 1996. On a dollar basis, standard products revenues increased by 91% to $16.7
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
million for the quarter ended March 31, 1997 from $8.7 million for the
comparable period in 1996. Sales of standard products by the Company were led by
the increased sales of low dropout regulators, computer peripheral components,
switching regulators, and latched drivers. Such products were sold to
manufacturers of portable computing, computing peripherals, industrial and
telecommunications products.
The Company believes that pricing pressures continue to be experienced by the
general technology sector and by companies in the analog segment of the
semiconductor industry despite an increase in unit demand for integrated
circuits. During the first quarter of 1997, standard product customer demand
continued to be short-term focused due to shorter than historical order lead
times. These factors affect the Company's ability to predict future sales
growth, profitability and forward visibility. The Company's ability to predict
demand in future quarters also continues to be affected by the trend of its
customers to place orders closer to desired shipment dates and to reduce their
long-term purchasing commitments, which is the result of less predictable
demand for such customers' products and increased product availability in the
semiconductor industry. The Company has sought to address these reduced order
lead times by implementing faster production cycles.
International sales represented 48% and 39% of net revenues for the quarter
ended March 31, 1997 and 1996, respectively. The increase in international
sales resulted from shipments to manufacturers of personal computers and
communications products and demand for the Company's products primarily in
Asian markets and, to a lesser extent, in Europe. The Company believes that if
the Company's standard products sales continue to increase as a percentage of
net revenues, international sales will similarly increase as a percentage of
net revenues.
The Company's international sales are primarily denominated in U.S. currency.
Consequently, changes in exchange rates that strengthen the U.S. dollar could
increase the price in local currencies of the Company's products in foreign
markets and make the Company's products relatively more expensive than
competitors' products that are denominated in local currencies, leading to a
reduction in sales or profitability in those foreign markets. The Company has
not taken any protective measures against exchange rate fluctuations, such as
purchasing hedging instruments with respect to such fluctuations.
The Company defers recognition of revenue derived from sales to domestic and
Canadian distributors until such distributors resell the Company's products to
their customers. Sales to international distributors are recognized upon
shipment. The Company estimates international distributor returns and provides
an allowance as the revenue is recognized.
Gross Margin. Gross margin is affected by the volume of product sales, product
mix, manufacturing utilization, product yields and average selling prices. The
Company's gross margin increased to approximately 52% for the quarter ended
March 31, 1997 from approximately 51% for the same period in the prior year.
The improvement in gross margin reflected the continuing shift in product mix
to standard products which carry proportionately higher margins than the
Company's traditional foundry products.
Research and Development Expenses. Research and development expenses include
costs associated with the development of new processes and the definition,
design and development of standard products. The Company's research and
development expenses increased by approximately $1.3 million, or 71%, to $3.2
million for the three months ended March 31, 1997 from $1.9 million for the same
period in 1996 while increasing on a percentage basis to 14% from 13% of net
revenues for the quarters ended March 31, 1997
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
and 1996, respectively. The increase in research and development expenses during
the three months ended March 31, 1997 was primarily due to increased costs
associated with the Company's conversion to six-inch wafer fabrication, design
services, prototype wafers and increased engineering staffing to support the
development of new standard products. The Company believes that the development
and introduction of new standard products is critical to its future success and
expects that research and development expenses will increase on a dollar basis
in the future.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to approximately $3.5 million for the quarter
ended March 31, 1997 from $2.5 million for the comparable period of 1996 while
declining on a percentage basis to 16% from 18% of net revenues for the quarters
ended March 31, 1997 and 1996, respectively. The dollar increase was principally
attributable to higher commissions, advertising, and other sales and marketing
and promotion expenses associated with the growth of the standard products sales
organization, and increased staffing in the administration and finance
departments to support the Company's growth.
Other Income, Net. Other income, net reflects interest income from the
investment of cash balances and short-term investments, which is partially
offset by interest incurred by the Company on its line of credit borrowings and
term notes. Other income, net increased by $28,000 to $222,000 for the quarter
ended March 31, 1997 from $194,000 for the comparable period in 1996 due to an
increase in average cash and investment balances and a decrease in interest
expense due to a reduction in average amount of notes payable, offset by a
reduction in miscellaneous income. A $35,000 gain on the sale of fixed assets
which is reflected in other income, net for the quarter ended March 31, 1997,
offset the absence of gains on the settlement of litigation during the quarter
ended March 31, 1996.
Provision for Income Taxes. For the quarters ended March 31, 1997 and 1996 the
provision for income taxes was 34% of income before taxes for each quarter. The
income tax provision for interim periods reflects the Company's estimated annual
income tax rate. The 1997 and 1996 income tax provisions differ from taxes
computed at the federal statutory rate due to the effect of state taxes offset
by the benefit from the foreign sales corporation, state research and
experimentation credits, state manufacturing credits and the federal research
and development tax credit.
Liquidity and Capital Resources
Since inception, the Company's principal sources of funding have been its cash
from operations, a bank line of credit and sales of common stock. Principal
sources of liquidity at March 31, 1997 consisted of cash and short-term
investments of $16.9 million and borrowing facilities consisting of (i) $3.0
million under a revolving line of credit, of which all was unused and
available, and (ii) $5.0 million under a non-revolving line of credit, under
which there were no outstanding borrowings at March 31, 1997. The two lines of
credit are covered by the same loan and security agreement. This agreement
expires on September 30, 1997, subject to automatic renewal on a month to month
basis thereafter unless terminated by either party upon 30 days notice. These
borrowings are collateralized by substantially all of the Company's assets. The
agreement contains certain restrictive covenants which include a restriction on
the declaration and payment of dividends without the lender's consent. The
Company was in compliance with all such covenants at March 31, 1997.
With respect to the non-revolving bank line of credit that is covered by the
loan agreement described above, this $5.0 million line can be used to fund
purchases of capital equipment under which the
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
Company may borrow up to 100% of the cost, excluding installation charges,
sales tax, freight and software charges. Amounts borrowed under this credit
line may be converted to four-year installment notes. All equipment notes are
collateralized by the equipment purchased, bear interest at prime and are
subject to the same restrictive covenants as the revolving line of credit.
Under two other notes payable, the Company has $0.6 million and $1.6 million
outstanding at March 31, 1997. The notes are collateralized by the equipment
purchased.
The Company's working capital decreased by $1.2 million to $31.8 million as of
March 31, 1997 from $33.0 million as of December 31, 1996. The decrease was
primarily attributable to a decrease in inventory of approximately $1.8 million
combined with a $1.5 million increase in accounts payable and a $0.8 million
increase in other current liabilities, which were partially offset by a $3.2
million increase in accounts receivable combined with increases in cash, cash
equivalents and short-term investments of $0.3 million for the quarter ended
March 31, 1997. The Company's short-term investments were principally invested
in investment grade, interest-bearing securities.
The Company's cash flows from operating activities increased to approximately
$6.2 million for the quarter ended March 31, 1997 from approximately $3.5
million for the quarter ended March 31, 1996. The increase was primarily
attributable to net income of $3.2 million, and increases in accounts payable
and income taxes payable combined with a decrease in inventory, which were
partially offset by increases in accounts receivable.
The Company's investing activities during the quarter ended March 31, 1997 used
cash of approximately $6.8 million compared to $1.8 million of cash used for
investing activities during the same period in 1996. This increase in such cash
usage resulted primarily from an incremental $3.1 million increase in equipment
purchases primarily relating to the six-inch wafer fabrication operation during
the three months ended March 31, 1997 and $1.8 million in net additional
purchases of short-term investments.
Financing activities during the quarter ended March 31, 1997 provided cash of
approximately $18,000 compared to $211,000 of cash used for financing
activities during the same period in 1996. This change was the result of an
increase of $130,000 in proceeds from the issuance of common stock during the
quarter ended March 31, 1997 as compared to the same period in 1996, and a
$99,000 reduction in repayments of long-term debt during the same periods.
The Company currently intends to spend up to approximately $20.0 million during
the next twelve months primarily for the purchase of additional wafer and test
manufacturing equipment and leasehold improvements. The Company expects that
its cash requirements through mid-1998 will be met by its existing cash
balances and short-term investments, cash from operations and its existing
credit facilities.
Factors That May Affect Operating Results
The statements contained in this Report on Form 10-K that are not purely
historical are forward looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, including statements regarding the Company's expectations, hopes,
intentions or strategies regarding the future. Forward looking statements
include: statements regarding future products or product development;
statements regarding future research and development spending
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
and the Company's product development strategy; statements regarding future
capital expenditures and financing requirements; and statements regarding the
levels of international sales. All forward looking statements included in this
document are based on information available to the Company on the date hereof,
and the Company assumes no obligation to update any such forward looking
statements. It is important to note that the Company's actual results could
differ materially from those in such forward looking statements. Some of the
factors that could cause actual results to differ materially are set forth
below.
The Company has experienced and expects to continue to experience significant
fluctuations in its results of operations. Factors that affect the Company's
results of operations include the volume and timing of orders received, changes
in the mix of products sold, market acceptance of the Company's and its
customers' products, competitive pricing pressures, the Company's ability to
meet increasing demand, the Company's ability to introduce new products on a
timely basis, the timing of new product announcements and introductions by the
Company or its competitors, the timing and extent of research and development
expenses, fluctuations in manufacturing yields, cyclical semiconductor industry
conditions, the Company's access to advanced process technologies and the
timing and extent of process development costs. As a result of the foregoing or
other factors, there can be no assurance that the Company will not experience
material fluctuations in future operating results on a quarterly or annual
basis, which would materially and adversely affect the Company's business,
financial condition and results of operations.
The Company has transitioned its business to rely more heavily on the sale of
standard products. The Company believes that a substantial portion of its net
revenues in the future will continue to depend upon standard products sales. As
compared with the custom and foundry products business, the standard products
business is characterized by shorter product lifecycles, greater pricing
pressure, larger competitors and more rapid technological change. Generally,
the standard products market is a rapidly changing market in which the Company
faces the risk that, as the market changes, its product offerings will become
obsolete. The Company competes in the standard products market with established
companies, most of which have substantially greater financial, engineering,
manufacturing and marketing resources than the Company. No assurance can be
given that the Company will be able to compete successfully in the standard
products market or that it will be able to successfully introduce new standard
products in the future. The failure of the Company to compete successfully in
the standard products business would materially and adversely affect the
Company's financial condition and results of operations.
The Company is also currently transitioning to the processing of six inch
wafers, which will involve process lithography that will handle items as small
as one micron. For such manufacturing capability, the Company has begun
purchasing equipment and preparing production facilities to provide for such
manufacturing capabilities. There can be no assurance that the transition to
six inch wafer processing will be achieved on schedule without encountering any
delays in the process implementation. Nor can there be any assurance that the
Company will achieve acceptable manufacturing yields or that the operating
income margins on such products will be comparable to those realized in
connection with the Company's four inch wafer fabrication processes. Failure to
achieve acceptable yields or margins could adversely affect the Company's
financial condition and results of operations.
The analog semiconductor industry is highly competitive and subject to rapid
technological change. Significant competitive factors in the analog market
include product features, performance, price, timing of product introductions,
emergence of new computer standards, quality and customer support. Because
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
the standard products market for analog integrated circuits is diverse and
highly fragmented, the Company encounters different competitors in its various
market areas. Most of these competitors have substantially greater technical,
financial and marketing resources and greater name recognition than the
Company. Due to the increasing demands for analog circuits, the Company expects
intensified competition from existing analog circuit suppliers and the entry of
new competition, including companies from Japan. Increased competition could
adversely affect the Company's financial condition or results of operations.
There can be no assurance that the Company will be able to compete successfully
in either the standard products or custom and foundry products business in the
future or that competitive pressures will not adversely affect the Company's
financial condition and results of operations.
The fabrication of integrated circuits is a highly complex and precise process.
Minute impurities, contaminants in the manufacturing environment, difficulties
in the fabrication process, defects in the masks used to print circuits on a
wafer, manufacturing equipment failures, wafer breakage or other factors can
cause a substantial percentage of wafers to be rejected or numerous die on each
wafer to be nonfunctional. Moreover, there can be no assurance that the Company
will be able to maintain acceptable manufacturing yields in the future.
The semiconductor industry is characterized by frequent litigation regarding
patent and other intellectual property rights. There can be no assurance that
these existing claims or any other assertions (or claims for indemnity
resulting from infringement claims) will not materially adversely affect the
Company's business, financial condition and results of operations.
The Company's future success depends in part upon its intellectual property,
including patents, trade secrets, know-how and continuing technology
innovation. There can be no assurance that the steps taken by the Company to
protect its intellectual property will be adequate to prevent misappropriation
or that others will not develop competitive technologies or products. There can
be no assurance that any patent owned by the Company will not be invalidated,
circumvented or challenged, that the rights granted thereunder will provide
competitive advantages to the Company or that any of the Company's pending or
future patent applications will be issued with the scope of the claims sought
by the Company, if at all. Furthermore, there can be no assurance that others
will not develop technologies that are similar or superior to the Company's
technology, duplicate the Company's technology or design around the patents
owned by the Company.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Certain claims and lawsuits have arisen against the Company in its normal course
of business. The Company believes that these claims and lawsuits will not have a
material adverse effect on the Company's financial position, cash flow or
results of operation.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
--------
<TABLE>
Exhibit
Number Description Page
------- -------------------------------------------------------- -----
<S> <C> <C>
10.1 Indemnification Agreement between the Registrant
and Mr. George Anderl, an officer of the Company. 16
11.1 Statement regarding calculation of net income per share. 24
27.1 Financial Data Schedule. 25
(b) Reports on Form 8-K. The Company did not file any Reports on Form 8-K
--------------------
during the quarter ended March 31, 1997.
</TABLE>
14
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MICREL, INCORPORATED
--------------------
(Registrant)
Date: May 12, 1997 By /S/ ROBERT J. BARKER
---------------------
Robert J. Barker
Vice President, Finance and
Chief Financial Officer
(Authorized Officer and
Principal Financial Officer)
15
<PAGE>
EXHIBIT 10.1
INDEMNIFICATION AGREEMENT
-------------------------
THIS AGREEMENT is entered into, effective as of June 3, 1996 by and between
MICREL, INCORPORATED, a California corporation (the "Company"), and George T.
Anderl ("Indemnitee").
WHEREAS, it is essential to the Company to retain and attract as directors
and officers the most capable persons available;
WHEREAS, Indemnitee is a director and/or officer of the Company;
WHEREAS, both the company and Indemnitee recognize the increased risk of
litigation and other claims currently being asserted against directors and
officers of corporations; and
WHEREAS, in recognition of Indemnitee's need for substantial protection
against personal liability in order to enhance Indemnitee's continued and
effective service to the Company, and in order to induce Indemnitee to provide
services to the Company as a director and/or officer, the Company wishes to
provide in this Agreement for the indemnification of and the advancing of
expenses to Indemnitee to the fullest extent (whether partial or complete)
permitted by California law and as set forth in this Agreement, and, to the
extent insurance is maintained, for the coverage of Indemnitee under the
Company's directors' and officers' liability insurance policies.
NOW, THEREFORE, in consideration of the above premises and of Indemnitee's
continuing to serve the Company directly or, at its request, with another
enterprise, and intending to be legally bound hereby, the parties agree as
follows:
1. Certain Definitions:
-------------------
(a) Board: the Board of Directors of the Company.
(b) Change in Control: shall be deemed to have occurred if (I) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Act"), other than a trustee or other
fiduciary holding securities under an employee benefit plan of the company or a
corporation owned directly or indirectly by the shareholders of the Company in
substantially the same proportions as their ownership of stock of the Company,
is or becomes the "Beneficial Owner" (as defined in Rule 13d-3 under the Act),
directly or indirectly, of securities of the company representing 30% or more of
the total voting power represented by the Company's then outstanding Voting
Securities, or (ii) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board and any new director whose
election by the Board or nomination for election by the Company's shareholders
was approved by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at the beginning of the period of whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority of the Board, or, or (iii) the shareholders of
the Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation that would result in the
Voting Securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into Voting Securities of the surviving entity) at least 80% of the total voting
power represented by the Voting Securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation, or (iv) the
shareholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or
16
<PAGE>
disposition by the Company (in one transaction or a series of transactions) of
all or substantially all of the Company's assets.
(c) Expenses: any expense, liability, or loss, including attorneys' fees,
judgments, fines, ERISA excise taxes and penalties, amounts paid or to be paid
in settlement, any interest, assessments, or other charges imposed thereon, and
any federal, state, local, or foreign taxes imposed as a result of the actual or
deemed receipt of any payments under this Agreement, paid or incurred in
connection with investigating, defending, being a witness in, or participating
in (including on appeal), or preparing for any of the foregoing in, any
Proceeding relating to any Indemnifiable Event.
(d) Indemnifiable Event: any event or occurrence that takes place either
prior to or after the execution of this Agreement, related to the fact that
Indemnitee is or was a director or an officer of the company, or while a
director or officer is or was serving at the request of the Company as a
director, officer, employee, trustee, agent, or fiduciary of another foreign or
domestic corporation, partnership, joint venture, employee benefit plan, trust,
or other enterprise, or was a director, officer, employee, or agent of a foreign
or domestic corporation that was a predecessor corporation of the Company or of
another enterprise at the request of such predecessor corporation, or related to
anything done or not done by Indemnitee in any such capacity, whether or not the
basis of the Proceeding is alleged action in an official capacity as a director,
officer, employee, or agent or in any other capacity while serving as a
director, officer, employee, or agent of the Company, as described above.
(e) Independent Counsel: the person or body appointed in connection with
Section 3.
(f) Potential Change in Control: shall be deemed to have occurred if (I)
the Company enters into an agreement or arrangement, the consummation of which
would result in the occurrence of a Change in Control; (ii) any person
(including the Company) publicly announces an intention to take or to consider
taking actions that, if consummated, would constitute a Change in Control; (iii)
any person (other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company acting in such capacity or a corporation
owned, substantially the same proportions as their ownership of stock of the
Company), who is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing 10% or more of the combined voting power
of the Company's then outstanding Voting Securities, increase his beneficial
ownership of such securities by 5% or more over the percentage so owned by such
person on the date hereof, or (iv) the board adopts a resolution to the effect
that, for purposes of this Agreement, a Potential Change in Control has
occurred.
(g) Proceeding: (I) any threatened, pending, or completed action, suit,
or proceeding, or whether civil, criminal, administrative, investigative, or
other; (ii) any inquiry, hearing, or investigation, whether conducted by the
Company or any other party, that Indemnitee in good faith believes might lead to
the institution of any such action, suit, or proceeding.
(h) Reviewing Party: the person or body appointed in accordance with
Section 3.
(I) Voting Securities: any securities of the Company that vote generally
in the election of officers.
2. Agreement to Indemnify.
----------------------
17
<PAGE>
(a) General Agreement. In the event Indemnitee was, is, or becomes a
party to or witness or other participant in, or is threatened to be made a party
to or witness or other participant in, a Proceeding by reason of (or arising in
part out of) an Indemnifiable Event, the company shall indemnify Indemnitee from
and against any and all Expenses to the fullest extent permitted by law, as the
same exits or may hereafter be amended or interpreted (but in the case of any
such amendment or interpretation, only to the extent that such amendment or
interpretation permits the company to provide broader indemnification rights
than were permitted prior thereto). The parties hereto intend that this
Agreement shall provide for indemnification in excess of that expressly
permitted by statute, including, without limitation, any indemnification
provided by the Company's Articles of Incorporation, its bylaws, vote of its
shareholders or disinterested directors, or applicable law.
(b) Initiation of Proceeding. Notwithstanding anything in this Agreement
to the contrary, Indemnitee shall not be entitled to indemnification pursuant to
this Agreement in connection with any Proceeding initiated by Indemnitee against
the Company or any director or officer of the Company unless (i) the Company has
joined in or the Board has consented to the initiation of such Proceeding; (ii)
the Proceeding is one to enforce indemnification rights under Section 5; or
(iii) the Proceeding is instituted after a Change in Control and Independent
Counsel has approved its initiation.
(c) Expense Advances. If so requested by Indemnitee, the Company shall
advance (within ten business days of such request) any and all Expenses to
Indemnitee (an "Expense Advance"); proved that, if and to the extent that the
Reviewing Party determines that Indemnitee would not be permitted to be so
indemnified under applicable law, the Company shall be entitled to be reimbursed
by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts
theretofore paid. If Indemnitee has commenced legal proceedings in a court of
competent jurisdiction to secure a determination that Indemnitee should be
indemnified under applicable law, as provided in Section 4, any determination
made by the Reviewing Party that Indemnitee would not be permitted to be
indemnified under applicable law shall not be binding and Indemnitee shall not
be required to reimburse the Company for any Expense Advance unit a final
judicial determination is made with respect thereto (as to which all rights of
appeal therefrom have been exhausted or have lapsed). Indemnitee's obligation
to reimburse the Company for Expense Advances shall be unsecured and no interest
shall be charged thereon.
(d) Mandatory Indemnification. Notwithstanding any other provision of
this Agreement (other than Section 2(f) below), to the extent that Indemnitee
has been successful on the merits in defense or any Proceeding relating in whole
or in part to an Indemnifiable Event or in defense of any issue or matter
therein, Indemnitee shall be indemnified against all Expenses incurred in
connection therewith.
(e) Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of Expense, but not, however, for the total amount thereof, the Company
shall nevertheless indemnify Indemnitee for the portion thereof to which
Indemnitee is entitled.
(f) Prohibited Indemnification. No indemnification pursuant to this
Agreement shall be paid by the Company on account of any Proceeding in which
judgment is rendered against Indemnitee for an accounting of profits made from
the purchase or sale by Indemnitee of securities of the Company pursuant to the
provisions of Section 16(b) of the Act or similar provisions of any federal,
state or local laws.
18
<PAGE>
3. Reviewing Party. Prior to any Change in Control, the Reviewing Party
shall be any appropriate person or body consisting of a member or members of the
Board or any other person or body appointed by the board who is not a party to
the particular Proceeding with respect to which Indemnitee is seeking
indemnification; after a Change in Control, the Reviewing Party shall be the
Independent Counsel referred to below. With respect to all matters arising
after a Change in Control (other than a Change in Control approved by a majority
of the directors on the Board who were directors immediately prior to such
Change in Control) concerning the rights of Indemnitee to indemnity payments and
Expense Advances under this Agreement or any other agreement or under applicable
law or the company's Articles of Incorporation of bylaws now or hereafter in
effect relating to indemnification for Indemnifiable Events, the Company shall
seek legal advice only from Independent Counsel selected by Indemnitee and
approved by the Company (which approval shall not be unreasonably withheld), and
who has not otherwise performed services for the Company or the Indemnitee
(other than in connection with indemnification matters ) within the last five
years. The Independent Counsel shall not include any person who, under the
applicable standards of professional conduct then prevailing, would have a
conflict of interest in representing either the Company or Indemnitee in an
action to determine Indemnitee's rights under this Agreement. Such counsel,
among other things, shall render its written opinion to the Company and
Indemnitee as to whether and to what extent the Indemnitee should be permitted
to be indemnified under applicable law. the Company agrees to pay the
reasonable fees of the Independent Counsel and to indemnify fully such counsel
against any and all expenses (including attorney's fees), claims, liabilities,
loss, and damages arising out of or relating to this Agreement or the engagement
of Independent Counsel pursuant hereto.
4. Indemnification Process and Appeal.
----------------------------------
(a) Indemnification Payment. Indemnitee shall be entitled to
indemnification of Expenses, and shall receive payment thereof, from the Company
in accordance with this Agreement as soon as practicable after Indemnitee has
made written demand on the company for indemnification, unless the Reviewing
Party has given a written opinion to the company that Indemnitee is not entitled
to indemnification under applicable law.
(b) Suit to Enforce Rights. Regardless of any action by the Reviewing
Party, if Indemnitee has not received full indemnification within thirty days
after making a demand in accordance with Section 4(a), Indemnitee shall have the
right to enforce its indemnification rights under this Agreement by commencing
litigation in any court in the State of California having subject matter
jurisdiction thereof and in which venue is proper seeking an initial
determination by the court or challenging any determination by the Reviewing
Party or any aspect thereof. The Company hereby consents to service of process
and to appear in any such proceeding. any determination by the Reviewing Party
not challenged by the Indemnitee shall be binding on the company and Indemnitee.
The remedy provided for in this Section 4 shall be in addition to any other
remedies available to Indemnitee in law or equity.
(c) Defense to Indemnification, Burden of Proof, and Presumptions. It
shall be a defense to any action brought by Indemnitee against the Company to
enforce this Agreement (other than an action brought to enforce a claim for
Expenses incurred in defending a Proceeding in advance of its final disposition
where the required undertaking has been tendered to the Company) that it is not
permissible under applicable law for the company to indemnify Indemnitee for the
amount claimed. In connection with any such action or any determination by the
Reviewing Party or otherwise as to whether Indemnitee is entitled to be
indemnified hereunder, the burden of proving such a defense or
19
<PAGE>
determination shall be on the Company. Neither the failure of the Reviewing
Party or the company (including its board, independent legal counsel, or its
shareholders) to have made a determination prior to the commencement of such
action by Indemnitee that indemnification of the claimant is proper under the
circumstances because Indemnitee has met the standard of conduct set forth in
applicable law, nor an actual determination by the Reviewing Party of Company
(including it Board, independent counsel, or its shareholders) that the
Indemnitee had not met such applicable standard of conduct, shall be a defense
to the action or create a presumption that the Indemnitee has not met the
applicable standard of conduct. For purposes of this Agreement, the termination
of any claim, action, suit, or proceeding, by judgment, order settlement
(whether with or without court approval), conviction, or upon a plea of nolo
contendere, or its equivalent, shall not create a presumption that Indemnitee
did not meet any particular standard of conduct or have any particular belief or
that a court has determined that indemnification is not permitted by applicable
law.
5. Indemnification for Expenses Incurred in Enforcing Rights. The Company
shall indemnify Indemnitee against any and all Expenses and, if requested by
Indemnitee, shall (within ten business days of such request), advance such
Expenses to Indemnitee, that are incurred by Indemnitee in connection with any
claim asserted against or action brought by Indemnitee for
(i) Indemnification of Expenses or Expense Advances by the Company under
this Agreement or any other agreement or under applicable law or the company's
Articles of Incorporation or Bylaws now or hereafter in effect relating to
indemnification for Indemnifiable Events, and/or
(ii) recovery under directors' and officers' liability insurance
policies maintained by the Company, regardless of whether Indemnitee ultimately
is determined to be entitled to such indemnification, Expense Advances, or
insurance recovery, as the case may be.
6. Notification and Defense of Proceeding.
---------------------------------------
(a) Notice. Promptly after receipt by Indemnitee of notice of the
commencement of any Proceeding, Indemnitee shall, if a claim in respect thereof
is to be made against the Company under this Agreement, notify the Company of
the commencement thereof; but the omission so to notify the Company will not
relieve the Company from any liability that it may have to Indemnitee, except as
provided in Section 6(c).
(b) Defense. With respect to any Proceeding as to which Indemnitee
notifies the Company of the commencement thereof, the Company shall be entitled
to participate in the Proceeding at its own expense and except as otherwise
provided below, to the extent the Company so wishes, it may assume the defense
thereof with counsel reasonably satisfactory to Indemnitee. After notice from
the Company to Indemnitee of its election to assume the defense of any
Proceeding, the Company shall not be liable to Indemnitee under this Agreement
or otherwise for any Expenses subsequently incurred by Indemnitee in connection
with the defense of such Proceeding other than reasonable costs of investigation
or as otherwise provided below. Indemnitee shall have the right to employ his
or her own legal counsel in such Proceeding, but all Expenses related thereto
incurred after notice from the Company of its assumption of the defense shall be
at Indemnitee's expense unless: (I) the employment of legal counsel by
Indemnitee has been authorized by the Company, (ii) Indemnitee has reasonably
determined that there may be a conflict of interest between Indemnitee and the
Company in the defense of the Proceeding, (iii) after a Change in Control, the
employment of counsel by Indemnitee has been approved by the Independent
Counsel, or (iv) the Company shall not in fact have employed counsel to assume
the defense of such Proceeding, in each of which case all Expenses of the
Proceeding
20
<PAGE>
shall be borne by the company. The company shall not be entitled to assume the
defense of any Proceeding brought by or on behalf of the Company or as to which
Indemnitee shall have made the determination provided for in (ii) above.
(c) Settlement of Claims. The Company shall not be liable to
indemnify Indemnitee under this Agreement or otherwise for any amounts paid in
settlement of any Proceeding effected without the Company's written consent,
provided, however, that if a Change in Control has occurred, the Company shall
be liable for indemnification of Indemnitee for amounts paid in settlement if
the Independent counsel has approved the settlement. The Company shall not
settle any Proceeding in any manner that would impose any penalty or limitation
on Indemnitee without Indemnitee's written consent. Neither the Company nor the
Indemnitee will unreasonably withhold their consent to any proposed settlement.
The Company shall not be liable to indemnify the Indemnitee under this Agreement
with regard to any judicial award if the Company was not given a reasonable and
timely opportunity, at its expense, to participate in the defense of such
action; the Company's liability hereunder shall not be excused if participation
in the Proceeding by the Company was barred by this Agreement.
7. Establishment of Trust. In the event of a Change in Control or a
Potential Change in Control, the Company shall, upon written request by
Indemnitee, create a Trust for the benefit of the Indemnitee and from time to
time upon written request of Indemnitee shall fund the Trust in an amount
sufficient to satisfy any and all Expense reasonably anticipated at the time of
each such request to be incurred in connection with investigating, preparing
for, participating in, and/or defending any Proceeding relating to an
Indemnifiable Event. The amount or amounts to be deposited in the Trust
pursuant to the foregoing funding obligation shall be determined by the
Reviewing Party. The terms of the Trust shall provide that upon a Change in
Control, (I) the Trust shall not be revoked or the principal thereof invaded,
without the written consent of the Indemnitee, (ii) the Trustee shall advance,
within ten business days of a request by the Indemnitee, any and all Expenses to
the Indemnitee (and the Indemnitee hereby agrees to reimburse the Trust under
the same circumstances for which the Indemnitee would be required to reimburse
the Company under Section 2(c) of this Agreement), (iii) the Trust shall
continue to be funded by the Company in accordance with the funding obligation
set forth above, (iv) the Trustee shall promptly pay to the Indemnitee all
amounts for which the Indemnitee shall be entitled to indemnification pursuant
to this Agreement or otherwise, and (v) all unexpended funds in the Trust shall
revert to the Company upon a final determination by the Reviewing Party or a
court of competent jurisdiction, as the case may be, that the Indemnitee has
been fully indemnified under the terms of this Agreement. The Trustee shall be
chosen by the Indemnitee. Nothing in this Section 7 shall relieve the Company
of any of its obligations under this Agreement. All income earned on the assets
held in the Trust shall be reported as income by the Company for federal, state,
local, and foreign tax purposes. The Company shall pay all costs of
establishing and maintaining the Trust and shall indemnify the Trustee against
any and all expenses (including attorneys' fees), claims, liabilities, loss, and
damages arising out of or relating to this Agreement or the establishment and
maintenance of the Trust.
8. Non-Exclusivity. The rights of Indemnitee hereunder shall be in
addition to any other rights Indemnitee may have under the Company's Articles of
Incorporation, Bylaws, applicable law, or otherwise. To the extent that a
change in applicable law (whether by statute or judicial decision) permits
greater indemnification by agreement than would be afforded currently under the
Company's Articles of Incorporation, Bylaws, applicable law, or this Agreement,
it is the intent of the parties that Indemnitee enjoy by this Agreement the
greater benefits so afforded by such change.
9. Liability Insurance. To the extent the company maintains an insurance
policy or policies providing directors' and officers' liability insurance,
Indemnitee shall be covered by
21
<PAGE>
such policy or policies, in accordance with its or their terms, to the maximum
extent of the coverage available for any Company director or officer.
10. Period of Limitations. No legal action shall be brought and no cause
of action shall be asserted by or on behalf of the company or any affiliate of
the Company against Indemnitee, Indemnitee's spouse, heirs, executors, or
personal or legal representatives after the expiration of two years from the
date of accrual of such cause of action, or such longer period as may be
required by state law under the circumstances. Any claim or cause of action of
the Company or its affiliate shall be extinguished and deemed released unless
asserted by the timely filing of a legal action within such period; provided,
however that if any shorter period of limitations is otherwise applicable to any
such cause of action the shorter period shall govern.
11. Amendment of this Agreement. No supplement, modification, or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall operate as a waiver of any other provisions hereof (whether or not
similar), nor shall such waiver constitute a continuing waiver. Except as
specifically provided herein, no failure to exercise or any delay in exercising
any right or remedy hereunder shall constitute a waiver thereof.
12. Subrogation. In the event of payment under this Agreement, the
Company shall be subjugated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
of such documents necessary to enable the Company effectively to bring suite to
enforce such rights.
13. No Duplication of Payments. The Company shall not be liable under
this Agreement to make any payment in connection with any claim made against
Indemnitee to the extent Indemnitee has otherwise received payment (under any
insurance policy, Bylaw, or otherwise) of the amounts otherwise Indemnifiable
hereunder.
14. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors (including any direct or indirect successor by purchase, merger,
consolidation, or otherwise to all or substantially all of the business and/or
assets of the Company), assigns, spouses, heirs, and personal and legal
representatives. The Company shall require and cause any successor (whether
direct or indirect by purchase, merger, consolidation, or otherwise) to all,
substantially all, or a substantial part, of the business and/or assets of the
Company, by written agreement in form and substance satisfactory to Indemnitee,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform if no such
succession had taken place. The indemnification provided under this Agreement
shall continue as to Indemnitee for any action taken or not taken while serving
in an indemnified capacity pertaining to an Indemnifiable Event even though he
or she may have ceased to serve in such capacity at the time of any Proceeding.
15. Severability. If any provision (or portion thereof) of this
Agreement shall be held by a court of competent jurisdiction to be invalid,
void, or otherwise unenforceable, the remaining provision shall remain
enforceable to the fullest extent permitted by law. Furthermore, to the fullest
extent possible, the provisions of this Agreement (including, without
limitation, each portion of this Agreement containing any provision held to be
invalid, void, or otherwise unenforceable, that is not itself
22
<PAGE>
invalid, void, or unenforceable) shall be construed so as to give effect to the
intent manifested by the provision held invalid, void, or unenforceable.
16. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California applicable to
contracts made and to be performed in such State without giving effect to the
principles of conflicts of laws.
17. Notices. All notices, demands, and other communications required or
permitted hereunder shall be made in writing and shall be deemed to have been
duly given if delivered by hand, against receipt, or mailed, postage prepaid,
certified or registered mail, return receipt requested, and addressed to the
Company at:
Micrel, Incorporated
1849 Fortune Drive
San Jose, California 95131
Attn: President
and to Indemnitee at:
George T. Anderl
10205 Avocado Place
Cupertino, CA 95014
Attn:
Notice of change of address shall be effective only when given in
accordance with this Section. All notices complying with this Section shall be
deemed to have been received on the date of delivery or on the third business
day after mailing.
18. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day specified above.
MICREL, INCORPORATED
By: /S/ Warren H. Muller
----------------------
Title: Vice President, Secretary
INDEMNITEE:
/S/ George T. Anderl
-----------------------------
George T. Anderl
23
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11.1
MICREL, INCORPORATED
COMPUTATION OF NET INCOME PER SHARE
(Unaudited)
(In thousands except per share data)
Three Months Ended
--------------------
March 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Weighted average common shares outstanding........ 9,367 8,979
Dilutive effect of stock options................ 892 965
------- -------
Number of shares used in computing per
share amounts.................................. 10,259 9,944
======= =======
Net income........................................ $ 3,241 $ 1,893
======= =======
Net income per common and equivalent share........ $ 0.32 $ 0.19
======= =======
</TABLE>
24
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE PERIOD ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-30-1997
<CASH> 2,665
<SECURITIES> 14,222
<RECEIVABLES> 11,982
<ALLOWANCES> 0
<INVENTORY> 12,124
<CURRENT-ASSETS> 43,794
<PP&E> 22,131
<DEPRECIATION> 0
<TOTAL-ASSETS> 66,044
<CURRENT-LIABILITIES> 11,979
<BONDS> 0
0
0
<COMMON> 21,566
<OTHER-SE> 29,355
<TOTAL-LIABILITY-AND-EQUITY> 66,044
<SALES> 22,113
<TOTAL-REVENUES> 22,113
<CGS> 10,731
<TOTAL-COSTS> 10,731
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,911
<INCOME-TAX> 1,670
<INCOME-CONTINUING> 3,241
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,241
<EPS-PRIMARY> 0
<EPS-DILUTED> 0.32
<PAGE>
</TABLE>
