<PAGE>
As filed with the Securities and Exchange Commission on September 27, 2000
Registration No. 333-46028
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 1
To
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------------
IXYS CORPORATION
(Exact name of registrant as specified in its charter)
---------------------
<TABLE>
<CAPTION>
Delaware 77-0140882-5
<S> <C>
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
3540 Bassett Street
Santa Clara, CA 95054
(408) 982-0700
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------
Arnold Agbayani
Vice President of Finance
IXYS Corporation
3540 Bassett Street
Santa Clara, CA 95054
(408) 982-0700
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
<TABLE>
<S> <C>
James R. Jones, Esq. H. Watt Gregory, III, Esq.
Luke J. Bergstrom, Esq. Jeffrey J. Gearhart, Esq.
Anna A. Tran, Esq. Kutak Rock LLP
Cooley Godward LLP 425 West Capitol Avenue
Five Palo Alto Square Suite 1100
3000 El Camino Real Little Rock, AR 72201-3409
Palo Alto, CA 94306-2155 (501) 975-3000
(650) 843-5000
</TABLE>
---------------------
Approximate date of commencement of proposed sale to the public: As soon
as practicable after this registration statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the Prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]
---------------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities Exchange Commission is effective. This prospectus is not an offer +
+to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED SEPTEMBER 27, 2000
4,000,000 Shares
[IXYS LOGO]
Common Stock
IXYS Corporation is offering 2,000,000 shares of common stock, and selling
stockholders are offering 2,000,000 shares of common stock in this offering. We
will not receive any of the proceeds from the sale of shares by the selling
stockholders.
Our common stock is traded on the Nasdaq National Market under the symbol
"SYXI." The last reported sale price of our common stock on the Nasdaq National
Market on September 26, 2000, was $25.25 per share.
--------------
See Risk Factors beginning on page 8 for factors that investors should
consider before investing in shares of our common stock.
--------------
<TABLE>
<CAPTION>
Per
Share Total
----- -----
<S> <C> <C>
Public offering price............................................... $ $
Underwriting discounts and commissions.............................. $ $
Proceeds, before expenses, to IXYS.................................. $ $
Proceeds to the selling stockholders................................ $ $
</TABLE>
ABB AG, one of the selling stockholders, has granted the underwriters the
right to purchase up to an additional 600,000 shares from ABB for a period of
thirty days.
The underwriters are severally underwriting the shares being offered. The
underwriters expect to deliver the shares of common stock to investors on
, 2000.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
Stephens Inc. CIBC World Markets
Needham & Company, Inc.
The date of this prospectus is , 2000.
<PAGE>
In the center of the page near the top margin is the IXYS logo.
Immediately below the logo in the center of the page is the phrase,
"Supplying high power, high performance power semiconductors for diverse
industries."
On the left-hand side of the top third of the page is the phrase,
"Communications Infrastructure."
On the right-hand side of the top third of the page are two photographs,
one of which depicts a line of satellite dishes of the type used in wireless
communications systems, and the other of which depicts a complex of computer
servers.
On the left-hand side of the middle third of the page are two
photographs, one of which depicts a forklift, and the other of which depicts
robotic machinery.
On the right-hand side of the middle third of the page is the phrase,
"Industrial Motor Drives."
On the left-hand side of the bottom third of the page is the phrase,
"Sophisticated Medical Electronics."
On the right-hand side of the bottom third of the page are two
photographs, one of which depicts a portable defibrillator, and the other of
which depicts an implantable defibrillator.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary..................................................... 4
Risk Factors........................................................... 8
Cautionary Note Regarding Forward-Looking Statements................... 17
Use of Proceeds........................................................ 17
Price Range of Common Stock............................................ 18
Dividend Policy........................................................ 18
Capitalization......................................................... 19
Selected Consolidated Financial Data................................... 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................ 22
Business............................................................... 28
Management............................................................. 38
Principal and Selling Stockholders..................................... 44
Certain Relationships and Related Transactions......................... 46
Description of Capital Stock........................................... 47
Underwriting........................................................... 50
Legal Matters.......................................................... 51
Experts................................................................ 51
Where You Can Find More Information About IXYS and This Offering....... 52
Index to Consolidated Financial Statements............................. F-1
</TABLE>
You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate as of the date on the
front cover of this prospectus only. Our business, financial condition, results
of operations and prospects may have changed since that date.
IXYS and the IXYS logo are our trademarks in the U.S. and other
jurisdictions.
<PAGE>
PROSPECTUS SUMMARY
This summary highlights selected information from this prospectus and
does not contain all of the information that may be important to you. You
should read the entire prospectus carefully, especially the information
discussed under Risk Factors. Except as otherwise indicated, all information in
this prospectus assumes no exercise of the underwriters' over-allotment option.
On August 10, 2000, we completed a two-for-one stock split of our common stock.
References to share and per share data have been adjusted to give effect to
this stock split.
IXYS Corporation
We are a leading company in the design, development, manufacture and
marketing of high power, high performance power semiconductors. Our power
semiconductors improve system efficiency and reliability by converting
electricity at relatively high voltage and current levels into the finely
regulated power required by electronic products. We focus on the market for
power semiconductors that are capable of processing greater than 500 watts of
power.
Our products are used primarily to control electricity in:
. power conversion systems for communications infrastructure
applications;
. motor drives for industrial applications; and
. sophisticated medical electronics applications.
We design our products primarily for industrial and business
applications, rather than for use in personal computers, mobile phones or other
household appliances.
In fiscal year 2000, we sold our products to over 2,000 customers
worldwide. Our major customers include Agilent Technologies, ASCOM, Emerson
Electric, Eurotherm, Guidant, Medtronic, Rockwell International, Siemens and
Still. In many cases, our customers incorporate our products into systems sold
to their own customers, which include Ericsson, General Electric, General
Motors, Hewlett Packard, IBM, Motorola and Nokia.
For the fiscal year ended March 31, 2000, our net revenues were $76.6
million, an increase of 15.2% over our net revenues of $66.5 million for the
fiscal year ended March 31, 1999. For the three months ended June 30, 2000, our
net revenues were $23.3 million, an increase of 36.3% over our net revenues of
$17.1 million for the three months ended June 30, 1999.
Industry and Markets
Demand for electricity in the 21st century is forecasted to increase
faster than demand for other forms of energy. Electronic products in all
markets are becoming increasingly sophisticated, offering greater
"intelligence" through the use of microprocessors and additional components.
The increasing complexity of such products requires more precisely regulated
power quality and greater power reliability. In addition, the increasing costs
of electricity, coupled with governmental regulations and environmental
concerns, have caused an increased demand for energy efficiency.
Generally, the more sophisticated the end product, the greater its need
for specially formatted, finely regulated power, and the greater its need for a
high performance power semiconductor. According to the Digital Power Report,
less than 15% of the world's electricity is currently switched by power
semiconductors, but this percentage is expected to grow significantly to meet
the increasing need for higher quality power.
4
<PAGE>
We believe the following key trends are driving the demand for our
products:
. growth in communications devices and infrastructure;
. increased demand for energy efficiency in motor drives;
. emergence of new applications in medical electronics;
. development of new technologies for power management; and
. demand for increasing power density.
Our Strategy
Since our inception in 1983, we have focused on meeting the needs of the
high power, high performance segment of the power semiconductor market. We
intend to continue building a leading position within our targeted segment of
this market by pursuing the following strategies:
. Maintain technological focus on high power, high performance
market. Our technological expertise enables us to focus on the high
power, high performance power semiconductor market. Due to
technological complexities, fewer industry players compete in this
market, resulting in a more favorable competitive environment for us.
. Target rapid growth opportunities within the high power, high
performance market. We select the specific markets where we intend to
compete by evaluating their potential growth, our ability to establish
an advantage based upon our technological capabilities and the
performance of competing products.
. Continue to diversify markets, customers and products. We will continue
to diversify the markets and customers we serve and the products we
produce. We believe this minimizes our dependence on any single
customer or group of customers, while enabling our customers to reduce
the number of suppliers that provide them power semiconductors.
. Pursue selective acquisition and investment strategy. We seek to access
additional technological capabilities and complementary product lines
through selective acquisitions and strategic investments. We believe
there are significant opportunities to capitalize on our extensive
distribution system and market additional products to many of our 2,000
customers.
. Collaborate with select companies on product development. We seek to
enter into collaborative arrangements with existing and potential
customers in attractive end user markets in order to optimize our
products for their use.
. Optimize mix between internal and external manufacturing. We intend to
continue the manufacture of wafers using both internal fabrication
facilities and our external foundry relationships. We also seek to
balance our product assembly through multiple sourcing relationships.
We believe that these strategies enable us to maximize our
manufacturing efficiency and flexibility.
We are a Delaware corporation. Our executive offices are located at 3540
Bassett Street, Santa Clara, California 95054, and our telephone number is
(408) 982-0700. Our website can be found at www.ixys.com. The information found
on our website is not a part of this prospectus.
5
<PAGE>
The Offering
Common stock offered by us.................. 2,000,000 shares
Common stock offered by the selling
stockholders................................ 2,000,000 shares
Common stock to be outstanding after the
offering.................................... 26,455,580 shares
Use of proceeds............................. To repay debt, fund capital
expenditures, fund possible
acquisitions of, or investments
in, other complementary products,
businesses or technologies, and
for general corporate purposes
Nasdaq National Market symbol............... SYXI
Common stock to be outstanding after the offering is based upon the
number of shares outstanding as of September 1, 2000 adjusted for the number of
shares offered for sale by us, and excludes the following:
. 3,312,006 shares of common stock subject to outstanding options under
our stock option plans at a weighted average exercise price of $3.10
and 1,668,100 shares reserved for future issuance under these plans;
. 280,250 shares of common stock subject to outstanding warrants at a
weighted average exercise price of $0.64; and
. 459,076 shares of common stock reserved for future issuance under our
employee stock purchase plan.
See Note 8 of Notes to Consolidated Financial Statements for descriptions of
our outstanding options and warrants.
6
<PAGE>
Summary Consolidated Financial Data
(in thousands, except per share data)
You should read the following financial information together with the
Consolidated Financial Statements and related notes and Management's Discussion
and Analysis of Financial Condition and Results of Operations, included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
Fiscal Year Ended March Three Months
31, Ended June 30,
--------------------------- ----------------
1998(1) 1999(2) 2000 1999 2000(3)
------- -------- -------- ------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net revenues................... $56,856 $ 66,523 $ 76,627 $17,072 $23,274
Gross profit................... 18,808 21,584 27,337 5,642 8,221
Operating income (loss)........ 7,095 (2,868) 11,219 1,574 4,025
Net income (loss).............. 6,084 (5,238) 6,899 1,162 3,694
Net income (loss) per share--
basic(4)..................... $ 0.73 $ (0.28) $ 0.29 $ 0.05 $ 0.15
------- -------- -------- ------- -------
Weighted average shares
outstanding--basic(4)........ 8,354 18,746 23,970 23,932 23,984
------- -------- -------- ------- -------
Net income (loss) per share--
diluted(4)................... $ 0.72 $ (0.28) $ 0.28 $ 0.05 $ 0.15
------- -------- -------- ------- -------
Weighted average shares
outstanding--diluted(4)...... 8,392 18,746 24,826 23,950 24,390
------- -------- -------- ------- -------
Selected Operating Data:
Gross profit margin............ 33.1% 32.4% 35.7% 33.0% 35.3%
EBITDA(5)...................... $ 8,620 $ 10,147 $ 14,571 $ 2,340 $ 4,844
EBITDA margin(6)............... 15.2% 15.3% 19.0% 13.7% 20.8%
</TABLE>
<TABLE>
<CAPTION>
June 30, 2000
-------------------
As
Actual Adjusted(7)
------- -----------
(Unaudited)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents................................... $12,601 $ 51,924
Working capital............................................. 33,414 75,531
Total assets................................................ 71,399 110,722
Total debt.................................................. 12,127 4,527
Total stockholders' equity.................................. 37,259 84,182
</TABLE>
--------
(1) Includes $3.7 million of income from a settlement of patent litigation.
(2) Includes a $10.4 million writeoff of in process research and development
and goodwill related to our merger with Paradigm Technology. See
Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview.
(3) Includes a $1.1 million gain, net of taxes, in the quarter ended June 30,
2000, which was composed primarily of a one time payment for a technology
license.
(4) Shares used in per share calculation for fiscal years 1998 and 1999 have
been restated to reflect our shares outstanding as a result of our merger
with Paradigm. In our merger with Paradigm, each outstanding share was
converted into 0.057842 shares.
(5) EBITDA means operating income before depreciation and amortization. EBITDA
excludes the writeoff of goodwill and in process research and development
that occurred in fiscal year 1999. Although EBITDA is a widely accepted
financial concept, it should not be considered as an alternative to
operating income or to cash flows from operating activities. Our management
and some investors use EBITDA as an indication of operating performance.
(6) EBITDA margin is EBITDA as a percentage of net revenues.
(7) Adjusted to reflect the sale of 2,000,000 shares of common stock offered by
us at an assumed offering price of $25.25 per share, and the application of
the estimated net proceeds.
7
<PAGE>
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. Additional risks not presently known to us or that we
currently believe are not serious may also impair our business and our
financial condition. The trading price of our common stock could decline at any
time due to any of these risks, and you could lose all or part of your
investment.
Our operating results fluctuate significantly because of a number of factors,
many of which are beyond our control.
Our operating results may fluctuate significantly. Some of the factors
that may affect our quarterly and annual results are:
. the reduction, rescheduling or cancellation of orders by customers;
. fluctuations in timing and amount of customer requests for product
shipments;
. the cyclicality of the semiconductor industry;
. fluctuations in our manufacturing yields and significant yield losses;
. availability of production capacity;
. changes in the mix of products that our customers purchase;
. competitive pressures on selling prices;
. the amount and timing of costs associated with product warranties and
returns;
. the amount and timing of investments in research and development;
. market acceptance of our products;
. changes in our product distribution channels and the timeliness of
receipt of distributor resale information;
. the impact of vacation schedules and holidays, largely during the
second and third fiscal quarters of our fiscal year; and
. difficulties in forecasting, planning and managing inventory levels.
As a result of these factors, many of which are difficult to control or
predict, as well as the other risk factors discussed in this prospectus, we may
experience material adverse fluctuations in our future operating results on a
quarterly or annual basis.
The semiconductor industry is cyclical, and an industry downturn could
adversely affect our operating results.
In the past, business conditions in the semiconductor industry have
rapidly changed from periods of strong demand to periods of weak demand. Any
future downturn in the industry could harm our business and cause our operating
results to suffer. The industry is characterized by:
. periods of overcapacity and production shortages;
. cyclical demand for semiconductors;
. changes in product mix in response to changes in demand;
. variations in manufacturing costs and yields;
. rapid technological change and the introduction of new products;
. significant price erosion; and
. significant expenditures for capital equipment and product
development.
8
<PAGE>
We may not be able to acquire additional production capacity to meet the
present or future demand for our products.
The semiconductor industry has been characterized by periodic limitations
on production capacity. Our current customer demand exceeds our ability to
internally or externally manufacture products to meet this demand. If we are
unable to increase our production capacity to meet demand, some of our
customers may seek other sources of supply or our future growth may be limited.
We depend on external foundries to manufacture many of our products.
Fifty percent of our revenues in fiscal year 2000 came from wafers
manufactured for us by external foundries. Our dependence on external foundries
may grow. We have arrangements with four wafer foundries, two of which produce
substantially all of the wafers that we purchase from external foundries.
Samsung Electronics' facility in Kiheung, South Korea is our principal external
foundry. Our relationships with our external foundries do not guarantee prices,
delivery or lead times, or wafer or product quantities sufficient to satisfy
current or expected demand. These foundries manufacture our products on a
purchase order basis. We provide these foundries with rolling forecasts of our
production requirements; however, the ability of each foundry to provide wafers
to us is limited by the foundry's available capacity. At any given time, these
foundries could choose to prioritize capacity for their own use or other
customers or reduce or eliminate deliveries to us on short notice. Accordingly,
we cannot be certain that these foundries will allocate sufficient capacity to
satisfy our requirements. In addition, we cannot be certain that we will
continue to do business with these or other foundries on terms as favorable as
our current terms. If we are not able to obtain additional foundry capacity as
required, our relationships with our customers could be harmed and our revenues
would likely be reduced. Moreover, even if we are able to secure additional
foundry capacity, we may be obligated to utilize all of that capacity or incur
penalties. These penalties could be expensive and could harm our operating
results. Other risks associated with our reliance on external foundries
include:
. the lack of control over delivery schedules;
. the unavailability of, or delays in obtaining access to, key process
technologies;
. limited control over quality assurance, manufacturing yields and
production costs; and
. potential misappropriation of our intellectual property.
Our requirements typically represent a small portion of the total
production of the external foundries that manufacture our wafers and products.
We cannot be certain these external foundries will continue to devote resources
to the production of our wafers and products or continue to advance the process
design technologies on which the manufacturing of our products is based. These
circumstances could harm our ability to deliver our products on time or
increase our costs.
Our success depends on our ability to efficiently manufacture our products.
We manufacture our products in facilities that are owned and operated by
us, as well as by using external wafer foundries and independent subcontract
assembly facilities. The fabrication of semiconductors is a highly complex and
precise process, and a substantial percentage of wafers could be rejected or
numerous die on each wafer could be nonfunctional as a result of, among other
factors:
. minute levels of contaminants in the manufacturing environment;
. defects in the masks used to print circuits on a wafer;
. manufacturing equipment failure; or
. wafer breakage.
For these and other reasons, we could experience a decrease in
manufacturing yields. Additionally, as we increase our manufacturing output, we
may also experience a decrease in manufacturing yields. As a result, we may not
be able to cost effectively expand our production capacity in a timely manner.
9
<PAGE>
We could be harmed by litigation involving patents and other intellectual
property rights.
As a general matter, the semiconductor industry is characterized by
substantial litigation regarding patent and other intellectual property rights.
Although none of our patents or other intellectual property rights has been
successfully challenged to date, we have been sued on occasion for purported
patent infringement. For example, we have recently been sued by International
Rectifier for purportedly infringing some of its patents covering power
MOSFETs. International Rectifier has asked the court to enjoin us from
continuing infringement and to award treble damages against us for the
infringement of International Rectifier's patents. We have denied infringement
of International Rectifier's patents and have asserted affirmative defenses to
its claims, but the outcome of this litigation remains uncertain to us. See
Business--Legal Proceedings.
Additionally, in the future, we could be accused of infringing the
intellectual property rights of other third parties. We also have certain
indemnification obligations to customers with respect to the infringement of
third party intellectual property rights by our products. We cannot be certain
that any future infringement claims by third parties or claims for
indemnification by customers or end users of our products resulting from
infringement claims will not be asserted or that assertions of infringement, if
proven to be true, will not harm our business.
In the event of any adverse ruling in any intellectual property
litigation, including the pending litigation with International Rectifier, we
could be required to pay substantial damages, cease the manufacturing, use and
sale of infringing products, discontinue the use of certain processes or obtain
a license from the third party claiming infringement with royalty payment
obligations by us. An adverse decision in the International Rectifier
litigation or any other infringement could materially and adversely affect our
financial condition and results of operations.
Any litigation relating to the intellectual property rights of third
parties, whether or not determined in our favor or settled by us, is costly and
may divert the efforts and attention of our management and technical personnel.
We may not be able to protect our intellectual property rights adequately.
Our ability to compete is affected by our ability to protect our
intellectual property rights. We rely on a combination of patents, trademarks,
copyrights, trade secrets, confidentiality procedures and non-disclosure and
licensing arrangements to protect our intellectual property rights. Despite
these efforts, we cannot be certain that the steps we take to protect our
proprietary information will be adequate to prevent misappropriation of our
technology, or that our competitors will not independently develop technology
that is substantially similar or superior to our technology.
More specifically, we cannot assure you that our pending patent
applications or any future applications will be approved, or that any issued
patents will provide us with competitive advantages or will not be challenged
by third parties. Nor can we assure you that, if challenged, our patents will
be found to be valid or enforceable, or that the patents of others will not
have an adverse effect on our ability to do business. Furthermore, others may
independently develop similar products or processes, duplicate our products or
processes or design their products around any patents that may be issued to us.
Our international operations expose us to material risks.
During fiscal year 2000, our product sales by region were 37.8% in North
America, 47.6% in Europe and the Middle East and 14.6% in Asia. We expect
revenues from foreign markets to continue to represent a significant portion of
total revenues. We maintain significant operations in Germany and contract with
suppliers and manufacturers in South Korea, Japan and elsewhere in Europe and
Asia. Some of the risks inherent in doing business internationally are:
. foreign currency fluctuations;
10
<PAGE>
. changes in the laws, regulations or policies of the countries in which
we manufacture or sell our products;
. trade restrictions;
. transportation delays;
. work stoppages; and
. economic or political instability.
Our sales of products manufactured in our Lampertheim facility are
denominated in German marks, as are our costs at that facility. Fluctuations in
the value of the German mark against the U.S. dollar could have a significant
impact on our balance sheet and results of operations, including our net
income. We currently do not enter into foreign currency hedging transactions to
control or minimize these risks. Fluctuations in currency exchange rates could
cause our products to become more expensive to customers in a particular
country, leading to a reduction in sales or profitability in that country. If
we expand our international operations or change our pricing practices to
denominate prices in other foreign currencies, we could be exposed to even
greater risks of currency fluctuations.
In addition, the laws of certain foreign countries may not protect our
products or intellectual property rights to the same extent as do U.S. laws
regarding the manufacture and sale of our products in the U.S. Therefore, the
risk of piracy of our technology and products may be greater when we
manufacture or sell our products in these foreign countries.
Our revenues are dependent upon our products being designed into our customers'
products.
Some of our new products are incorporated into customers' products or
systems at the design stage. The value of any design win largely depends upon
the commercial success of the customer's product and on the extent to which the
design of the customer's electronic system also accommodates incorporation of
components manufactured by our competitors. In addition, our customers could
subsequently redesign their products or systems so that they no longer require
our products. We may not achieve design wins or our design wins may not result
in future revenues.
Because our products typically have lengthy sales cycles, we may experience
substantial delays between incurring expenses related to research and
development and the generation of revenues.
The time from initiation of design to volume production of new power
semiconductor products often takes 18 months or longer. We first work with
customers to achieve a design win, which may take nine months or longer. Our
customers then complete the design, testing and evaluation process and begin to
ramp up production, a period which may last an additional nine months or
longer. As a result, a significant period of time may elapse between our
research and development efforts and our realization of revenues, if any, from
volume purchasing of our products by our customers.
Our backlog may not result in future revenues.
Our business is characterized by short term orders and shipment
schedules. Customer orders typically can be cancelled or rescheduled without
penalty to the customer. As a result, our backlog at any particular date is not
necessarily indicative of actual revenues for any succeeding period. A
reduction of backlog during any particular period, or the failure of our
backlog to result in future revenues, could harm our results of operations.
The markets in which we participate are intensely competitive.
Certain of our target markets are intensely competitive. Our ability to
compete successfully in our target markets depends on the following factors:
. product quality, reliability and performance;
11
<PAGE>
. product features;
. timely delivery of products;
. price;
. breadth of product line;
. design and introduction of new products; and
. technical support and service.
In addition, our competitors or customers may offer new products based on
new technologies, industry standards or end user or customer requirements,
including products that have the potential to replace, or provide lower cost or
higher performance alternatives to, our products. The introduction of new
products by our competitors or customers could render our existing and future
products obsolete or unmarketable.
Our primary competitors include Advanced Power Technology, Fuji,
International Rectifier, Infineon, On Semiconductor, Semikron International,
Powerex, STMicroelectronics, Siemens and Toshiba. Many of our competitors have
greater financial, technical, marketing and management resources than we have.
Some of these competitors may be able to sell their products at prices below
which it would be profitable for us to sell our products or benefit from
established customer relationships that provide them with a competitive
advantage.
We rely on our distributors and sales representatives to sell many of our
products.
A substantial majority of our products are sold through distributors and
sales representatives. Our distributors and sales representatives could reduce
or discontinue sales of our products. They may not devote the resources
necessary to sell our products in the volumes and within the time frames that
we expect. In addition, we depend upon the continued viability and financial
resources of these distributors and sales representatives, some of which are
small organizations with limited working capital. These distributors and sales
representatives, in turn, depend substantially on general economic conditions
and conditions within the semiconductor industry. We believe that our success
will continue to depend upon these distributors and sales representatives. At
June 30, 2000, two distributors accounted for approximately 17% and 12%,
respectively, of our outstanding receivables. If these or other distributors
and sales representatives experience financial difficulties, or otherwise
become unable or unwilling to promote and sell our products, our business could
be harmed.
Our future success depends in part on the continued service of our management
and key engineering personnel and our ability to identify, hire and retain
additional personnel.
Our success depends, to a significant extent, upon the efforts and
abilities of Nathan Zommer, Ph.D., our President and Chief Executive Officer,
and other members of senior management. The loss of the services of one or more
of our senior management or other key employees could adversely affect our
business. We do not maintain key person life insurance on any of our officers,
employees or consultants.
There is intense competition for qualified employees in the semiconductor
industry, particularly for highly skilled design, applications and test
engineers. Competition is especially intense in the Silicon Valley, where our
U.S. design facility is located. We may not be able to continue to attract and
retain engineers or other qualified personnel necessary for the development of
our business or to replace engineers or other qualified individuals who could
leave our company at any time in the future. Our anticipated growth is expected
to place increased demands on our resources, and will likely require the
addition of new management and engineering staff as well as the development of
additional expertise by existing management employees. If we lose the services
of or fail to recruit key engineers or other technical and management
personnel, our business could be harmed.
12
<PAGE>
Our dependence on independent subcontractors to assemble and test our products
subjects us to a number of risks, including an inadequate supply of products
and higher materials costs.
We depend on independent subcontractors for the assembly and testing of
our products. During fiscal year 2000, the majority of our products were
assembled by independent subcontractors. Our reliance on these subcontractors
involves the following significant risks:
. reduced control over delivery schedules and quality;
. the potential lack of adequate capacity during periods of excess
demand;
. difficulties selecting and integrating new subcontractors;
. limited warranties by subcontractors or other vendors on products
supplied to us;
. potential increases in prices due to capacity shortages and other
factors; and
. potential misappropriation of our intellectual property.
These risks may lead to delayed product delivery or increased costs,
which would harm our profitability and customer relationships.
In addition, we use a limited number of subcontractors to assemble a
significant portion of our products. If one or more of these subcontractors
experience financial, operational, production or quality assurance
difficulties, we could experience a reduction or interruption in supply.
Although, we believe alternative subcontractors are available, our operating
results could temporarily suffer until we engage one or more of those
alternative subcontractors.
We depend on others to supply us with wafers and other raw materials.
We do not have long term supply agreements with the companies that supply
us with silicon wafers. Any of these suppliers could reduce or terminate our
wafer supply at any time. Our reliance on a limited number of suppliers also
involves other risks, including reduced control over wafer prices, timely
delivery, and product reliability and quality.
Our markets are subject to technological change; therefore, our success depends
on our ability to develop and introduce new products.
The markets for our products are characterized by:
. changing technologies;
. changing customer needs;
. frequent new product introductions and enhancements;
. increased integration with other functions; and
. product obsolescence.
To develop new products for our target markets, we must develop, gain
access to and use leading technologies in a cost effective and timely manner
and continue to expand our technical and design expertise.
Our operating expenses are relatively fixed, and we may order materials in
advance of anticipated customer demand. Therefore, we have limited ability to
reduce expenses quickly in response to any revenue shortfalls.
Our operating expenses are relatively fixed, and, therefore, we have
limited ability to reduce expenses quickly in response to any revenue
shortfalls. Consequently, our operating results will be harmed if our revenues
do not meet our revenue projections.
13
<PAGE>
We also typically plan our production and inventory levels based on
internal forecasts of customer demand, which are highly unpredictable and can
fluctuate substantially. From time to time, in response to anticipated long
lead times to obtain inventory and materials from our external suppliers and
foundries, we may order materials or production in advance of anticipated
customer demand. This advance ordering may result in excess inventory levels or
unanticipated inventory write downs if expected orders fail to materialize.
Periods of rapid growth and expansion could continue to place a significant
strain on our resources, including our employee base.
To manage our possible future growth effectively, we will be required to
continue to improve our operational, financial and management systems. In doing
so, we will periodically implement new software and other systems that will
affect our internal operations regionally or globally. Presently, we are
upgrading our enterprise resource planning software to integrate our operations
worldwide. The conversion process is complex and requires, among other things,
that data from our existing system be made compatible with the upgraded system.
During the transition to this upgrade, we could experience delays in ordering
materials, inventory tracking problems and other inefficiencies, which could
cause delays in shipments of products to our customers.
Future growth will also require us to successfully hire, train, motivate
and manage our employees. In addition, our continued growth and the evolution
of our business plan will require significant additional management, technical
and administrative resources. We may not be able to effectively manage the
growth and evolution of our current business.
We may not be successful in our future acquisitions.
We have in the past and may in the future make acquisitions. These
acquisitions involve numerous risks, including:
. diversion of management's attention;
. failure to retain key personnel of the acquired business;
. amortization of acquired intangible assets, which could depress future
earnings;
. customer dissatisfaction or performance problems with an acquired
company;
. the cost associated with acquisitions and the integration of acquired
operations; and
. assumption of known or unknown liabilities or other unanticipated
events or circumstances.
We cannot assure you that we will be able to successfully acquire other
businesses or product lines or integrate them into our operations without
substantial expense, delay in implementation or other operational or financial
problems.
Regulations may adversely affect our ability to sell our products.
Power semiconductors with operating voltages above 40 volts are subject
to regulations intended to address the safety, reliability and quality of the
products. These regulations relate to processes, design, materials and
assembly. For example, in the United States some high voltage products are
required to pass Underwriters Laboratory recognition for voltage isolation and
fire hazard tests. Sales of power semiconductors outside of the United States
are subject to international regulatory requirements that vary from country to
country. The process of obtaining and maintaining required regulatory
clearances can be lengthy, expensive and uncertain. The time required to obtain
approval for sale internationally may be longer than that required for U.S.
approval, and the requirements may differ.
In addition, approximately 10% of our revenues in fiscal year 2000 were
derived from the sale of products included in medical devices that are subject
to extensive regulation by numerous governmental
14
<PAGE>
authorities in the United States and internationally, including the U.S. Food
and Drug Administration, or FDA. The FDA and certain foreign regulatory
authorities impose numerous requirements for medical device manufacturers to
meet, including adherence to Good Manufacturing Practices, or GMP, regulations
and similar regulations in other countries, which include testing, control and
documentation requirements. Ongoing compliance with GMP and other applicable
regulatory requirements is monitored through periodic inspections by federal
and state agencies, including the FDA, and by comparable agencies in other
countries. Our failure to comply with applicable regulatory requirements could
prevent our products from being included in approved medical devices.
Our business could also be harmed by delays in receiving or the failure
to receive required approvals or clearances, the loss of previously obtained
approvals or clearances or the failure to comply with existing or future
regulatory requirements.
Earthquakes and other natural disasters may damage our facilities or those of
our suppliers.
Our corporate headquarters in California is located near major earthquake
faults which have experienced earthquakes in the past. In addition, some of our
suppliers are located near fault lines. In the event of a major earthquake or
other natural disaster near our headquarters, our operations could be harmed.
Similarly, a fire, major earthquake or other natural disaster near one or more
of our facilities or those of our major suppliers could disrupt our operations
and those of our suppliers, which could in turn limit the supply of our
products and harm our business.
We may be affected by environmental laws and regulations.
We are subject to a variety of laws, rules and regulations in the United
States and in Germany related to the use, storage, handling, discharge and
disposal of certain chemicals and gases used in our manufacturing process. Any
of those regulations could require us to acquire expensive equipment or to
incur substantial other expenses to comply with them. If we incur substantial
additional expenses, product costs could significantly increase. Our failure to
comply with present or future environmental laws, rules and regulations could
result in fines, suspension of production or cessation of operations.
We face the risk of financial exposure to product liability claims alleging
that the use of devices which incorporate our products resulted in adverse
effects.
Approximately 10% of our net revenues in fiscal year 2000 were derived
from sales of products used in medical devices such as defibrillators. Product
liability risks may exist even for those medical devices that have received
regulatory approval for commercial sale. We do not currently carry product
liability insurance, and any defects in our products used in these devices
could result in significant recall or product liability costs to us.
Our stock price is volatile.
The market price of our common stock has fluctuated significantly to
date. See Price Range of Common Stock. The future market price of our common
stock may also fluctuate significantly due to:
. variations in our actual or expected quarterly operating results;
. announcements or introductions of new products;
. technological innovations by our competitors or development setbacks
by us;
. conditions in the communications and semiconductor markets;
. the commencement or adverse outcome of litigation;
15
<PAGE>
. changes in analysts' estimates of our performance or changes in
analysts' forecasts regarding our industry, competitors or customers;
. announcements of merger or acquisition transactions; or
. general economic and market conditions.
In addition, the stock market in recent years has experienced extreme
price and volume fluctuations that have affected the market prices of many high
technology companies, including semiconductor companies. These fluctuations
have often been unrelated or disproportionate to the operating performance of
companies in our industry, and could harm the market price of our common stock.
ABB and Nathan Zommer will continue to own a controlling interest in our common
stock after this offering.
ABB and Nathan Zommer, Ph.D., our President and Chief Executive Officer,
will beneficially own, collectively, approximately 58.8% of our outstanding
shares of common stock following the completion of this offering, and
approximately 56.5% if the underwriters' over-allotment option is exercised in
full. As a result, ABB and Dr. Zommer, acting together, could exercise
significant control over all matters requiring stockholder approval, including
the election of the board of directors. These concentrated holdings could
result in a delay of, or serve as a deterrent to, possible changes in control
of IXYS, which may reduce the market price of our common stock. See Management
and Principal and Selling Stockholders.
Our management will have broad discretion over the use of the net proceeds of
this offering and may fail to use such funds effectively.
We expect to use approximately $23 million from the proceeds of this
offering for repayment of debt and capital equipment purchases, and the
remainder of the net proceeds will be utilized for possible acquisitions or
investments and for working capital and general corporate purposes.
Consequently, our management will have significant flexibility in applying the
net proceeds of this offering. Management's decisions in regard to the
allocation of the proceeds of this offering may not benefit the business, and
could harm our financial results.
The anti-takeover provisions of our certificate of incorporation and of the
Delaware General Corporation Law may delay, defer or prevent a change of
control.
Our board of directors has the authority to issue up to 5,000,000 shares
of preferred stock and to determine the price, rights, preferences and
privileges and restrictions, including voting rights, of those shares without
any further vote or action by our stockholders. The rights of the holders of
common stock will be subject to, and may be harmed by, the rights of the
holders of any shares of preferred stock that may be issued in the future. The
issuance of preferred stock may delay, defer or prevent a change in control
because the terms of any issued preferred stock could potentially prohibit our
consummation of any merger, reorganization, sale of substantially all of our
assets, liquidation or other extraordinary corporate transaction, without the
approval of the holders of the outstanding shares of preferred stock. In
addition, the issuance of preferred stock could have a dilutive effect on our
stockholders.
Our stockholders must give substantial advance notice prior to the
relevant meeting to nominate a candidate for director or present a proposal to
our stockholders at a meeting. These notice requirements could inhibit a
takeover by delaying stockholder action. The Delaware anti-takeover law
restricts business combinations with some stockholders once the stockholder
acquires 15% or more of our common stock. The Delaware statute makes it more
difficult for our company to be acquired without the consent of our board of
directors and management.
16
<PAGE>
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements in this prospectus and the documents incorporated
by reference are forward-looking statements. These statements are based on our
current expectations, assumptions, estimates and projections about our
business and our industry, and involve known and unknown risks, uncertainties
and other factors that may cause our or our industry's results, levels of
activity, performance or achievement to be materially different from any
future results, levels of activity, performance or achievements expressed or
implied in or contemplated by the forward-looking statements. Words such as
"believe," "anticipate," "expect," "intend," "plan," "will," "may," "should,"
"estimate," "predict," "potential," "continue," or the negative of such terms
or other similar expressions, identify forward-looking statements. In
addition, any statements that refer to expectations, projections or other
characterizations of future events or circumstances are forward-looking
statements. Our actual results could differ materially from those anticipated
in such forward-looking statements as a result of several factors more fully
described under the caption Risk Factors and in the documents incorporated by
reference. The forward-looking statements made in this prospectus relate only
to events as of the date on which the statements are made. We do not intend to
update publicly any forward-looking statements for any reason, even if new
information becomes available or other events occur in the future.
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the 2,000,000 shares
of common stock that we are offering at an assumed public offering price of
$25.25 per share will be approximately $46.9 million after deducting the
underwriting discounts and commissions and estimated offering expenses of
approximately $800,000 payable by us.
We expect to use the net proceeds from this offering for the following
purposes:
. $7.6 million for the repayment of our existing bank debt;
. $15.0 million for the purchase of wafer fabrication, assembly and test
equipment;
. possible acquisitions of, or investments in, other complementary
products, businesses or technologies; and
. working capital and general corporate purposes.
At June 30, 2000, the outstanding debt to be repaid from the proceeds of
this offering consisted of:
. $2.1 million outstanding under our U.S. line of credit, which expires
on December 31, 2000 and bears interest at the bank's prime rate (9.5%
at June 30, 2000); and
. $5.5 million outstanding under our German term loan agreement, which
expires on October 31, 2009 and bears interest at an annual rate of
5.4% through August 2001, at which time the interest rate will be
adjusted to market rates.
Our management will have broad discretion in applying a substantial
portion of our net proceeds from this offering. Pending such application, the
net proceeds from this offering will be invested in investment grade,
interest-bearing instruments. We currently have no commitments or agreements
to acquire or invest in any other company or technology.
17
<PAGE>
PRICE RANGE OF COMMON STOCK
Our common stock trades publicly on the Nasdaq National Market under the
symbol SYXI. Prior to August 21, 2000, our common stock traded on the Nasdaq
Small Cap Market. As of September 1, 2000, there were approximately 179 holders
of record of our common stock.
The table below sets forth the range of quarterly high and low closing
sales prices for our common stock on the Nasdaq Stock Market, as adjusted for
our two-for-one stock split completed on August 10, 2000.
<TABLE>
<CAPTION>
High Low
------ ------
<S> <C> <C>
Fiscal year 1999
Quarter ended June 30, 1998(1)............................ $ 1.25 $ 0.13
Quarter ended September 30, 1998(1)....................... 5.25 0.09
Quarter ended December 31, 1998........................... 3.25 1.13
Quarter ended March 31, 1999.............................. 10.59 1.13
Fiscal year 2000
Quarter ended June 30, 1999............................... $ 2.44 $ 1.25
Quarter ended September 30, 1999.......................... 4.25 2.00
Quarter ended December 31, 1999........................... 3.63 1.59
Quarter ended March 31, 2000.............................. 10.59 2.94
Fiscal year 2001
Quarter ended June 30, 2000............................... $32.19 $ 4.66
Quarter through September 26, 2000........................ 45.38 23.00
</TABLE>
--------
(1) Prior to September 24, 1998, IXYS was a privately held company, and the
prices listed above relate to Paradigm, whose common stock traded under the
symbol PRDM. On September 23, 1998, IXYS merged with Paradigm. In
connection with the Paradigm merger, Paradigm changed its name to IXYS
Corporation and began trading under the symbol SYXI.
DIVIDEND POLICY
We do not currently pay cash dividends on our capital stock and do not
anticipate paying any cash dividends in the foreseeable future. Any future
determination to pay dividends will be at the discretion of our board of
directors and will be dependent upon then existing conditions, including our
financial condition, results of operations, contractual restrictions, capital
requirements, business prospects, and other factors our board of directors
deems relevant.
18
<PAGE>
CAPITALIZATION
The following table sets forth on an unaudited basis our capitalization
as of June 30, 2000 and as adjusted to reflect the sale of the 2,000,000 shares
of common stock we are offering at an assumed offering price of $25.25 per
share, and the receipt of the estimated net proceeds, after deducting the
underwriting discounts and our estimated offering expenses. The table shows the
effect of a two-for-one stock split effected on August 10, 2000. You should
read this table in conjunction with the Consolidated Financial Statements and
related notes and Selected Consolidated Financial Data, included elsewhere in
this prospectus.
<TABLE>
<CAPTION>
June 30, 2000
-----------------
As
Actual Adjusted
------- --------
(Unaudited)
(in thousands)
<S> <C> <C>
Cash and cash equivalents.................................... $12,601 $51,924
======= =======
Debt:
Notes payable to bank...................................... 8,278 678
Capitalized leases......................................... 3,849 3,849
------- -------
Total debt............................................ 12,127 4,527
------- -------
Stockholders' equity:
Preferred stock, $0.01 par value per share, 5,000,000
share authorized; none issued and outstanding............ -- --
Common stock, $0.01 par value per share, 40,000,000 shares
authorized; 24,358,092 shares issued and outstanding;
26,358,092 shares issued and outstanding as
adjusted(1).............................................. 244 264
Additional paid-in capital................................. 46,162 93,065
Notes receivable from stockholders......................... (861) (861)
Accumulated deficit........................................ (6,005) (6,005)
Comprehensive income....................................... (2,281) (2,281)
------- -------
Total stockholders' equity............................ 37,259 84,182
------- -------
Total capitalization.................................. $49,386 $88,709
======= =======
</TABLE>
--------
(1) Excludes 3,523,094 shares of common stock issuable upon exercise of stock
options and warrants outstanding as of June 30, 2000 at a weighted average
exercise price of $2.83 per share.
19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
You should read the following selected consolidated financial data in
conjunction with our Consolidated Financial Statements and related notes and
Management's Discussion and Analysis of Financial Condition and Results of
Operations included elsewhere in this prospectus. The consolidated statements
of operations data for the years ended March 31, 1998, 1999 and 2000 and the
balance sheet data as of June 30, 1999 and 2000 are derived from our
consolidated financial statements that are included in this prospectus. The
statements of operations data for the years ended March 31, 1996 and 1997 are
derived from our consolidated financial statements that are not included in
this prospectus. The consolidated statements of operations data for the three
month periods ended June 30, 1999 and 2000 and the consolidated balance sheet
data as of June 30, 2000 are derived from our unaudited consolidated financial
statements that include, in the opinion of our management, all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the information set forth therein. Historical results are not
necessarily indicative of results to be expected in any future period.
<TABLE>
<CAPTION>
Three Months Ended
Fiscal Year Ended March 31, June 30,
------------------------------------------- ---------------------
1996(1) 1997 1998(2) 1999(3) 2000 1999 2000(4)
------- ------- ------- ------- ------- --------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenues............ $57,436 $55,322 $56,856 $66,523 $76,627 $ 17,072 $ 23,274
Cost of goods sold...... 35,629 34,158 38,048 44,939 49,290 11,430 15,053
------- ------- ------- ------- ------- --------- ---------
Gross profit............ 21,807 21,164 18,808 21,584 27,337 5,642 8,221
------- ------- ------- ------- ------- --------- ---------
Operating expenses:
Research, development
and engineering...... 3,423 3,015 3,329 4,196 4,668 1,255 1,164
Selling, general and
administrative....... 9,430 8,950 8,384 9,855 11,450 2,813 3,032
Writeoff of goodwill
and in process
research and
development.......... -- -- -- 10,401 -- -- --
------- ------- ------- ------- ------- --------- ---------
Total operating
expenses............ 12,853 11,965 11,713 24,452 16,118 4,068 4,196
------- ------- ------- ------- ------- --------- ---------
Operating income
(loss)................. 8,954 9,199 7,095 (2,868) 11,219 1,574 4,025
Interest expense........ (78) (116) (431) (993) (417) (62) (65)
Gain (loss) on foreign
currency transactions.. (32) (246) 183 37 184 33 117
Other income (expense),
net.................... (1,578) (484) 3,466 669 (199) -- 1,881
------- ------- ------- ------- ------- --------- ---------
Income (loss) before
(provision) benefit for
income tax............. 7,266 8,353 10,313 (3,155) 10,787 1,545 5,958
(Provision) benefit for
income tax............. 4,327 (3,946) (4,229) (2,083) (3,888) (383) (2,264)
------- ------- ------- ------- ------- --------- ---------
Net income (loss)....... $11,593 $ 4,407 $ 6,084 $(5,238) $ 6,899 $ 1,162 $ 3,694
======= ======= ======= ======= ======= ========= =========
Net income (loss) per
share--basic(5)........ $ 1.38 $ 0.53 $ 0.73 $ (0.28) $ 0.29 $ 0.05 $ 0.15
======= ======= ======= ======= ======= ========= =========
Weighted average shares
used in per share
calculation--basic(5).. 8,382 8,382 8,354 18,746 23,970 23,932 23,984
======= ======= ======= ======= ======= ========= =========
Net income (loss) per
share--diluted(5)...... $ 1.38 $ 0.53 $ 0.72 $ (0.28) $ 0.28 $ 0.05 $ 0.15
======= ======= ======= ======= ======= ========= =========
Weighted average shares
used in per share
calculation--
diluted(5)............. 8,392 8,392 8,392 18,746 24,826 23,950 24,390
======= ======= ======= ======= ======= ========= =========
Selected Operating Data:
Gross profit margin..... 38.0% 38.3% 33.1% 32.4% 35.7% 33.0% 35.3%
EBITDA(6)............... $11,152 $10,168 $ 8,620 $10,147 $14,571 $ 2,340 $ 4,844
EBITDA margin(7)........ 19.4% 18.4% 15.2% 15.3% 19.0% 13.7% 20.8%
Depreciation &
amortization........... $ 2,198 $ 969 $ 1,525 $ 2,614 $ 3,352 $ 766 $ 819
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
June 30, 2000
-------------------
As
Actual Adjusted(8)
------- -----------
(Unaudited)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents................................... $12,601 $ 51,924
Working capital............................................. 33,414 75,531
Total assets................................................ 71,399 110,722
Total debt.................................................. 12,127 4,527
Total stockholders' equity.................................. 37,259 84,182
</TABLE>
--------
(1) Includes the effect of the recognition of net operating loss carryforwards.
(2) Includes $3.7 million of income from a settlement of patent litigation.
(3) Includes a $10.4 million writeoff of in process research and development
and goodwill, related to our merger with Paradigm.
(4) Includes a $1.1 million gain, net of taxes, in the quarter ended June 30,
2000, which was composed primarily of a one time payment for a technology
license.
(5) Shares used in per share calculation in fiscal years 1996 through 1999 have
been restated to reflect our shares outstanding as a result of the Paradigm
merger. In the Paradigm merger, each outstanding share was converted into
0.057842 shares.
(6) EBITDA means operating income before depreciation and amortization. EBITDA
excludes the writeoff of goodwill and in process research and development,
which occurred in fiscal year 1999. Although EBITDA is a widely accepted
financial concept, it should not be considered as an alternative to
operating income or to cash flows from operating activities. Our management
and some investors use EBITDA as an indication of operating performance.
(7) EBITDA margin is EBITDA as a percentage of net revenues.
(8) Adjusted to reflect the sale of 2,000,000 shares of common stock offered by
us at an assumed offering price of $25.25 per share, and the application of
the estimated net proceeds.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
We are a leading company in the design, development, manufacture and
marketing of high power, high performance power semiconductors. Our power
semiconductors improve system efficiency and reliability by converting
electricity at relatively high voltage and current levels into the finely
regulated power required by electronic products. We focus on the market for
power semiconductors that are capable of processing greater than 500 watts of
power.
We were founded in 1983. In 1989, we acquired from ABB our semiconductor
operation in Lampertheim, Germany, now called IXYS Semiconductor GmbH. This
acquisition provided us with a strong foothold in Europe.
In 1995, we reincorporated in Delaware. Also in 1995, ABB converted
approximately $10.5 million in debt owed to it by us into our capital stock. In
January 1998, we purchased the Lampertheim facility, which had previously been
leased from ABB.
In September 1998, IXYS Corporation merged with Paradigm Technology, a
Delaware corporation that designed and marketed SRAM products, in a transaction
accounted for as a reverse merger. In the merger, Paradigm issued its common
stock in exchange for all outstanding shares of our capital stock. At the
conclusion of the merger, IXYS stockholders held approximately 96% of the
combined company, and the historic accounting records of IXYS became those of
the combined company. Accordingly, Paradigm formally changed its name to "IXYS
Corporation."
In May 2000, we acquired Directed Energy, which gave us added scientific
expertise and additional products related to laser diode drives, high voltage
pulse generators and modulators. In connection with this acquisition, we issued
250,370 shares of our common stock to the former shareholders of Directed
Energy.
The semiconductor industry is cyclical and has from time to time
experienced depressed business conditions. The semiconductor industry has
historically experienced a decrease in average selling prices of products over
time. From 1996 through 1998, the semiconductor industry experienced worldwide
overcapacity, which caused prices to erode and was accompanied by a slowdown in
the demand for semiconductors. Additionally, a number of factors can result in
quarter to quarter fluctuations in operating results, including: the reduction,
rescheduling or cancellation of orders by customers; fluctuations in the timing
and amount of customer requests for product shipments; fluctuations in the
manufacturing yields and significant yield losses; and availability of
production capacity.
In fiscal year 2000, net revenues derived from North American and
international sales represented approximately 37.8% and 62.2%, respectively, of
our net revenues. Of our international sales, approximately 47.6% of our net
revenues were derived from sales in Europe and the Middle East and 14.6% of our
net revenues were derived from sales in Asia. No single end customer accounted
for more than 10% of our net revenues in fiscal year 2000. We do not hedge our
foreign currency transactions. Accordingly, although many of our sales and
expenses occur in the same currency, translation of foreign currencies into
U.S. dollars may negatively impact us.
We relied on external foundries for approximately 50% of our wafer
fabrication requirements in fiscal year 2000, and our utilization of external
foundries is expected to grow. We have arrangements with four external wafer
foundries, two of which produce substantially all of the wafers provided to us
by external foundries. Our principal external foundry is Samsung Electronics'
facility located in Kiheung, South Korea. Our relationship with Samsung
Electronics extends over 16 years. We provide our foundries forecasts for wafer
fabrication six months in advance and make firm purchase commitments one to two
months in advance of delivery. Other than these firm commitments, we do not
have any obligations to order any minimum quantities.
22
<PAGE>
Results of Operations
The following table presents our consolidated statement of operations
data for the periods indicated as a percentage of net revenues.
<TABLE>
<CAPTION>
Three
Months
Ended
Years Ended March 31, June 30,
--------------------------- -------------
1998 1999 2000 1999 2000
------- ------- ------- ----- -----
<S> <C> <C> <C> <C> <C>
Net revenues.................... 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Cost of goods sold.............. 66.9 67.6 64.3 67.0 64.7
------- ------- ------- ----- -----
Gross profit.................... 33.1 32.4 35.7 33.0 35.3
Operating expenses:
Research, development and
engineering................. 5.9 6.3 6.1 7.3 5.0
Selling, general and
administrative.............. 14.7 30.4 14.9 16.5 13.0
------- ------- ------- ----- -----
Total operating expenses... 20.6 36.8 21.0 23.8 18.0
------- ------- ------- ----- -----
Income (loss) from operations... 12.5 (4.3) 14.7 9.2 17.3
Interest expense................ (0.8) (1.5) (0.5) (0.3) (0.3)
Gain (loss) on foreign currency
transactions.................. 0.3 0.1 0.2 0.1 0.5
Other income (expense), net..... 6.1 0.9 (0.3) -- 8.1
------- ------- ------- ----- -----
Income (loss) before income
tax........................... 18.1 (4.8) 14.1 9.0 25.6
Provision for income tax........ (7.4) (3.1) (5.1) (2.2) (9.7)
------- ------- ------- ----- -----
Net income (loss)............... 10.7 % (7.9)% 9.0 % 6.8 % 15.9 %
======= ======= ======= ===== =====
</TABLE>
Three months ended June 30, 2000 and June 30, 1999
Net Revenues. Net revenues for the three months ended June 30, 2000 were
$23.3 million, an increase of 36.3% from the $17.1 million reported in the same
period of fiscal year 1999. International net revenues were $14.8 million for
the three months ended June 30, 2000, or 63.8% of total net revenues, as
compared to $10.5 million for the same period of fiscal year 1999, or 61.3% of
net revenues. The increase in net revenues was attributable to an increase in
unit sales volume, partially offset by a slight decrease in average selling
prices. We believe that the increase in unit sales volume was largely
attributable to increased demands for power conversion systems for
communications infrastructure applications.
Gross Profit. Gross profit was $8.2 million, or 35.3% of net revenues,
for the three months ended June 30, 2000, as compared to $5.6 million, or 33.0%
of net revenues, for the same period of fiscal year 1999. This increase was due
primarily to an increase in manufacturing efficiencies as units sold increased
by approximately 44%, partially offset by a decline in average selling prices
of approximately 5%.
Research, Development and Engineering. R&D expense was $1.2 million in
the three months ended June 30, 2000, as compared to $1.3 million in the same
period of fiscal year 1999. R&D expense decreased to 5.0% of net revenues in
the three months ended June 30, 2000, as compared to 7.3% in the same period of
fiscal year 1999 as a result of such expense remaining relatively constant
while revenues increased.
Selling, General and Administrative. SG&A expense was $3.0 million, or
13.0% of net revenues, in the three months ended June 30, 2000, as compared to
$2.8 million, or 16.5% of net revenues, in the same period of fiscal year 1999.
The dollar increase was primarily related to increased selling costs on higher
revenues. The decrease in percentages was the result of selling general and
administrative expenses increasing less rapidly than net revenues between the
two comparative periods. We anticipate that operating expenses will fluctuate
in absolute dollars and as a percentage of net sales as headcount is modified
to support new product introductions, and due to changes in levels of
production volume and unit shipments.
Interest Expense. During the three months ended June 30, 2000, interest
expense was $65,000, as compared to $62,000 in the same period of fiscal year
1999.
23
<PAGE>
Other Income (Expense), Net. Other income (expense), net, including gain
on foreign currency transactions, increased to $2.0 million during the three
months ended June 30, 2000, as compared to $33,000 for the same period of
fiscal year 1999. The increase was caused primarily by receipt of a one-time
payment for a technology license, partially offset by an increase in reserve
for other legal expenses.
Provision for Income Taxes. Our effective tax rate was 38% for the three
months ended June 30, 2000, as compared to 25% in the same period of fiscal
year 1999. The effective tax rate in the fiscal year 2000 period increased as a
result of the exhaustion of all net operating loss carryforwards in fiscal year
1999.
Years Ended March 31, 2000 and March 31, 1999
Net Revenues. Net revenues for fiscal year 2000 were $76.6 million, a
15.2% increase from net revenues of $66.5 million in fiscal year 1999.
International net revenues were $47.6 million for fiscal year 2000, or 62.2% of
net revenues, as compared to $42.8 million for fiscal year 1999, or 64.3% of
net revenues. The increase is primarily related to an approximately 7% increase
in units shipped in fiscal year 2000 as compared to fiscal year 1999, and an
approximately 8% increase in average selling prices across our product line. We
believe that the increase in unit sales volume was largely attributable to
increased demand for power conversion systems for communications infrastructure
applications.
Gross Profit. Gross profit was $27.3 million, or 35.7% of net revenues in
fiscal year 2000, as compared to $21.6 million, or 32.4% of net revenues, in
fiscal year 1999. The increase in margins was primarily due to higher average
selling prices relating to increased demand for our products and greater
revenue earned during the year.
Research, Development and Engineering. During fiscal year 2000, R&D
expense was $4.7 million, or 6.1% of net revenues, as compared to $4.2 million,
or 6.3% of net revenues, in fiscal year 1999. The dollar increase was due to
higher engineering headcount in fiscal year 2000, as well as an increase in the
number of R&D projects. As a percentage of revenues, R&D expense decreased as a
result of such expense increasing at a relatively slower rate than revenues.
Selling, General and Administrative. During fiscal year 2000, SG&A
expense was $11.5 million, or 14.9% of net revenues, as compared to $20.3
million, or 30.4% of net revenues, in fiscal year 1999. The decrease reflects a
$10.4 million writeoff of in process research and development and goodwill
related to the Paradigm merger in fiscal year 1999. Absent these writeoffs,
SG&A expense in fiscal year 1999 would have been $9.9 million, or 14.8% of net
revenues.
Interest Expense. During fiscal year 2000, interest expense was $417,000,
as compared to $993,000 in fiscal year 1999. The decrease is due to lower
interest rates for the year as well as repayment of loans throughout fiscal
year 2000.
Other Income (Expense), Net. Other income (expense), net, including gain
on foreign currency transactions, in fiscal year 2000 was ($15,000), as
compared to $706,000 in fiscal year 1999.
Provision For Income Taxes. The fiscal year 2000 provision for income
taxes reflects an effective tax rate of 36% in fiscal year 2000, as compared to
the fiscal year 1999 provision for an effective income tax rate of 29%,
excluding the effect of a $10.4 million nondeductible writeoff related to our
merger with Paradigm.
Years Ended March 31, 1999 and March 31, 1998
Net Revenues. Net revenues for fiscal year 1999 were $66.5 million, a
17.0% increase from net revenues of $56.9 million in fiscal year 1998.
International net revenues were $42.8 million for fiscal year 1999, or 64.3% of
net revenues, as compared to $35.7 million for fiscal year 1998, or 62.8% of
net revenues. The
24
<PAGE>
increase in net revenues is primarily related to a 39% increase in units
shipped in fiscal year 1999 as compared to fiscal year 1998, partially offset
by a 16% decrease in average selling prices resulting from a shift in our
product mix. We believe that the increase in unit sales volume was largely
attributable to increased demand for power conversion systems for
communications infrastructure applications.
Gross Profit. Gross profit was $21.6 million, or 32.4% of net revenues,
as compared to $18.8 million, or 33.1% of net revenues, in fiscal year 1998.
The decrease was due to average selling prices which, in connection with a
shift in our product mix, declined at a somewhat faster rate than our ability
to reduce our cost of goods sold.
Research, Development and Engineering. During fiscal year 1999, R&D
expense was $4.2 million, or 6.3% of net revenues, as compared to $3.3 million,
or 5.9% of net revenues, in fiscal year 1998. This increase was due to higher
engineering headcount in fiscal year 1999.
Selling, General and Administrative. During fiscal year 1999, SG&A
expense was $20.3 million, or 30.4% of net revenues, as compared to $8.4
million, or 14.7% of net revenues, in fiscal year 1998. The increase reflects a
$10.4 million writeoff of in process research and development and goodwill
related to our merger with Paradigm.
Interest Expense. During fiscal year 1999, interest expense was $993,000,
as compared to $431,000 in fiscal year 1998. The increase was due to higher
average borrowings to fund additional working capital in fiscal year 1999, as
compared to fiscal year 1998.
Other Income (Expense), Net. Other income (expense), net, including gain
on foreign currency transactions, in fiscal year 1999 was $706,000, as compared
to $3.6 million in fiscal year 1998, which included our receipt of $3.7 million
attributable to the settlement of a patent claim.
Provision For Income Taxes. The fiscal year 1999 provision for income
taxes reflects an effective tax rate of 29%, excluding the effect of a
nondeductable writeoff related to our merger with Paradigm, as compared to an
effective income tax rate of 41% in fiscal year 1998.
Quarterly Results of Operations
The following table shows, for the periods indicated, selected data from
our consolidated statement of operations. This selected data has been derived
from our unaudited consolidated financial statements, and, in our opinion,
includes all adjustments, consisting only of normal recurring adjustments, that
are necessary for a fair presentation of the results of operations for these
periods.
This unaudited selected quarterly financial data should be read in
conjunction with the consolidated financial statements and notes included
elsewhere in this prospectus. Our operating results in any quarter are not
necessary indicative of the results that may be expected from any future
period.
<TABLE>
<CAPTION>
Sept. Dec. June Sept. Dec. June
30, 31, Mar. 31, 30, 30, 31, March 31, 30,
1998(1) 1998 1999(2) 1999 1999 1999 2000 2000
------- ------- -------- ------- ------- ------- --------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues............ $16,449 $16,890 $16, 915 $17,072 $17,417 $19,592 $22,546 $23,274
Gross profit............ 5,820 4,767 6,178 5,642 6,340 6,938 8,417 8,221
Operating income
(loss)................ (3,749) 292 (5,285) 1,574 2,485 2,941 4,219 4,025
Net income (loss)....... (4,480) 71 (6,037) 1,162 1,571 1,789 2,375 3,694
</TABLE>
--------
(1)Includes a $5.8 million writeoff of in process R&D.
(2)Includes a $4.6 million writeoff of goodwill and other intangibles.
25
<PAGE>
Liquidity and Capital Resources
We have financed our operations to date through the sale of equity,
lease financing and bank borrowings. As of June 30, 2000, cash and cash
equivalents were $12.6 million, an increase of $3.1 million from cash and cash
equivalents of $9.5 million at March 31, 2000. The increase in cash and cash
equivalents was primarily due to cash received in payment of a technology
license and cash generated from operations.
There are two line of credit facilities available to us. In the United
States, we have a line of credit with a U.S. bank that consists of a $5.0
million commitment amount which is available through December 2000. The line
bears interest at the bank's prime rate (9.5% at June 30, 2000). The line is
collateralized by certain assets and contains certain general and financial
covenants. At June 30, 2000, we had drawn $2.1 million against such line of
credit.
In Germany, we have two lines of credit with German banks that, as of
June 30, 2000, consisted of:
. DM 1.5 million ($731,279) commitment amount with an outstanding
balance of DM 1.5 million ($731,279), bearing interest at 3.5% at June
30, 2000. This line of credit is secured by compensating balances.
. DM 7.0 million ($3.4 million) commitment amount without any
outstanding balance. This line supports a letter of credit facility.
Our accounts receivable at June 30, 2000 were $16.5 million, a decrease
of 2.1% as compared to March 31, 2000. Our inventories at June 30, 2000 were
$24.0 million, an increase of 11.8% as compared to March 31, 2000. Net plant
and equipment at June 30, 2000 were $10.8 million, an increase of 5.8% as
compared to March 31, 2000.
We believe that the net proceeds of this offering, together with cash
generated from operations, and banking facilities will be sufficient to meet
our cash requirements for at least the next 18 months. From time to time, we
consider acquisitions and strategic investments. To the extent that our
available funds are insufficient to meet our capital requirements, we will be
required to raise additional funds. There can be no assurance that additional
financing will be available on acceptable terms. The lack of such financing,
if needed, would have a material adverse effect on our business, financial
condition and results of operations.
New Accounting Standards
In June 1998, the Financial Accounting Standards Board, or FASB, issued
Statement of Financial Accounting Standard 133, "Accounting for Derivative
Instruments and Hedging Activities," or SFAS No. 133. SFAS No. 133 will
require us to recognize all derivatives on our balance sheet at fair value.
SFAS No. 133 requires that derivative instruments used to hedge be identified
specifically as to assets, liabilities, firm commitments or anticipated
transactions, and measured as to effectiveness and ineffectiveness when
hedging changes in fair value or cash flows. Derivative instruments that do
not qualify as either fair value or cash flow hedges will be valued at fair
value with the resultant gain or loss recognized in current earnings. Changes
in the effective portion of fair value hedges will be recognized in current
earnings along with the change in fair value of the hedged item. Changes in
the effective portion of the fair value of cash flow hedges will be recognized
in other comprehensive income until realization of the cash flows of the
hedged item through current earnings. Any ineffective portion of hedges will
be recognized in current earnings.
In June 1999, the FASB issued SFAS No. 137, "Deferral of the Effective
Date of FASB Statement No. 133," to defer for one year the effective date of
implementation of SFAS No. 133. SFAS No. 133, as amended by SFAS No. 137, is
effective for fiscal years beginning after June 15, 2000, with earlier
application encouraged. We are in the process of evaluating the requirements
of SFAS Nos. 133, but do not expect this pronouncement to materially impact
our financial position or results of operations.
26
<PAGE>
In December 1999, the SEC issued Staff Accounting Bulletin No. 101, or
SAB 101, "Revenue Recognition in Financial Statements." SAB 101 summarizes
certain of the SEC's views in applying generally accepted accounting principles
to revenue recognition in financial statements. In June 2000, the SEC issued
SAB No. 101B to defer the effective date of implementation of SAB No. 101 with
earlier application encouraged. We do not expect the adoption of SAB 101 to
have a material effect on our financial position or results of operations.
In March 2000, the FASB issued FASB interpretation No. 44, "Accounting
for Certain Transactions Involving Stock Compensation: An Interpretation of APB
Opinion No. 25," or Fin 44. Fin 44 clarifies the definition of an employee for
purposes of applying Accounting Practice Board Opinion No. 25, "Accounting for
Stock Issued to Employees," or APB 25, the criteria for determining whether a
plan qualifies as a noncompensatory plan, the accounting consequence of various
modifications to the terms of a previously fixed stock option or award, and the
accounting for an exchange of stock compensation awards in a business
combination. This interpretation is effective July 1, 2000, but the adoption of
this interpretation is not expected to have a material effect on our financial
position or results of operations.
Year 2000 Conversion
We have not experienced any known material adverse impacts on our current
products, internal information systems, and non-information technology systems
(equipment and systems) as a result of the Year 2000 issue. We made capital
expenditures and incurred related expenses of approximately $330,000 to prepare
ourselves for the Year 2000 conversion. No system projects were deferred in
relation to the Year 2000 issue.
27
<PAGE>
BUSINESS
We are a leading company in the design, development, manufacture and
marketing of high power, high performance power semiconductors. Our power
semiconductors improve system efficiency and reliability by converting
electricity at relatively high voltage and current levels into the finely
regulated power required by electronic products. We focus on the market for
power semiconductors that are capable of processing greater than 500 watts of
power.
Our power semiconductor products have historically been divided into two
primary categories, power metal oxide semiconductor, or MOS, transistors and
bipolar products. Our power semiconductors are sold as individual units and are
also packaged in high power modules that frequently consist of multiple
semiconductor dies. In fiscal year 2000, power semiconductors constituted
approximately 92% of our revenues, which included 45% from power MOS
transistors and 47% from bipolar products. In fiscal year 2000, we sold our
first gallium arsenide product, which we believe will become a primary product
category. In addition to power semiconductors, we manufacture our proprietary
direct copper bond, or DCB, substrate for use in our own power semiconductors
as well as for sale to other power semiconductor manufacturers. We also sell
integrated circuits, or ICs, that have applications associated with power
management, and high speed, high density static random access memory, or SRAM,
products.
Our products are used primarily to control electricity in:
. power conversion systems, including uninterruptible power supplies, or
UPS, and switch mode power supplies, or SMPS, for communications
infrastructure applications such as wireless base stations, network
servers and telecommunication switching stations;
. motor drives for industrial applications such as industrial
transportation, robotics and process control equipment; and
. medical electronics for sophisticated applications, such as
defibrillators and medical imaging.
We design our products primarily for industrial and business
applications, rather than for use in personal computers, mobile phones or other
household appliances.
In fiscal year 2000, we sold our products to over 2,000 customers
worldwide. Our major customers include Agilent Technologies, ASCOM, Emerson
Electric, Eurotherm, Guidant, Medtronic, Rockwell International, Siemens and
Still. In many cases, our customers incorporate our products into systems sold
to their own customers, which include Ericsson, General Electric, General
Motors, Hewlett Packard, IBM, Motorola and Nokia.
Industry Background
Demand for electricity in the 21st century is forecasted to increase
faster than demand for other forms of energy. Electrical energy is currently
being demanded worldwide at an increasing rate due to:
. proliferation of technology driven products that require electricity,
including computers, telecommunications equipment and the
infrastructure to support portable electronics;
. increased use of electronic content in traditional products such as
airplanes, automobiles and home appliances;
. increased use of automation and electrical processes in industry and
mass transit systems; and
. penetration of technology into developing countries.
Not only is demand increasing, but the requirements for electricity are
also changing. Electronic products in all markets are becoming increasingly
sophisticated, offering more "intelligence" through the use of microprocessors
and additional components. For example, the Information Technology Industry
Council reports
28
<PAGE>
that computers represented 13% of U.S. electrical consumption in 1998, versus
only 6% in 1994. The increasing complexity of such products requires more
precisely regulated power quality and greater power reliability. In addition,
the increasing costs of electricity, coupled with governmental regulations and
environmental concerns, have caused an increased demand for energy efficiency.
Power semiconductors are used to provide the precisely regulated power
required by sophisticated electronic products and equipment and address the
growing demand for energy efficiency. In most cases, power semiconductors:
. convert or "rectify" alternating current, or AC, power delivered by
electrical utilities to direct current, or DC, power which is required
by most electronic equipment;
. convert DC power at a certain voltage level to DC power at a different
voltage level to meet the specific voltage requirement for an
application;
. invert DC power to high frequency AC power to permit the processing of
power using substantially smaller electronic components; or
. rectify high frequency AC power from switch-mode power supplies to
meet the specific DC voltage required by an application.
The more sophisticated the end product, the greater its need for
specially formatted, finely regulated power, and the greater its need for a
high performance power semiconductor. According to the Digital Power Report,
less than 15% of the world's electricity is currently switched by power
semiconductors, but this percentage is expected to grow significantly to meet
the need for higher quality power.
Power semiconductors improve system efficiency and reliability by
processing and converting electrical energy into more usable, higher quality
power. Specifically, power semiconductors are used primarily in controlling
energy in power conversion systems, including switch mode power supplies, or
SMPS, and uninterruptible power supplies, or UPS, and motor drive controls.
Switch mode power supplies efficiently convert power to meet the specific
voltage requirements of an application, such as communications equipment.
Uninterruptible power supplies provide a short term backup of electricity in
the event of power failure. Motor drive controls regulate the voltage, current
and frequency of power to a motor.
Market Size and Trends
Statistics published by the Semiconductor Industry Association project
that the worldwide market for all power semiconductors, including discrete and
integrated circuits, will grow at a 20% compound annual growth rate, from $10.5
billion in 1999 to $18.1 billion in 2002. Based on this same data, we believe
the specific markets we serve will grow even faster, at a 25% compound annual
growth rate, from $7.6 billion in 1999 to $14.9 billion in 2002.
The primary markets we serve are characterized by complex technological
development and higher power level requirements. We believe the following key
trends are driving the demand for our products:
Growth in communications devices and infrastructure. The worldwide
communications industry has experienced rapid growth in recent years, fueled
largely by growth in the Internet, deregulation, competition, privatization and
other technological advances, including the convergence of voice, video and
data communication. The proliferation of electronic devices and the
infrastructure to support them is resulting in increasing power level
requirements and the demand for greater power reliability.
Increased demand for energy efficiency in motor drives. Electronic motors
consume approximately one-half of the world's electricity. Due to costs and
complexity, motor controls that permit variable speed operation, which in turn
reduce energy consumption, have been predominantly used only in higher end
applications. However, recent advancements in power management enable more cost
effective, variable speed motor controls, which enhance energy efficiency and
improve performance in a wide range of industrial and commercial applications,
such as heating, ventilation and air conditioning systems.
29
<PAGE>
Emergence of new applications in medical electronics. Continued
advancements in medical technologies are resulting in more sophisticated
medical electronic devices. Power semiconductors can greatly reduce the size of
equipment and improve the precision of medical measurements and functionality.
For example, power semiconductors have enabled cardiac defibrillators to become
much smaller and more portable, improving the ability to install these devices
in more non-medical establishments, such as airplanes and office buildings.
Development of new technologies for power management. New technologies
such as the use of radio frequency, or RF, for nontraditional power
applications are opening new markets for power semiconductors. For example, RF
based semiconductor production equipment is migrating to high frequency power
MOS transistors from traditional RF tubes. Additionally, material science
developments, such as gallium arsenide, are enabling the production of higher
power density power management products, such as those required for wireless
base stations.
Demand for increasing power density. The need for higher levels of power
in end use applications is causing purchasers of power semiconductors to demand
more power for their applications from the same physical space. In the
communications industry, the growth in bandwidth demands is requiring
communications equipment providers to add more equipment or more powerful
equipment to confined spaces in highly populated areas. As a result, power
semiconductor manufacturers are being required to design and produce products
that enable their customers to expand power levels without expanding product
footprints, or maintaining levels of power while shrinking product footprints.
Our Strategy
Since our inception, we have focused on meeting the needs of the high
power, high performance segment of the power semiconductor market. We intend to
continue building a leading position within our targeted segment of this market
by pursuing the following strategies:
Maintain technological focus on high power, high performance market. Our
technological expertise enables us to focus on the high power, high performance
power semiconductor market. Due to technological complexities, fewer industry
players compete in this market, resulting in a more favorable competitive
environment for us. We believe our technological expertise differentiates us
from most of our competitors. This expertise encompasses a wide range of
scientific disciplines and technical capabilities, including physics,
mechanical engineering, chemistry, circuit design, material science and
packaging. Using our technological expertise, we continually strive to
introduce innovative products. For example, we have recently brought to market
a gallium arsenide rectifier, one use of which will permit increased power
density in wireless base stations.
Target rapid growth opportunities within the high power, high performance
market. We select the specific markets where we intend to compete by evaluating
their potential growth, our ability to establish an advantage based upon our
technological capabilities and the performance of competing products. For
example, to capitalize on the power density and switching speed of our
products, we have entered the telecommunications and data communications
segments of the communications infrastructure market. These segments include
applications for wireless base stations, internet servers for co-location
facilities and storage area networks.
Continue to diversify markets, customers and products. We believe that
diversifying the markets and customers we serve and the products we produce
enables us to minimize the traditional cyclical effects of the semiconductor
industry on our business. We have a significant market presence in Europe,
North America and Asia, the three principal geographic markets for high
performance power semiconductors. Moreover, our products are used in a broad
range of applications, from communications infrastructure to industrial
automation to medical electronics, thereby reducing our reliance on customers
from any particular industry. Our product
30
<PAGE>
line spans a broad range of functionality and price, which allows us to provide
an appropriate solution to most of our customers' power semiconductor needs.
This product diversity permits our customers to reduce the number of their
suppliers by enabling them to purchase a substantial portion of their power
semiconductor needs from us.
Pursue selective acquisition and investment strategy. We seek to access
additional technological capabilities and complementary product lines through
selective acquisitions and strategic investments. For example, through the
acquisition of Directed Energy in May 2000, we added scientific expertise and
additional products related to laser diode drivers, high voltage pulse
generators and modulators. We also believe there are significant opportunities
to capitalize on our extensive distribution system and market additional
products to many of our 2,000 customers.
Collaborate with select companies on product development. We seek to
enter into collaborative arrangements with existing and potential customers in
attractive end user markets in order to optimize our products for their use. We
believe that our ability to provide technical assistance to these companies in
the design of their hardware and software systems encourages the incorporation
of our products in their devices. For example, we partnered with manufacturers
of portable defibrillators at an early stage in the development of this market,
and we have become a leading supplier of power semiconductors for these
devices. In addition, we have had over 200 design wins in each of the last
three years.
Optimize mix between internal and external manufacturing. We intend to
continue using both internal wafer fabrication facilities and our external
foundry relationships. We also seek to balance our product assembly through
multiple sourcing relationships. We believe these strategies enable us to
maximize our manufacturing efficiency and flexibility. We also believe that our
internal manufacturing capabilities enable us to lower our manufacturing cost
with respect to certain products, bring products to market more quickly than
would be possible if we were required to rely exclusively on external
foundries, retain certain proprietary aspects of our process technology and
more quickly introduce new process and product innovations through close
collaboration between our design and process engineers. Our alliances with
external foundries and assembly subcontractors allow us to substantially reduce
capital spending and manufacturing overhead expenses, obtain competitive
pricing and technologies and expand manufacturing capacity more rapidly than
could be achieved with internal facilities alone.
Products
Our power semiconductor products have historically been divided into two
primary categories, power MOS transistors and bipolar products. Our power
semiconductors are sold separately and are also packaged in high power modules
that frequently consist of multiple semiconductor dies. In fiscal year 2000,
power semiconductors constituted approximately 92% of our revenues, which
included 45% from power MOS transistors and 47% from bipolar products. In
fiscal year 2000, we sold our first gallium arsenide product, which we believe
will become a primary product category. In addition to power semiconductors, we
manufacture our proprietary DCB substrate for use in our own power
semiconductors as well as for sale to other power semiconductor manufacturers.
We also sell ICs that have applications associated with power management, and
high speed, high density SRAM products.
Power MOS Transistors
Power MOS transistors offer significant price/performance benefits over
traditional bipolar transistors. Power MOS transistors operate at much greater
switching speeds, allowing the design of smaller and less costly end products,
primarily due to the smaller and less expensive peripheral components required
at higher switching frequencies. Power MOS transistors are activated by voltage
rather than current, so they require less external circuitry to operate, making
them more compatible with IC controls. Power MOS transistors also offer more
reliable long term performance and are more rugged than traditional bipolar
transistors, permitting them to better withstand adverse operating conditions.
Our power MOS transistors consist of power MOSFETs and IGBTs.
31
<PAGE>
Power MOSFETs. A power MOSFET, or metal oxide semiconductor field effect
transistor, is a switch controlled by voltage at its gate. Power MOSFETs are
used in combination with passive components to vary the amperage and frequency
of electricity by switching on and off at high frequency.
Our power MOSFETs are used primarily in power conversion systems and are
focused on higher voltage applications ranging from 60 to 1,100 volts. Our
power MOSFETs have on state resistance among the lowest available for a given
die size and voltage. Lower on state resistance results in increased efficiency
of a power semiconductor device. We believe that as the power requirements of
workstations, servers and other computers increase as the result of larger and
more powerful microprocessors, disk drives and CD/ROMs, the designers of power
supplies will increasingly demand higher power density. MOSFETs accommodate
this need by providing higher power without increasing the physical size of the
power supply incorporated into the equipment.
IGBTs. IGBTs, or insulated gate bipolar transistors, also are used as
switches. IGBTs have achieved many of the advantages of power MOSFETs and of
traditional bipolar technology by combining the voltage controlled switching
features of power MOSFETs with the superior conductivity and energy efficiency
of bipolar transistors. For a given semiconductor die size, IGBTs can operate
at higher currents and voltages, making them a more cost effective device
compared to power MOSFETs for high energy applications. The principal tradeoff
of IGBTs compared to power MOSFETs is the switching speed of IGBTs, which is
slower than that of power MOSFETs. IGBTs are seldom used in applications where
very fast switching is required, including SMPS operating at speeds over 150
kilohertz.
Since inception, we have been a leader in the development of IGBTs for
high voltage applications. In 1986, we introduced the first 800 volt, 50 amp
device into the market. Our current products are focused on voltage
applications ranging from 300 volts to 2,000 volts. Our IGBTs are used
principally in AC motor drives and defibrillators.
Bipolar Products
Bipolar products are also used to process electricity, but are activated
by current rather than voltage. Bipolar products are capable of switching
electricity at substantially higher power levels than power MOS transistors.
However, switching speeds of bipolar products are slower than those of power
MOS transistors, and as a result, bipolar products are preferred where very
high power is required. Our bipolar products consist of rectifiers and
thyristors.
Rectifiers. Rectifiers convert AC power to DC power and are used
primarily in input and output rectification and inverters. Our rectifiers are
used in DC and AC motor drives, power supplies, lighting and heating controls
and welding equipment.
A subset of our rectifier product group is a very fast switching device
known as a FRED, or fast recovery epitaxial diode. FREDs limit spikes in
voltage across the power switch to reduce power dissipation and electromagnetic
interference. Our FREDs are used principally in AC motor drives and power
supplies.
Thyristors. Thyristors are switches that can be turned on by a controlled
signal and turned off only when the output current is reduced to zero, which
occurs in the flow of AC power. Thyristors are preferred over power MOSFETs and
IGBTs in high voltage, low frequency AC applications because their on state
resistance is lower than the on state resistance of power MOSFETs and IGBTs.
Our thyristors are used in motor drives, defibrillators, power supplies,
lighting and heating controls and welding.
Gallium Arsenide Products
Commencing in fiscal year 2000, we began to sell gallium arsenide
products. Our first gallium arsenide product is a Schottkey rectifier, useful
for high power density applications, such as power supplies for wireless
32
<PAGE>
communications base stations. Gallium arsenide offers higher frequency and
higher temperature operation, enabling substantially greater power density than
silicon based solutions.
Other Products
We manufacture our proprietary DCB substrates for use in our own
semiconductor products as well as for sale to a variety of customers, including
those in the power semiconductor industry. DCB technology cost effectively
provides excellent thermal transfer while maintaining high electrical
isolation. This technology addresses thermal fatigue and die cracking problems
encountered by manufacturers of power semiconductor modules utilizing
traditional copper base plates.
We also market ICs that have applications associated with power
semiconductors, such as high voltage current regulators, motion controllers,
digital pulse width modulators and power MOSFET/IGBT drivers. Additionally, we
manufacture and sell laser diode drivers, high voltage pulse generators and
modulators and sell synchronous and asynchronous SRAMs, a legacy product from
the Paradigm merger. Our SRAMs are available in a variety of configurations and
commercial and industrial temperature range versions.
Customers and Applications
Our power semiconductors are used primarily to control electricity in
power conversion systems, motor drives and medical electronics. The following
table summarizes the primary categories of uses for power semiconductors, our
products used in each category, the end user applications served by these
products and our representative customers for each category.
<TABLE>
<CAPTION>
IXYS
Category Products End User Applications Selected Customers
-------- -------- --------------------- ------------------
<S> <C> <C> <C>
Power
Conversion
Systems FREDs SMPS and UPS for: Alpha Technologies
IGBTs . wireless base stations ASCOM
Modules . internet co-location facilities Delta Electronics
MOSFETs . storage area networks Emerson Electric
Rectifiers RF generators Lucent Technologies
Power-One
Schneider Group
Transistor Devices
Motor Drives FREDs Industrial transportation Emerson Electric
IGBTs Robotics Eurotherm
Rockwell
Modules Process control equipment International
MOSFETs Machine tools Siemens
Thyristors Electric vehicles Still
Medical Agilent
Electronics IGBTs Defibrillators Technologies
MOSFETs Medical imaging devices Guidant
Thyristors Laser power supplies Medtronic
</TABLE>
We also sell our power semiconductor chips and DCB substrates to other
power semiconductor companies for use in their modules. These customers include
Infineon, International Rectifier, Powersem and Tyco.
33
<PAGE>
Sales and Marketing
We sell our products through a worldwide selling organization that
includes direct sales personnel, independent representatives and distributors
managed through our Santa Clara, California and Lampertheim, Germany offices.
We employ 24 people in sales and marketing and customer support and service. We
currently use 18 sales representative organizations and six distributors in
North America and 19 sales representative organizations and 42 distributors in
the rest of the world. During fiscal years 1998, 1999 and 2000, sales to
distributors accounted for approximately 46%, 41% and 42% of net revenues,
respectively.
In fiscal year 2000, net revenues derived from North American and
international sales represented approximately 37.8% and 62.2%, respectively, of
our net revenues. Of our international sales, approximately 47.6% of our net
revenues were derived from sales in Europe and the Middle East and 14.6% of our
net revenues were derived from sales in Asia. No single end customer accounted
for more than 10% of our net revenues in fiscal year 2000.
We market our products through advertisements, technical articles and
press releases that appear regularly in a variety of trade publications, as
well as through the dissemination of brochures, data sheets and technical
manuals. Additionally, we participate in industry trade shows on a regular
basis. We also have a presence on the Internet through a worldwide web page
that enables engineers to access and download technical information and data
sheets.
Research and Development
We believe that we successfully compete in the power semiconductor market
because of our ability to design, develop and introduce to the market on a
timely basis new products offering technological improvements. We are a pioneer
in technology with respect to higher power IGBTs, IGBT modules and DCB
substrates. While the time from initiation of design to volume production of
new power semiconductors products often takes 18 months or longer, our power
semiconductors have a product lifetime exceeding an average of 10 years. During
fiscal years 1999 and 2000, our research and development expenses were
approximately $4.2 million and $4.7 million, respectively. As of September 1,
2000, we employed 36 people in engineering and research and development
activities.
We are engaged in ongoing research and development efforts focused on
enhancements to existing products and the development of new products.
Currently, we are pursuing research and development projects with respect to:
. increasing the voltage operating range of our MOS and bipolar
products;
. developing new gallium arsenide products;
. developing higher power IGBT modules;
. developing a complete range of high voltage, bipolar MOS products;
. improving our multiple die module assembly technology; and
. expanding our line of power management IC products.
Research and development activities are conducted in collaboration with
manufacturing activities to help expedite new products from the development
phase to manufacturing and to more quickly implement new process technologies.
Our research and development efforts also include participation in
technology collaborations with universities and research institutions. These
technology collaborations allow research and development activities that would
otherwise require potentially cost prohibitive capital expenditures since the
necessary capital equipment is often available at research institutes and
universities. Through these technology collaborations, we believe we are able
to maximize our range of research and development activities without diffusing
the focus of our internal research and development work.
34
<PAGE>
Patents
We hold 96 patents, including 59 that have been issued in the U.S. and 37
that have been issued in international jurisdictions. We rely on a combination
of patent rights, copyrights and trade secrets to protect the proprietary
elements of our products. Our policy is to file patent applications to protect
technology, inventions and improvements that are important to our business. We
also seek to protect our trade secrets and proprietary technology, in part,
through confidentiality agreements with employees, consultants and other
parties.
While we believe that our intellectual property rights are valuable, we
also believe that other factors, such as innovative skills, technical
expertise, the ability to adapt quickly to new technologies and evolving
customer requirements, product support and customer relations, are of greater
competitive significance.
Manufacturing and Facilities
The production of our products is a highly complex and precise process.
We manufacture our products in our own manufacturing facilities and by
utilizing external wafer foundries and subcontract assembly facilities. We
divide our manufacturing operations into three key areas, wafer fabrication,
assembly and test.
Wafer Fabrication. We own an approximately 170,000 square foot
manufacturing facility in Lampertheim, Germany at which we fabricate all of our
bipolar products. We also fabricate our 1,600 volt and higher power MOS devices
at this facility in order to protect our process technologies. We believe that
our internal fabrication capabilities enable us to lower our manufacturing cost
with respect to certain products, bring products to the market more quickly
than would be possible if we were required to rely exclusively on external
foundries, retain certain proprietary aspects of our process technology and
more quickly introduce new process innovations.
In addition to maintaining our own fabrication facility, we have
established alliances with selected foundries for wafer fabrication. This
approach allows us to reduce substantial capital spending and manufacturing
overhead expenses, obtain competitive pricing and technologies and expand
manufacturing capacity more rapidly than could be achieved with internal
foundries alone. We retain the flexibility to shift the production of our
products to different or additional foundries for cost or performance reasons.
Our product designs enable the production of our devices at multiple foundries
using well established and cost effective processes.
We relied on external foundries for approximately 50% of our wafer
fabrication requirements in fiscal year 2000, and our utilization of external
foundries is expected to grow. We have arrangements with four external wafer
foundries, two of which provide substantially all of the wafers provided to us
by external foundries. Our principal external foundry is Samsung Electronics'
facility located in Kiheung, South Korea. Our relationship with Samsung
Electronics extends over 16 years. We provide our foundries forecasts for wafer
fabrication six months in advance and make firm purchase commitments one to two
months in advance of delivery. Other than these firm commitments, we do not
have any obligations to order any minimum quantities.
Wafer fabrication of power semiconductors generally employs process
technology and equipment already proven in IC manufacturing. Power
semiconductors are manufactured using fabrication equipment that is one or more
generations behind the equipment used to fabricate leading edge ICs. Used
fabrication equipment can be obtained at prices substantially less than the
original cost of such equipment or than the cost of current equipment applying
the latest technology. Consequently, the fabrication of power semiconductors is
less capital intensive than the fabrication of ICs.
Assembly. Packaging or assembly is the sequence of production steps that
divide the wafer into individual chips and enclose the chips in external
structures, termed packages, that make them useable in a circuit. Discrete
manufacturing involves the assembly and packaging of single die devices. Module
manufacturing involves the assembly of multiple devices within a single
package. The resulting packages vary
35
<PAGE>
in configuration, but all have leads which are used to mount the package
through holes in the customer's printed circuit boards.
Most of our wafers are sent to independent subcontract assembly
facilities. We have equipment at, or manufacturing supply arrangements with,
assembly subcontractors located in Asia and Europe in order to take advantage
of low assembly costs. Approximately 60% of our products are assembled at
external assembly facilities, and the remainder are assembled in our
Lampertheim facility.
Test. Generally, each die on our wafers is electrically tested for
performance after wafer fabrication. Following assembly, our products are
returned to Santa Clara, California or Lampertheim, Germany for testing and
final inspection prior to shipment to customers. We lease an approximately
20,000 square foot facility in Santa Clara, which also houses our corporate
offices. We test substantially all of our IGBTs, power MOSFETs and ICs in Santa
Clara and test our bipolar and custom MOS modules in Lampertheim.
Competition
The power semiconductor industry is intensely competitive and is
characterized by price competition, technological change, limited fabrication
capacity, international competition and manufacturing yield problems. The
competitive factors in the market for our products include:
. product quality, reliability and performance;
. product features;
. timely delivery of products;
. price;
. breadth of product line;
. design and introduction of new products; and
. technical support and service.
We believe that we are one of a limited group of companies focused on the
development and marketing of high power, high performance semiconductors
capable of performing all of the basic functions of power semiconductor design
and manufacture. Our primary competitors include Advanced Power Technology,
Fuji, International Rectifier, Infineon, On Semiconductor, Semikron
International, Powerex, STMicroelectronics, Siemens and Toshiba.
Backlog
At June 30, 2000, our backlog of orders was approximately $38 million, as
compared with $18 million at June 30, 1999. Backlog represents firm orders
anticipated to be shipped within the next 12 months. Our business and, to a
large extent, that of the entire semiconductor industry is characterized by
short term order and shipment schedules. Because orders constituting our
current backlog are subject to changes in delivery schedules or to cancellation
at the option of the purchaser without significant penalty, backlog is not
necessarily an indication of future revenues.
Employees
At September 1, 2000, we employed 368 employees, of whom 36 were
primarily engaged in engineering and research and development activities, 24 in
marketing, sales and customer support, 283 in manufacturing and 25 in
administration and finance. Of these employees, 48 hold engineering or science
degrees, including 11 Ph.D.s. Certain employees at our Lampertheim facility are
subject to collective bargaining agreements. There have been no work stoppages
at any of our facilities to date. We believe that our employee relations are
good.
36
<PAGE>
Legal Proceedings
From time to time in our industry, participants become involved in
litigation over intellectual property rights and other matters. On June 22,
2000, International Rectifier filed an action for patent infringement against
us in the United States District Court for the Central District of California,
alleging that certain of our products sold in the United States, including but
not limited to four specified power MOSFET parts, infringe at least five
identified U.S. patents owned by International Rectifier. International
Rectifier's complaint against us alleges that our infringement of its patents
has been and continues to be willful and deliberate, seeks to enjoin us from
further infringement, and requests an award of unspecified, actual monetary
damages, but no less than a reasonable royalty on the products that we sell
which are claimed to infringe International Rectifier's patents. International
Rectifier also seeks to have the claimed damages trebled. We have answered the
complaint, denied any infringement and have asserted that International
Rectifier's patents are invalid and unenforceable for, among other reasons,
failure of International Rectifier to properly disclose known prior art during
its prosecution of the patents in suit, and that International Rectifier's
claims are barred by reason of the doctrines of estoppel and laches. In prior
years, International Rectifier has approached us on several occasions and
requested that we enter into royalty-bearing license agreements with them,
covering the technology identified in their patents. We have declined to do so,
based upon our belief that our products do not infringe the International
Rectifier patents. The suit is in the early stages of discovery, and it is our
intent to vigorously contest the claims of International Rectifier. It is
possible that as discovery progresses International Rectifier may expand its
assertions to include additional products we sell, other than those specified
in the complaint. While we believe our defenses to the infringement claims are
meritorious, there can be no assurance of a favorable outcome in this suit. In
the event of an adverse outcome, any damages awarded by the court could be
materially adverse to our financial condition and results of operations.
We are also involved in a class action lawsuit in Santa Clara County,
California Superior Court brought on behalf of California purchasers of our
common stock between November 20, 1995 and March 22, 1996, prior to the
Paradigm merger, alleging violations of federal and state securities laws. We
have denied the claims set forth in that lawsuit, which remains in discovery. A
similar lawsuit filed in the United States District Court for the Northern
District of California was dismissed with prejudice in 1999, but there can be
no assurance that we will be successful in the defense of the remaining state
court lawsuit. See Note 7 of Notes to Consolidated Financial Statements.
We are also from time to time a party to litigation or claims that arise
out of the ordinary conduct of our business, which can include matters related
to employment, commercial transactions, contracts or the environment.
37
<PAGE>
MANAGEMENT
Directors, Executive Officers and Key Employees
The following table sets forth as of September 1, 2000, the names, ages
and positions of our directors, executive officers and other key employees:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Nathan Zommer..... 52 Chairman of the Board, President and Chief
Executive Officer
Arnold Agbayani... 55 Vice President, Finance and Administration, Chief
Financial Officer, Secretary and Director
Peter Ingram...... 52 Vice President, European Operations
Kevin McDonough... 49 Vice President, U.S. Operations
Andreas Sperner... 44 Vice President, Sales and Marketing, Europe
Clifford Knudsen.. 58 Vice President, Sales, North America
Kent Paris........ 59 Vice President, Sales, Far East and Canada
Donald Feucht..... 66 Director
Andreas Hartmann.. 56 Director
Samuel Kory....... 57 Director
Joon Lee.......... 61 Director
</TABLE>
Nathan Zommer. Dr. Zommer, our founder, has served as a member of our
board of directors since our inception in 1983, and has served as Chairman of
the Board, President and Chief Executive Officer since March 1993. From 1984 to
1993, Dr. Zommer served as our Executive Vice President. Prior to founding IXYS
Dr. Zommer served in a variety of positions with Intersil, Hewlett Packard and
General Electric, including as a scientist in the Hewlett Packard Laboratories
and Director of the Power MOS Division for Intersil/General Electric. Dr.
Zommer received his B.S. and M.S. degrees in Physical Chemistry from Tel Aviv
University and a Ph.D. in Electrical Engineering from Carnegie Mellon
University.
Arnold Agbayani. Mr. Agbayani has served as our Vice President, Finance
and Administration and Chief Financial Officer, Secretary and Director since
1993. From 1989 to 1993, he served as our Controller. Prior to joining us, Mr.
Agbayani held various financial positions with National Semiconductor,
Fairchild Camera and Instruments, ATARI and Frito-Lay. Mr. Agbayani received
his B.S. in Finance and an M.B.A. from Roosevelt University of Chicago.
Peter Ingram. Mr. Ingram has served as our Vice President of European
Operations since 1994. From 1989 to 1995, he served as our Director of Wafer
Fab Operations. Mr. Ingram worked with the semiconductor operations of ABB from
1982 until we acquired those operations in 1989. Mr. Ingram received an Honors
degree in Chemistry from the University of Nottingham.
Kevin McDonough. Mr. McDonough has served as our Vice President of U.S.
Operations since 1999. From 1998 to 1999, he served as our Director of Quality
Assurance and Product Engineering, and from 1990 to 1994, he served as our
Director of Operations and Quality Assurance. From 1995 to 1998, Mr. McDonough
served as Manager of Wafer Fab Foundries for Advanced Micro Devices. Mr.
McDonough received his B.S. in Science from the University of California at
Davis and his M.B.A. from Oregon State University.
Andreas Sperner. Mr. Sperner has served as our Vice President, Sales and
Marketing, Europe since 1997. From 1993 to 1997, he served as our Director of
Sales and Marketing. Mr. Sperner received his degree in Engineering from the
Technical College in West Berlin.
Clifford Knudsen. Mr. Knudsen has served as our Vice President of North
American Sales since May 2000. From 1992 to 2000, he served as our Director of
Area Sales. Mr. Knudsen received a B.S. in Electrical Engineering and an M.S.
in Electrical Engineering from the New Jersey Institute of Technology and his
M.B.A. in Marketing from Rutgers University.
38
<PAGE>
Kent Paris. Mr. Paris has served as our Vice President, Sales, Far East
and Canada since June 2000. From 1997 to June 2000, he served as our Director,
Sales, Far East and Canada. From 1993 to 1997, Mr. Paris served as Sales
Manager of Advanced Power Technology. Mr. Paris received his M.B.A. from
Wichita State University.
Donald Feucht. Dr. Feucht has served as a member of our board of
directors since July 2000. From 1992 until his retirement in 1998, Dr. Feucht
served as Vice President for Operations for Associated Western Universities. He
was employed as a Program Management Specialist for EG&G Rocky Flats, Inc. from
1990 until 1992. Dr. Feucht received his B.S. degree in Electrical Engineering
from Valparaiso University. He holds M.S. and Ph.D. degrees in Electrical
Engineering from Carnegie Mellon University.
Andreas Hartmann. Mr. Hartmann has served as a member of our board of
directors since November 1998. Since 1990, he has served as Assistant General
Counsel and Vice President of ABB. Mr. Hartmann received his degree in law from
Erlangen Nurnberg University in 1970 and his degree in law from the Ministry of
Justice of the State of Bavaria in 1973.
Samuel Kory. Mr. Kory has served as a member of our board of directors
since November 1999. In 1988, he founded Samuel Kory Associates, a management
consulting firm. Since founding the firm, Mr. Kory has served as the firm's
sole proprietor and principal as well as a consultant for the firm. Mr. Kory
received his B.S.M.E. from Pennsylvania State University in 1965.
Joon Lee. Dr. Lee has served as a member of our board of directors since
July 2000. Since 1990, Mr. Lee has served as President of Omni Electronics. Dr.
Lee also served as President of Adaptive Logic from 1991 until 1996. Dr. Lee
received his B.S., M.S. and Ph.D. degrees in Electrical Engineering from the
University of Minnesota.
39
<PAGE>
Executive Compensation
The following table sets forth certain compensation awarded or paid by us
during the fiscal years ended March 31, 2000, March 31, 1999 and March 31, 1998
to our President and Chief Executive Officer and our other executive officers
who earned more than $100,000 during fiscal year 2000. These people are
referred to in this prospectus as our named executive officers.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual
Compensation
---------------
Securities
Name and Principal Other Annual Underlying All Other
Position Year Salary($) Bonus($)(1) Compensation($)(2) Options(#) Compensation($)
------------------ ---- ---------- ----------- ------------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Nathan Zommer........... 2000 357,420(3) 124,300 15,605 480,000 2,110(4)
President and Chief 1999 200,004 257,700 16,597 62,600 11,607(5)
Executive Officer 1998 200,004 267,800 18,710 -- 2,200(4)
Arnold Agbayani......... 2000 189,190(3) 48,000 12,693 40,000 2,830(4)
Vice President, 1999 128,004 171,600 15,238 34,800 10,229(6)
Finance and 1998 128,004 171,600 12,839 -- 2,830(4)
Administration, Chief
Financial Officer and
Secretary
Richard Fassler(7)...... 2000 111,907 43,013 -- 140,000 --
Former Vice President, 1999 100,848 28,411 7,800 14,000 --
Sales and Marketing 1998 90,250 41,405 7,800 -- --
Peter Ingram............ 2000 154,578 19,294 1,752 180,000 --
Vice President, 1999 153,961 25,851 6,893 24,400 --
European Operations 1998 151,483 -- 6,373 -- --
Kevin McDonough(8)...... 2000 120,346 3,000 -- 240,000 --
Vice President, U.S. 1999 110,822 3,000 -- 8,600 --
Operations 1998 23,692 2,000 1,800 -- --
</TABLE>
--------
(1) Represents annual bonus earned for performance in the specified fiscal
year.
(2) Represents car allowance.
(3) Includes retroactive payments made during fiscal year 2000 attributable to
base salary increases in fiscal year 1999.
(4) Represents premiums paid for group term life insurance.
(5) Includes $2,110 premiums paid for group term life insurance and $9,497 tax
gross-up paid by us.
(6) Includes $2,830 premiums paid for group term life insurance and $7,399 tax
gross-up paid by us.
(7) Mr. Fassler left our company in January 2000.
(8) Mr. McDonough joined us in January 1998.
40
<PAGE>
Option Grants In Fiscal Year 2000
<TABLE>
<CAPTION>
Potential
Realizable Value at
Assumed Annual
# of Rates of Stock
Securities % of Total Exercise Price Appreciation
Underlying Options Price for Term
Options Granted in Per Expiration -------------------
Name Granted Fiscal Year Share Date 5% 10%
---- ---------- ----------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Nathan Zommer........... 480,000 16.3% $2.338 11/18/09 $706,860 $1,783,980
President and Chief
Executive Officer
Arnold Agbayani......... 40,000 1.4 2.125 11/18/09 53,550 135,150
Vice President,
Finance and
Administration, Chief
Financial Officer and
Secretary
Richard Fassler......... 140,000 4.8 2.125 11/18/09 187,425 473,025
Former Vice President,
Sales and Marketing
Peter Ingram............ 60,000 2.0 2.125 11/18/09 80,325 202,725
Vice President, 69,256 2.4 3.625 1/20/10 158,163 399,174
European Operations 50,744 1.7 3.625 1/20/10 115,886 292,475
Kevin McDonough......... 70,000 2.4 2.125 11/18/09 93,712 236,512
Vice President, U.S. 70,004 2.4 3.625 1/20/10 159,871 403,485
Operations 99,996 3.4 3.625 1/20/10 228,365 576,351
</TABLE>
The information regarding stock options granted to named executive
officers as a percentage of total options granted to employees in the fiscal
year, as disclosed in the table, is based upon options to purchase an aggregate
of 2,940,000 shares of common stock that were granted to all employees as a
group, including named executive officers, in the fiscal year ended March 31,
2000.
The exercise price per share of each option was equal to the closing
price of our common stock on the Nasdaq Small Cap Market on the date of grant,
except Dr. Zommer's option was granted with an exercise price 10% above the
closing price on the date of grant.
The potential realizable value is calculated based on the term of the
option at its time of grant and is calculated by assuming that the stock price
on the date of grant appreciates at the indicated annual rate compounded
annually for the entire term of the option and that the option is exercised and
sold on the last day of its term for the appreciated price. The 5% and 10%
assumed annual rates of the stock price appreciation are derived from the rules
of the SEC and do not represent our estimate or projection of the future common
stock prices.
41
<PAGE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth the number of shares of common stock
acquired and the value realized upon exercise of stock options by our named
executive officers during fiscal year 2000. The value realized is based on the
fair market value of our common stock on the date of exercise minus the
exercise price. The table also includes information concerning exercisable and
unexercisable stock options held by the executive officers named in the summary
compensation table at March 31, 2000. The value of unexercised in-the-money
options is based on the fair market value of our common stock on March 31, 2000
of $6.78, minus the actual exercise prices.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised In-
Underlying Unexercised The-Money Options at
Shares Value Options at March 31, 2000 March 31, 2000
Acquired on Realized ------------------------- -------------------------
Name Exercise # $ Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Nathan Zommer........... -- -- 199,810 530,080 $675,676 $2,379,777
President and Chief
Executive Officer
Arnold Agbayani......... -- -- 67,518 71,022 236,995 338,654
Vice President,
Finance and
Administration, Chief
Financial Officer and
Secretary
Richard Fassler......... 2,100 $4,856 33,245 -- 125,479 --
Former Vice President,
Sales and Marketing
Peter Ingram............ -- -- 43,284 201,024 186,424 762,604
Vice President,
European Operations
Kevin McDonough......... -- -- 1,720 176,880 8,762 897,607
Vice President, U.S.
Operations
</TABLE>
Director Compensation
Directors currently receive no cash compensation from us for their
services as members of our board of directors, but are reimbursed for certain
expenses in connection with attendance at our board and committee meetings. Our
2000 Non-Employee Directors' Equity Incentive Plan, effective during fiscal
year 2000, provides for the grant of options to non-employee directors pursuant
to a discretionary grant mechanism administered by our board. These options
vest over a period of time, to be determined in each case by our board, so long
as the optionee remains a non-employee director. Each director currently
receives an option to acquire 30,000 shares upon becoming a member of our board
of directors.
Employment Agreements
We entered into an employment agreement, dated as of January 1, 1995,
with Dr. Zommer. The agreement provides for, among other things, salaries,
bonuses and car allowances as determined by our board. Under the terms of the
agreement, we agree to maintain term life insurance on Dr. Zommer's life in the
amount of $1,000,000. In addition, the agreement provides that if we terminate
Dr. Zommer's employment without cause, Dr. Zommer shall be entitled to receive
as severance his monthly salary, incremented one month per year of service to
us, to a maximum of twelve months. The agreement also provides Dr. Zommer with
a paid annual physical exam and the limited services of a financial advisor.
42
<PAGE>
Under Dr. Zommer's amended agreement, running through January 31, 2004,
his annual bonus is 40% of his base salary, which was $285,000 in fiscal year
2000. In addition, he is eligible for an incentive payment of three times his
base annual salary in the event of certain change of control transactions,
including a reorganization, consolidation, merger and sale of the company's
stock or assets. Additionally, if his employment terminates without cause or he
resigns his employment for certain reasons within a year after a change of
control event, Dr. Zommer is entitled to receive severance equal to three times
his average annual compensation, continued benefits for 18 months and
accelerated vesting of all option shares.
We also entered into an employment agreement, dated as of January 1,
1995, with Mr. Agbayani. The agreement provides for, among other things,
salaries, bonuses and car allowances as determined by our board. Under the
terms of the agreement, we agree to maintain term life insurance on Mr.
Agbayani's life in the amount of $1,000,000. In addition, the agreement
provides that if we terminate Mr. Agbayani's employment without cause,
Mr. Agbayani shall be entitled to receive as severance his monthly salary,
incremented one month per year of service to us, to a maximum of twelve months.
The agreement also provides Mr. Agbayani with a paid annual physical exam and
the limited services of a financial advisor.
Under Mr. Agbayani's amended agreement, running through January 31, 2004,
his annual bonus is 30% of his base salary, which was $160,000 in fiscal year
2000. In addition, he is eligible for an incentive payment of three times his
annual base salary in the event of certain change of control transactions,
including a reorganization, consolidation, merger and sale of the company's
stock or assets. Additionally, if his employment terminates without cause or he
resigns his employment for certain reasons within a year after a change of
control event, Mr. Agbayani is entitled to receive severance equal to three
times his average annual compensation, continued benefits for 18 months and
accelerated vesting of all option shares.
43
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock as of September 1, 2000 with respect to:
. each person or group of affiliated persons known to us to own
beneficially more than 5% of the outstanding shares of common stock;
. each of our directors;
. each of the executive officers named in the summary compensation
table;
. all directors and executive officers as a group; and
. our selling stockholders.
Beneficial ownership of shares is determined under the rules of the
Securities and Exchange Commission and generally includes any shares over which
a person exercises sole or shared voting or investment power. This table is
based upon information supplied by officers, directors and principal
stockholders and Schedules 13D and 13G filed with the Securities and Exchange
Commission. Except as indicated by footnote, and subject to applicable
community property laws, each person identified in the table possesses sole
voting and investment power with respect to all shares of common stock held by
them. Shares of common stock subject to options currently exercisable or
exercisable within 60 days of September 1, 2000 and not subject to repurchase
as of that date, are deemed outstanding for calculating the percentage of
outstanding shares of the person holding these options, but are not deemed
outstanding for calculating the percentage of any other person. Applicable
percentage ownership on the following table is based on 24,455,580 shares of
common stock outstanding as of September 1, 2000 and 26,455,580 shares of
common stock outstanding immediately following the completion of this offering.
<TABLE>
<CAPTION>
Ownership of Common
Ownership of Common Stock After
Stock Prior to the Offering the Offering
------------------------------- ---------------------
Number of Percentage Number of Shares Number of Percentage
Beneficial Owner Shares Ownership Offered Hereby Shares Ownership
---------------- ---------------- -------------- ---------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Entities Affiliated with
ABB(1)................ 10,817,380 44.1% 1,995,000(2) 8,822,380 33.3%
Gottlieb-Daimler
Strasse 8
68165 Mannheim
Germany
Nathan Zommer(3)........ 6,855,783 27.8 -- 6,855,783 25.8
3540 Bassett Street
Santa Clara, Ca 95054
Arnold Agbayani(4)...... 568,397 2.3 -- 568,397 2.1
Richard Fassler(5)...... 13,622 * -- 13,622 *
Peter Ingram(6)......... 398,627 1.6 -- 398,627 1.5
Kevin McDonough(7)...... 16,711 * -- 16,711 *
Donald Feucht........... -- -- -- -- --
Andreas Hartmann(1)..... 10,817,380 44.1 1,995,000 8,822,380 33.3
Samuel Kory(8).......... 750 * -- 750 *
Joon Lee................ -- -- -- -- --
All directors and
executive officers as
a group (8
persons)(9)........... 18,657,648 75.3 1,995,000 16,662,648 62.3
Other Selling
Stockholder
Yoshio Kojima........... 29,538 * 5,000 24,538 *
</TABLE>
--------
* Represents less than 1%.
44
<PAGE>
(1) Includes 10,085,944 shares held by ABB and 681,662 shares held by ASEA
Brown Boveri Inc. Also includes 49,774 shares which an entity affiliated
with ABB has the right to acquire pursuant to a warrant exercisable within
60 days of September 1, 2000. Mr. Hartmann disclaims beneficial ownership
of the ABB Shares. Mr. Hartmann is a Vice President of ABB and may be
deemed to exercise voting power with respect to the ABB Shares.
(2) ABB has granted the underwriters the right to purchase up to an additional
600,000 shares from ABB for a period of 30 days.
(3) Includes an aggregate of 5,200 shares held in trusts for Dr. Zommer's
children. Also includes 172,949 shares Dr. Zommer has the right to acquire
pursuant to options exercisable within 60 days of September 1, 2000.
(4) Includes 44,765 shares Mr. Agbayani has the right to acquire pursuant to
options exercisable within 60 days of September 1, 2000.
(5) Mr. Fassler left our company in January 2000.
(6) Includes 31,473 shares Mr. Ingram has the right to acquire pursuant to
options exercisable within 60 days of September 1, 2000.
(7) Includes 15,703 shares Mr. McDonough has the right to acquire pursuant to
options exercisable within 60 days of September 1, 2000.
(8) Represents shares Mr. Kory has the right to acquire pursuant to options
exercisable within 60 days of September 1, 2000.
(9) See footnotes 1 through 8 above.
45
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On September 14, 1995, our board of directors authorized stock grants,
made pursuant to certain stock purchase agreements, to Dr. Zommer and Messrs.
Agbayani, Fassler and Ingram. In connection with these stock grants, an
aggregate of 7,410,134 shares of our common stock were granted to these
individuals. The shares were paid for with recourse promissory notes in an
aggregate principal amount of $832,716 and are currently fully vested. The note
terms provide that between September 15, 2003 and September 15, 2005, quarterly
installments of principal and accrued interest are due, and all principal of
the notes, plus accrued interest, is due and payable September 15, 2005. The
notes bear interest at a rate of 6.25% per annum compounded annually. In the
event any of these individuals sells shares of our common stock currently held
by them, a mandatory prepayment in an amount equal to 30.0% of the net sale
proceeds is due from the individual selling stock-holder. In the event of
termination of employment, any unpaid principal and interest become due and
payable. In the event of a change in control, the notes mature within
12 months, provided the change in control occurs before September 15, 2004.
In November 1996, we loaned approximately $75,000 to Dr. Zommer, in
exchange for a promissory note bearing a simple interest rate of 8.25% per
annum. The principal amount of the loan, plus any interest thereon, is due and
payable no later than November 12, 2001. In the event of Dr. Zommer's voluntary
termination or his termination for cause, the loan will be due and payable one
year from the date of his termination.
ABB is a principal stockholder of IXYS. In fiscal year 2000, we generated
revenues of $653,000 from sales of products to ABB and to ABB's affiliates for
use as components in their products.
We have entered into indemnity agreements with our executive officers and
directors containing provisions which may require us, among other things, to
indemnify them against certain liabilities that may arise by reason of their
status or services as officers or directors.
46
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 40,000,000 shares of common
stock, $0.01 par value, and 5,000,000 shares of preferred stock, $0.01 par
value. As of September 1, 2000, there were 24,455,580 shares of common stock
outstanding that were held of record by 179 stockholders. There will be
26,455,580 shares of common stock outstanding, assuming no exercise of
outstanding options and warrants, after giving effect to the sale by us of
2,000,000 shares of common stock in this offering. Our board of directors has
decided to submit to our stockholders at our next annual meeting a proposal to
increase the number of shares of common stock that we are authorized to issue
from 40,000,000 to 80,000,000.
Common Stock
The holders of common stock are entitled to one vote per share on all
matters submitted to a vote of our stockholders. Subject to preferences that
may be applicable to any preferred stock outstanding at the time, the holders
of outstanding shares of common stock are entitled to receive ratably any
dividends out of assets legally available therefor as our board of directors
may from time to time determine. Upon liquidation, dissolution or winding up of
our company, holders of our common stock are entitled to share ratably in all
assets remaining after payment of liabilities and the liquidation preference of
any then outstanding shares of preferred stock. Holders of common stock have no
preemptive or conversion rights or other subscription rights. There are no
redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of common stock are fully paid and nonassessable.
Preferred Stock
Our certificate of incorporation provides that our board of directors has
the authority, without further action by the stockholders, to issue up to
5,000,000 shares of preferred stock in one or more series. The board is able to
fix the rights, preferences, privileges and restrictions of the preferred
stock, including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences, sinking fund terms and the number of
shares constituting any series or the designation of this series. The issuance
of preferred stock could adversely affect the voting power of holders of common
stock, and the likelihood that holders of preferred stock will receive dividend
payments and payments upon liquidation may have the effect of delaying,
deferring or preventing a change in control of our company, which could depress
the market price of our common stock. We have no present plan to issue any
shares of preferred stock.
Registration Rights
Under the terms of an agreement among ABB, one of its subsidiaries and
us, ABB and its subsidiary are entitled to demand that we register their shares
with the SEC so long as the total offering price to the public of the shares is
at least $5 million. ABB and its subsidiary are entitled to make such a demand
on no more than two occasions. Also, if we propose to register any shares of
our common stock, ABB and its subsidiary are entitled to include their shares
in the registration. Furthermore, if we are eligible to file a registration
statement on Form S-3, ABB and its subsidiary can demand that we file with the
SEC up to four registration statements on Form S-3 covering the registration of
all or a portion of their shares so long as the offering price to the public of
the shares covered by each such Form S-3 registration statement is at least
$500,000. ABB and its subsidiary currently own an aggregate of 10,767,606
shares of our common stock. Approximately 2,000,000 of those shares are being
included in this offering, plus up to an additional 600,000 shares if the
underwriters exercise their overalloment option.
We have also agreed to register 231,436 shares of our common stock held
by the former shareholders of Directed Energy, which we acquired on May 16,
2000. In connection with this offering, we have obtained a waiver of our
obligation to register those shares of our common stock until the earlier of
March 31, 2001 or 91 days after the effective date of the registration
statement covering this offering. In consideration for that waiver, we offered
to the former shareholders of Directed Energy the opportunity to participate in
this offering. One of those shareholders, Yoshio Kojima, has elected to sell
5,000 shares of our common stock in this offering.
47
<PAGE>
Anti-Takeover Provisions of Delaware Law and Charter Provisions
We are subject to Section 203 of the Delaware General Corporation Law. In
general, the statute prohibits a publicly held Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the date that the stockholder became an
interested stockholder unless:
. prior to the date, the board of directors of the corporation approved
either the business combination or the transaction that resulted in
the stockholder becoming an interested stockholder;
. upon consummation of the transaction that resulted in the
stockholder's becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding those
shares owned by persons who are directors and also officers, and
employee stock plans in which employee participants do not have the
right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer; or
. on or subsequent to the date, the business combination is approved by
the board of directors and authorized at an annual or special meeting
of stockholders, and not by written consent, by the affirmative vote
of at least two-thirds of the outstanding voting stock held by
stockholders other than that interested stockholder.
Section 203 defines "business combination" to include:
. any merger or consolidation involving the corporation and the
interested stockholder;
. any sale, transfer, pledge or other disposition involving the
interested stockholder of 10% or more of the assets of the
corporation;
. subject to exceptions, any transaction that results in the issuance or
transfer by the corporation of any stock of the corporation to the
interested stockholder; or
. the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by
or through the corporation.
In general, Section 203 defines an interested stockholder as any entity or
person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by the entity or person.
Our certificate of incorporation and our bylaws contain provisions that
may have the effect of deterring hostile takeovers or delaying changes in
control or our management. For example, our certificate of incorporation grants
our board of directors the authority to issue up to 5,000,000 shares of
preferred stock and to determine the price, rights, preferences and privileges
and restrictions, including voting rights, of those shares without any further
vote or action by our stockholders. The rights of the holders of common stock
will be subject to, and may be harmed by, the rights of the holders of any
shares of preferred stock that may be issued in the future. The issuance of
preferred stock may delay, defer or prevent a change in control, as the terms
of the preferred stock that might be issued could potentially prohibit our
consummation of any merger, reorganization, sale of substantially all of our
assets, liquidation or other extraordinary corporate transaction without the
approval of the holders of the outstanding shares of preferred stock.
Our certificate of incorporation also requires that any action required
or permitted to be taken by our stockholders must be effected at a duly called
annual or special meeting of stockholders and may not be effected by a consent
in writing.
Certain provisions of our bylaws may have the effect of deterring hostile
takeovers or delaying changes in control of our management by delaying
stockholder action. Specifically, our bylaws provide that candidates for
director may be nominated only by the board of directors or by a stockholder
who gives written notice to us
48
<PAGE>
in accordance with our bylaws. For directors to be elected at an annual meeting
of stockholders, a stockholder must give written notice no earlier than 120
days prior to the first anniversary of the last annual meeting of stockholders
and no later than 90 days prior to the annual meeting. For directors to be
elected at a special meeting of stockholders, a stockholder must give written
notice no earlier than 120 days prior to the special meeting and no later than
the later of 90 days prior to the special meeting or the tenth day following
the date on which public announcement is first made of the date of the special
meeting and of the nominees proposed by our board of directors to be elected at
the special meeting. Furthermore, between stockholder meetings, the board may
appoint new directors to fill vacancies or newly created directorships.
Limitation of Liability and Indemnification Agreements
Our certificate of incorporation provides that to the fullest extent
permitted by the Delaware General Corporation Law our directors will not be
liable to us or our stockholders for monetary damages for breach of fiduciary
duty as a director. Under the Delaware General Corporation Law, liability of a
director may not be limited:
. for any breach of the director's duty of loyalty to us or our
stockholders;
. for acts or omissions not in good faith or involving intentional
misconduct or a knowing violation of law;
. in respect of certain unlawful dividend payments or stock redemptions
or repurchases; and
. for any transaction from which the director derives an improper
personal benefit.
The effect of these provisions of our certificate of incorporation is to
eliminate our rights and those of our stockholders (through stockholders'
derivative suits on our behalf) to recover monetary damages against a director
for breach of the fiduciary duty of care as a director (including breaches
resulting from negligent or grossly negligent behavior), except in the
situations described above. This provision does not limit or eliminate our
rights or any of our stockholders to seek nonmonetary relief, such as an
injunction or rescission, in the event of a breach of a director's duty of
care. Our certificate of incorporation and bylaws provide that we must
indemnify our directors, officers, employees and agents against claims,
liabilities, damages, expenses, losses, costs, penalties or amounts paid in
settlement incurred by such director or officer in or arising out of his or her
capacity as our director, officer, employee and/or agent to the extent the
person acted in good faith and in a manner reasonably believed to be in or not
opposed to our best interest. In addition, that director or officer is entitled
to an advance of expenses to the maximum extent authorized or permitted by law.
Transfer Agent and Registrar
The transfer agent and registrar for our common shares is ChaseMellon
Shareholder Services. Its address is 235 Montgomery Street, 23rd Floor, San
Francisco, CA 94104, and its telephone number at that location is (800) 356-
2017.
49
<PAGE>
UNDERWRITING
The underwriters named below, through their representatives, Stephens
Inc., CIBC World Markets Corp. and Needham & Company, Inc., have severally
agreed to purchase from us and the selling stockholders the following
respective number of shares of our common stock:
<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- ---------
<S> <C>
Stephens Inc......................................................
CIBC World Markets Corp. .........................................
Needham & Company, Inc. ..........................................
Total........................................................... 4,000,000
=========
</TABLE>
The underwriters propose to offer the shares of our common stock directly
to the public at the public offering price set forth on the cover page of this
prospectus, and to certain dealers at that price less a concession not in
excess of $. per share. The underwriters may allow and such dealers may
reallow a concession not in excess of $. per share to certain other dealers.
After the public offering of the shares, the underwriters may change the
offering price and other selling terms. The representatives of the underwriters
may change the offering price and other selling terms. The representatives of
the underwriters have advised us that the underwriters do not intend to confirm
any shares to any accounts over which they exercise discretionary authority.
The underwriting agreement makes the obligations of the underwriters
subject to conditions that we and the selling stockholders must satisfy, such
as the receipt of certificates, opinions and letters from us, the selling
stockholders, our counsel and our independent auditors. The underwriters are
committed to purchase all shares of common stock offered in this prospectus
(other than those covered by the over-allotment options described below) if any
of those shares are purchased.
The offering of the shares is made for delivery when, as and if accepted
by the underwriters and subject to prior sale and to withdrawal, cancellation
or modification of the offering without notice. The underwriters reserve the
right to reject an order for the purchase of shares in whole or in part.
Over-Allotment Option. ABB has granted the underwriters an option,
exercisable within 30 days after the date of this prospectus, to purchase up to
600,000 additional shares of our common stock. The underwriters may exercise
their option only to cover over-allotments made in connection with the sale of
common stock offered in this prospectus. To the extent that the underwriters
exercise this option, each underwriter is severally committed to purchase a
number of shares that reflects approximately the same percentage of total
shares that such underwriter purchased in the above table. ABB will be
obligated to sell shares to the underwriters to the extent the option is
exercised.
Underwriting Discounts and Commissions. The following table shows the per
share and total underwriting discounts and commissions that we and the selling
stockholders will pay to the underwriters. These amounts are shown assuming
both no exercise and full exercise of the underwriters' option to purchase
600,000 additional shares.
<TABLE>
<CAPTION>
Paid by Selling
Paid By Company Stockholders
------------------------- -------------------------
No Exercise Full Exercise No Exercise Full Exercise
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Per share................... $ $ $ $
Total....................... $ $ $ $
==== ==== ==== ====
</TABLE>
50
<PAGE>
Indemnity. We and the selling stockholders have agreed to indemnify the
underwriters against certain liabilities, including liabilities under the
Securities Act, and to contribute to payments the underwriters may be required
to make in respect thereof.
Lock-Up Agreements. IXYS, our executive officers and directors and ABB
have agreed that they will not, without the consent of Stephens Inc., directly
or indirectly, offer to sell, contract to sell, sell or otherwise dispose of
any shares of our common stock or any securities convertible into or
exercisable or exchangeable for our common stock during the 90 day period
following the effective date of the registration statement relating to this
prospectus. Stephens Inc. has the discretion, at any time and without notice,
to release the sale prohibitions in part or in whole.
Stabilization. The underwriters may over-allot or effect transactions
that stabilize, maintain or otherwise affect the market price of our common
stock at levels above those which might otherwise prevail in the open market.
This may be done by entering stabilizing bids, effecting syndicate covering
transactions to cover short sales or imposing penalty bids. A stabilizing bid
means placing a bid or making a purchase for the purpose of pegging, fixing or
maintaining the price of the common stock.
Short sales involve the sale by the underwriters of a greater number of
shares than they are required to purchase in the offering and may be either
"covered" or "naked" short sales. A "covered" short sale is a sale made in an
amount not greater than the underwriters' over-allotment option to purchase
additional shares in the offering, and may be closed out by either exercising
the over-allotment option or purchasing shares in the open market. A "naked"
short sale is a sale in excess of the over-allotment option and may be closed
out by purchasing shares in the open market. A naked short position is more
likely to be created if the underwriters are concerned that there maybe
downward pressure on the price of the shares in the open market after pricing.
A penalty bid means an arrangement that permits the underwriters to
reclaim a selling concession from a syndicate member in connection with the
offering when shares of common stock sold by the syndicate member are purchased
in syndicated covering transactions.
These stabilizing transactions may be effected on the Nasdaq National
Market, the over-the-counter market or otherwise, and may be discontinued at
any time. These stabilizing transactions, including the purchase of shares to
cover short positions, may have the effect of raising or maintaining the market
price of our common stock or preventing or retarding a decline in the market
price of our stock. As a result, the price of our stock may be higher than the
price that might otherwise exist in the open market.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon by Cooley Godward LLP, Palo Alto, California. Kutak Rock LLP, Little Rock,
Arkansas, is acting as counsel for the underwriters.
EXPERTS
The financial statements of IXYS Corporation at March 31, 1999 and 2000,
and for each of the three years in the period ended March 31, 2000, appearing
in this prospectus have so been included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given upon the authority
of said firm as experts in accounting and auditing.
51
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION ABOUT IXYS AND THIS OFFERING
You should rely only on the information provided or incorporated by
reference in this prospectus. We have authorized no one to provide you with
different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information in this prospectus or any prospectus supplement is accurate as of
any date other than the date on the front of the document.
We have filed with the SEC a registration statement on Form S-3 to
register the common stock offered by this prospectus. However, this prospectus
does not contain all of the information contained in the registration statement
and the exhibits and schedules to the registration statement. We strongly
encourage you to carefully read the registration statement and the exhibits and
schedules to the registration statement.
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, DC, New York, New York and Chicago,
Illinois. You can request copies of these documents by contacting the SEC and
paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are also
available to the public from the SEC's website at www.sec.gov.
The SEC allows us to "incorporate by reference" the information contained
in documents that we file with them, which means that we can disclose important
information to you by referring to those documents. The information
incorporated by reference is considered to be part of this prospectus.
Information in this prospectus supersedes information incorporated by reference
which we filed with the SEC prior to the date of this prospectus, while
information that we file later with the SEC will automatically update and
supersede this information. We incorporate by reference the documents listed
below and any future filings we will make with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934.
The following documents filed with the SEC are incorporated by reference
in this prospectus:
1. Our Annual Report on Form 10-K for the fiscal year ended March 31,
2000, including the Amendment to our Annual Report on Form 10-K for the fiscal
year ended March 31, 2000 filed on July 31, 2000;
2. Our Current Report on Form 10-Q for the Quarter Ended June 30, 2000;
and
3. The description of our common stock contained in our Registration
Statement on Form 8-A, including any amendment or report filed for the purpose
of updating such description.
We will furnish without charge to you, on written or oral request, a copy
of any or all of the documents incorporated by reference, including exhibits to
these documents. You should direct any requests for documents to IXYS
Corporation, 3540 Bassett Street, Santa Clara, California, 95054, telephone:
(408) 982-0700.
52
<PAGE>
IXYS CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants......................................... F-2
Audited Consolidated Financial Statements
Consolidated Balance Sheets............................................. F-3
Consolidated Statement of Operations.................................... F-4
Consolidated Statement of Comprehensive Income.......................... F-5
Consolidated Statement of Cash Flows.................................... F-6
Consolidated Statement of Stockholders' Equity/(Deficit)................ F-7
Notes to Consolidated Financial Statements.............................. F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors IXYS Corporation:
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, stockholders' equity and cash
flows present fairly, in all material respects, the financial position of IXYS
Corporation and its subsidiaries at March 31, 2000 and 1999, and the results of
their operations and their cash flows for each of the three years in the period
ended March 31, 2000, in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of IXYS' management; our responsibility is to express an opinion
on these financial statements based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in
the United States of America, which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
San Jose, California
May 10, 2000, except for note 16,
as to which the date is June 22, 2000,
except as to the two-for-one common stock split,
as to which the date is August 10, 2000, and
note 17, as to which date
is August 31, 2000
F-2
<PAGE>
IXYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
March 31,
------------------ June 30,
1999 2000 2000
-------- -------- -----------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................... $ 7,087 $ 9,455 $ 12,601
Restricted cash.............................. 1,393 304 291
Accounts receivable, net of allowance for
doubtful accounts of $600 in 1999, $1,427
in 2000 and $2,275 at June 30, 2000........ 11,731 16,863 16,512
Inventories, net............................. 20,167 21,477 24,022
Deferred income taxes........................ 1,617 1,627 1,627
-------- -------- --------
Total current assets...................... 41,995 49,726 55,053
Plant and equipment, net..................... 11,323 10,175 10,762
Goodwill and other intangible assets......... 693 231 2,417
Other assets................................. 2,050 2,131 2,385
Deferred income taxes........................ 1,039 782 782
-------- -------- --------
Total assets.............................. $ 57,100 $ 63,045 $ 71,399
======== ======== ========
LIABILITIES
Current liabilities:
Current portion of capitalized lease
obligations................................ $ 1,102 $ 1,365 $ 1,735
Current portion of notes payable to bank..... 4,369 2,789 2,794
Accounts payable............................. 5,161 5,467 5,167
Accrued expenses and other liabilities....... 6,954 10,345 11,943
-------- -------- --------
Total current liabilities................. 17,586 19,966 21,639
Notes payable to bank, net of current
portion.................................... 6,211 5,544 5,484
Capitalized lease obligations, net of
current portion............................ 2,195 1,783 2,114
Pension liabilities.......................... 5,388 4,855 4,903
-------- -------- --------
Total liabilities......................... 31,380 32,148 34,140
-------- -------- --------
Commitments and contingencies (Note 7)
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value:
Authorized: 5,000,000 shares; none issued.... -- -- --
Common stock, $.01 par value:
Authorized: 40,000,000 shares; issued and
outstanding: 23,973,322 shares in 1999,
24,008,166 shares in 2000 and 24,358,092
at June 30, 2000........................... 240 240 244
Additional paid-in capital................... 43,177 43,204 46,162
Notes receivable from stockholders........... (936) (861) (861)
Accumulated deficit.......................... (16,597) (9,698) (6,005)
Comprehensive income......................... (164) (1,988) (2,281)
-------- -------- --------
Stockholder's equity......................... 25,720 30,897 37,259
-------- -------- --------
Total liabilities and stockholders'
equity.................................. $ 57,100 $ 63,045 $ 71,399
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
IXYS CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months
Ended
Year Ended March 31, June 30,
---------------------------- ------------------
1998 1999 2000 1999 2000
-------- -------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net revenues................ $ 56,856 $ 66,523 $ 76,627 $ 17,072 $ 23,274
Cost of goods sold.......... 38,048 44,939 49,290 11,430 15,053
-------- -------- -------- -------- --------
Gross profit.............. 18,808 21,584 27,337 5,642 8,221
-------- -------- -------- -------- --------
Operating expenses:
Research, development and
engineering............. 3,329 4,196 4,668 1,255 1,164
Selling, general and
administrative.......... 8,384 20,256 11,450 2,813 3,032
-------- -------- -------- -------- --------
Total operating
expenses............. 11,713 24,452 16,118 4,068 4,196
-------- -------- -------- -------- --------
Operating income (loss)..... 7,095 (2,868) 11,219 1,574 4,025
Interest expense............ (431) (993) (417) (62) (65)
Gain (loss) on foreign
currency transactions..... 183 37 184 33 117
Other income (expense)...... 3,466 669 (199) -- 1,881
-------- -------- -------- -------- --------
Income (loss) before income
tax provision............. 10,313 (3,155) 10,787 1,545 5,958
Provision for income tax.... (4,229) (2,083) (3,888) (383) (2,264)
-------- -------- -------- -------- --------
Net income (loss)........... $ 6,084 $ (5,238) $ 6,899 $ 1,162 $ 3,694
======== ======== ======== ======== ========
Net income (loss) per
share--basic.............. $ 0.73 $ (0.28) $ 0.29 $ 0.05 $ 0.15
======== ======== ======== ======== ========
Weighted average shares used
in per share calculation--
basic..................... 8,354 18,746 23,970 23,932 23,984
======== ======== ======== ======== ========
Net income (loss) per
share--diluted............ $ 0.72 $ (0.28) $ 0.28 $ 0.05 $ 0.15
======== ======== ======== ======== ========
Weighted average shares used
in per share calculation--
diluted................... 8,392 18,746 24,826 23,950 24,390
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
IXYS CORPORATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in thousands)
<TABLE>
<CAPTION>
Three Months
Ended
Year Ended March 31, June 30,
----------------------- --------------
1998 1999 2000 1999 2000
------ ------- ------ ------ ------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net income........................... $6,084 $(5,238) $6,899 $1,162 $3,694
Other comprehensive income, net of
tax:
Foreign currency translation
adjustments...................... (540) 405 (1,167) (1,093) (182)
------ ------- ------ ------ ------
Comprehensive income............... $5,544 $(4,833) $5,732 $ 69 $3,512
------ ------- ------ ------ ------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
IXYS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Three Months
Year Ended March 31, Ended June 30,
------------------------- ----------------
1998 1999 2000 1999 2000
------- ------- ------- ------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss)................ $ 6,084 $(5,238) $ 6,899 $ 1,162 $ 3,694
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depreciation and amortization... 1,525 2,614 3,352 766 819
Other........................... 1,018 -- 864 1,323 847
Provision for excess and
obsolete inventories.......... 708 1,367 (668) 310 103
Writeoff of goodwill and in
process research and
development................... -- 10,401 -- -- --
Loss (gain) on foreign currency
translation................... (317) 297 (929) 12 (439)
Deferred income taxes........... 4,369 600 247 473 2,405
Changes in operating assets and
liabilities:
Accounts receivable............ (3,447) (2,290) (6,779) (2,257) (276)
Inventories.................... (6,907) (5,657) (1,699) 909 (2,289)
Prepaid expenses and other
current assets............... (5) (514) (567) (103) (1,028)
Other assets................... (754) (1,213) (73) 78 768
Accounts payable............... 2,446 (178) 566 (557) (447)
Accrued expenses and other
liabilities.................. (1,741) 151 3,915 (1,043) (695)
Pension liabilities............ 353 275 -- -- 29
------- ------- ------- ------- -------
Net cash provided by
operating activities....... 3,332 615 5,128 1,073 3,491
------- ------- ------- ------- -------
Cash flows from investing
activities:
Acquisition of Directed Energy,
net of cash acquired.......... -- -- -- -- 135
Purchases of plant and
equipment..................... (9,311) (3,722) (1,775) (640) (1,546)
Proceeds from sale of plant and
equipment..................... -- -- 42 -- --
------- ------- ------- ------- -------
Net cash used in investing
activities................. (9,311) (3,722) (1,733) (640) (1,411)
------- ------- ------- ------- -------
Cash flows from financing
activities:
Proceeds from capital lease
obligations................... 350 2,143 402 672 671
Restricted cash (increase)...... 641 (443) 1,089 1,218 13
Principal payments on capital
lease obligations............. (209) (303) (214) (789) --
Repayment of notes payable to
bank.......................... (2,500) -- (1,418) -- (91)
Proceeds from bank loan......... 11,148 -- -- -- --
Other........................... 5 (977) 103 35 162
------- ------- ------- ------- -------
Net cash provided by (used
in) financing activities... 9,435 420 (38) 1,136 755
------- ------- ------- ------- -------
Effect of foreign exchange rate
fluctuations on cash and cash
equivalents..................... (452) 130 (989) (1,280) 311
------- ------- ------- ------- -------
Net increase (decrease) in cash
and cash equivalents............ 3,004 (2,557) 2,368 289 3,146
Cash and cash equivalents at
beginning of year............... 6,640 9,644 7,087 7,087 9,455
------- ------- ------- ------- -------
Cash and cash equivalents at end
of year......................... $ 9,644 $ 7,087 9,455 $ 7,376 $12,601
======= ======= ======= ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the period for
interest...................... $ 501 $ 979 $ 467 $ 62 $ 69
Cash paid during the period for
income taxes.................. 326 2,739 2,701 -- 800
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING
ACTIVITIES:
Purchase of fixed assets under
capital lease................. -- 129 1,296 -- --
Conversion of mandatorily
convertible preferred stock... -- 37,556 -- -- --
Common stock issued for
Paradigm assets............... -- 4,740 -- -- --
Common stock issued for
Directed Energy, net
assets........................ -- -- -- -- 2,800
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
IXYS CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY / (DEFICIT)
FOR THE YEARS ENDED MARCH 31, 1997, 1998 and 1999
(in thousands)
<TABLE>
<CAPTION>
Notes
Additional Receivable Cumulative Total
Paid-In from Accumulated Translation Stockholders'
Shares Amount Capital Stockholders Deficit Adjustment Equity / (Deficit)
------ ------ ---------- ------------ ----------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, March 31,
1997.................. 8,392 $ 84 $ 985 $ (936) $ (17,443) $ 181 $ (17,129)
Exercise of stock
options............... 4 -- 2 -- -- -- 2
Repurchase of common
stock................. (42) -- (4) -- -- -- (4)
Foreign currency
translation
adjustments........... -- -- -- -- -- (915) (915)
Net income.............. -- -- -- -- 6,084 -- 6,084
------ ---- -------- ------ --------- ------- ---------
Balances, March 31,
1998.................. 8,354 84 983 (936) (11,359) (734) (11,962)
Exercise of stock
options............... 12 -- 17 -- -- -- 17
Exercise of warrants.... 1,786 18 -- -- -- -- 18
Conversion of preferred
stock................. 12,938 129 37,427 -- -- -- 37,556
Issuance of common
stock................. 884 9 4,750 -- -- -- 4,759
Foreign currency
translation
adjustment............ -- -- -- -- -- 570 570
Net loss................ -- -- -- -- (5,238) -- (5,238)
------ ---- -------- ------ --------- ------- ---------
Balances, March 31,
1999.................. 23,974 240 43,177 (936) (16,597) (164) 25,720
Exercise of stock
options............... 50 -- 27 -- -- -- 27
Exercise of warrants.... 24 -- -- -- -- -- --
Payment or notes
receivable from
stockholders.......... -- -- -- 75 -- -- 75
Foreign currency
translation
adjustment............ -- -- -- -- -- (1,824) (1,824)
Net income.............. -- -- -- -- 6,899 -- 6,899
------ ---- -------- ------ --------- ------- ---------
Balances, March 31,
2000.................. 24,048 240 43,204 (861) (9,698) (1,988) 30,897
Exercise of stock
options (unaudited)... 51 1 71 -- -- -- 72
Issuance of common stock
for the acquisition of
Directed Energy,
(unaudited)........... 250 3 2,797 -- -- -- 2,800
Issuance of common stock
under the Employee
Stock Purchase Plan
(unaudited)........... 45 -- 90 -- -- -- 90
Exercise of warrants
(unaudited)........... 4 -- -- -- -- -- --
Payment or notes
receivable from
stockholders
(unaudited)........... -- -- -- -- (1) -- (1)
Foreign currency
translation adjustment
(unaudited)........... -- -- -- -- -- (293) (293)
Net income (unaudited).. -- -- -- -- 3,694 -- 3,694
------ ---- -------- ------ --------- ------- ---------
Balances, June 30, 2000
(unaudited)........... 24,398 $244 $ 46,162 $ (861) $ (6,005) $(2,281) $ 37,259
====== ==== ======== ====== ========= ======= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
IXYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. FORMATION AND BUSINESS OF IXYS:
Effective September 23, 1998, IXYS Corporation ("IXYS") merged with
Paradigm Technology, Inc. ("Paradigm"), a company that designed and marketed
fast SRAM products, in a transaction accounted for as a reverse merger. In the
merger, Paradigm issued 23,027,642 shares of its common stock in exchange for
all outstanding shares of IXYS capital stock. At the conclusion of the merger,
IXYS stockholders held approximately 96% of the combined company. After the
Paradigm merger, the historic accounting records of IXYS became those of the
combined company and, accordingly, Paradigm changed its name to IXYS.
IXYS is a leading company in the design, development, manufacture and
marketing of high power, high performance power semiconductors. IXYS power
semiconductors improve system efficiency and reliability by converting
electricity at relatively high voltage and current levels into the finely
regulated power required by electronic products. Power semiconductors improve
system efficiency and reliability by processing and converting electrical
energy into more usable, higher quality power. IXYS focuses on the market for
power semiconductors that are capable of processing greater than 500 watts of
power.
IXYS' power semiconductor products have historically been divided into
two primary categories, power metal oxide semiconductor, or MOS, transistors
and bipolar products. IXYS power semiconductors are sold as individual units
and are also packaged in high power modules that frequently consist of multiple
semiconductor dies. In addition to power semiconductors, IXYS manufactures
proprietary direct copper bond, or DCB, substrate for use in power
semiconductors as well as for sale to other power semiconductor manufacturers.
IXYS also sells integrated circuits, or ICs, that have applications associated
with power management, and high speed, high density static random access
memory, or SRAM, products.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation:
The consolidated financial statements include the accounts of IXYS and
its wholly owned subsidiaries after elimination of all significant intercompany
balances and transactions.
Unaudited Information
The consolidated financial statements and related disclosures for the
three-month periods ended June 30, 1999 and 2000 included herein are unaudited;
however, they contain all normal recurring adjustments which, in the opinion of
management, are necessary to present fairly the consolidated financial position
of IXYS at June 30, 2000, and the consolidated results of operations and cash
flows for the three-month periods ended June 30, 1999 and 2000. It should be
understood that accounting measurements at interim dates inherently involve
greater reliance on estimates than at year-end. The results of operations for
the three-month period ended June 30, 2000 are not necessarily indicative of
the results to be expected for the full year.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could materially differ from IXYS' estimates.
F-8
<PAGE>
IXYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Foreign Currency Translation:
The local currency is considered to be the functional currency of IXYS'
wholly owned subsidiary IXYS Semiconductor GmbH ("IXYS GmbH"). Accordingly,
assets and liabilities are translated at the exchange rate in effect at year
end, and revenues and expenses are translated at average rates during the year.
Adjustments resulting from the translation of the accounts of IXYS GmbH into
U.S. dollars are included in cumulative translation adjustment, a separate
component of stockholders' equity. Foreign currency transaction gains and
losses are included as a component of other income and expense.
Cash Equivalents:
IXYS considers all highly liquid investments with original or remaining
maturities of three months or less at the time of purchase to be cash
equivalents. Restricted cash is served as collateral on IXYS' letter of credit
to overseas vendors.
Reclassifications:
Certain reclassifications have been made to the prior year's consolidated
financial statements to conform to the current year's presentation. Such
reclassifications had no effect on previously reported results of operations or
retained earnings.
Inventories:
Inventories, consisting primarily of power MOS transistors, bipolar
devices and other products, are stated at the lower of cost or market value.
Cost is determined on a standard cost basis which approximates actual costs
determined on a first-in, first-out (FIFO) method.
Plant and Equipment:
Plant and equipment, including equipment under capital leases, is stated
at cost less accumulated depreciation and amortization. Depreciation or
amortization is computed using the straight-line method over estimated useful
lives of three to five years for equipment and fifty years for buildings. Upon
disposal, the assets and related accumulated depreciation are removed from
IXYS' accounts, and the resulting gains or losses are reflected in the
statements of income. IXYS' policy is to regularly review the carrying value of
specialized assets to evaluate the remaining life and recoverability of such
equipment in light of current market conditions.
Product Warranty:
Expected future product warranty expense is recorded when the product is
sold.
Revenue Recognition:
Revenue from power semiconductor product sales is recognized upon
shipment and is reflected net of an allowance for estimated returns and
discounts. In general, IXYS' sales to distributors are made under agreements
allowing certain rights of return and price protection on products unsold by
the distributors.
In December 1999, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements." SAB No. 101 provides guidance on the recognition, presentation and
disclosure of revenue in the financial statements. IXYS has reviewed the
bulletin and believes that its current revenue recognition policy is consistent
with the guidance of SAB No. 101.
Advertising:
IXYS expenses advertising as the costs are incurred. Advertising expense
for the years ended March 31, 1998, 1999 and 2000 was $408,000, $413,000, and
$392,000 respectively. For the three month periods ended June 30, 1999
(unaudited) and 2000 (unaudited), advertising expenses were $196,000 and
$123,000 respectively.
F-9
<PAGE>
IXYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Research and Development:
Research and development costs are charged to operations as incurred.
Income Taxes:
IXYS' provision for income taxes is comprised of its current tax
liability and the change in deferred tax assets and liabilities. Deferred tax
assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse.
Other Assets--Goodwill and Other Intangible Assets:
The purchase price for Paradigm, consisting of the value of Paradigm
common stock outstanding at the date of the Paradigm merger, costs incurred by
IXYS and the Paradigm liabilities assumed, has been allocated to Paradigm's
tangible and intangible assets based on relative fair values as follows (in
thousands):
<TABLE>
<S> <C>
Net tangible assets............................................... $ 1,564
In process research and development............................... 5,807
Other intangibles................................................. 1,463
Goodwill.......................................................... 3,824
-------
$12,658
=======
</TABLE>
The goodwill and other intangible assets recorded, as part of the
purchase price allocation, in the total amount of approximately $5.3 million,
was to be amortized over twenty-four months. The value of the in process
research development acquired in the transaction, in the amount of $5.8
million, was recorded as an expense immediately following the transaction as
the products under development had not reached technological feasibility and
there was no other alternative future use for the costs incurred. The amounts
allocated to intangible assets, including in process research and development,
were based on an analysis of the relative fair values of the net assets
acquired. Acquired in process research and development represented development
projects in areas that had not reached technological feasibility and had no
alternative future use and were valued using the "stage of completion"
methodology prescribed by the Securities and Exchange Commission, and were
charged to operations at the date of the acquisition.
IXYS assesses the recoverability of intangible assets by determining
whether the amortization of the asset's net book value over its remaining life
can be recovered through projected undiscounted future cash flows. Accordingly,
IXYS wrote off approximately $1.5 million of intangible assets and $3.1 million
of goodwill in the fourth quarter of fiscal year 1999 to reflect an impairment
in the value of intangible assets and goodwill associated with the acquisition.
The anticipated cash flows related to the related products indicated that the
recoverability of those assets was not reasonably assured.
Total charges related to the Paradigm transaction as expensed in 1999 are
as follows and are included within the operating statement caption, "Selling,
general and administrative" (in thousands):
<TABLE>
<S> <C>
In process research and development.............................. $ 5,807
Other intangibles, including amortization of $366................ 1,463
Goodwill, including amortization of $956......................... 3,131
-------
Total charge................................................... $10,401
=======
</TABLE>
F-10
<PAGE>
IXYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The remaining goodwill is being amortized over its remaining life of 18
months and the balance at March 31, 1999 and 2000, net of accumulated
amortization was, $693,000 and $231,000, respectively.
The following table presents unaudited pro forma information as if IXYS and
Paradigm had been combined as of the beginning of 1998 and 1997. The pro forma
data are presented for illustrative purposes only and are not necessarily
indicative of the combined financial position or results of operations of
future periods or the results that actually would have resulted had the
companies been a combined company during all of 1999 and 1998. The pro forma
results include the effects of the purchase price allocation on amortization of
acquired intangible assets and exclude the acquisition related charge for the
purchased in process technology.
<TABLE>
<CAPTION>
Year Ended March 31,
----------------------
1998 1999
---------- ----------
(in thousands, except
per share amounts)
<S> <C> <C>
Net revenue............................................ $ 67,647 $ 68,514
========== ==========
Net loss............................................... $ 3,754 $ 9,343
========== ==========
Basic loss per share:
Loss per share..................................... $ (0.45) $ (0.50)
========== ==========
Weighted average number of common shares
outstanding........................................ 8,354 18,746
========== ==========
Diluted loss per share:
Loss per share..................................... $ (0.45) $ (0.50)
========== ==========
Weighted average number of common shares
outstanding........................................ 8,354 18,746
========== ==========
</TABLE>
Segment Reporting
On June 30, 1997, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information." SFAS No. 131 requires publicly held companies to report financial
and descriptive information about their operating segments in financial
statements issued to stockholders for interim and annual periods. The statement
also requires additional disclosures with respect to products and services,
geographic areas of operation, and major customers. SFAS No. 131 is effective
for fiscal years beginning after December 15, 1997 and requires restatement of
earlier periods presented. IXYS adopted SFAS No. 131 in the fiscal year ended
March 31,1999. The adoption of SFAS No. 131 did not affect IXYS' results of
operations or financial position, but did affect the disclosure of segment
information as presented in Note 13 of the Notes to the Consolidated Financial
Statements. IXYS operates in one operating segment.
Net Income Per Share:
Basic EPS is computed by dividing net income by the weighted-average
number of common shares outstanding for the period. Diluted EPS reflects the
potential dilution from the exercise or conversion of other securities into
common stock.
Basic net loss per share is computed using the weighted average number of
shares of common stock outstanding. Diluted net loss per share does not differ
from basic net loss per share since potential common shares from conversion of
stock options and warrants are anti-dilutive for all periods presented.
Recent Accounting Pronouncements:
In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities."
The statement will require IXYS to recognize
F-11
<PAGE>
IXYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
all derivatives on the balance sheet at fair value. SFAS No. 133 requires that
derivative instruments used to hedge be identified specifically as to assets,
liabilities, firm commitments or anticipated transactions and measured as to
effectiveness and ineffectiveness when hedging changes in fair value or cash
flows. Derivative instruments that do not qualify as either a fair value or
cash flow hedge will be valued at fair value with the resultant gain or loss
recognized in current earnings. Changes in the effective protion of fair value
hedges will be recognized in current earnings along with the change in the fair
value of the hedged item. Changes in the effective portion of the fair value of
cash flow hedges will be recognized in other comprehensive income until
realization of the cash flows of the hedged item through current earnings. Any
ineffective portion of hedges will be recognized in current earnings.
In June 1999, the FASB issued SFAS No. 137, "Deferral of the Effective
Date of FASB Statement No. 133," to defer for one year the effective date of
implementation of SFAS No. 133 SFAS No. 133, as amended by SFAS No. 137, is
effective for fiscal years beginning after June 15, 2000, with earlier
application encouraged. IXYS is in the process of evaluating the requirements
of SFAS Nos. 133, but does not expect this pronouncement to materially impact
its financial position or results of operations.
In March 2000, The Financial Accounting Standards Board ("FASB") issued
FASB interpretation No. 44, "Accounting for Certain Transactions Involving
Stock Compensation an interpretation of APB Opinion No. 25." This
interpretation has provisions that are effective on staggered dates, some of
which began after December 15, 1998 and others that become effective after June
30, 2000. The adoption of this interpretation is not expected to have a
material impact on the financial statements.
Comprehensive Income:
IXYS adopted Statement of Financial Accounting Standards No. 130, or SFAS
130, Accounting for Comprehensive Income, during fiscal year 1998. This
statement establishes standards for reporting and display of comprehensive
income and its components (including revenues, expenses, gains and losses) in a
full set of general-purpose financial statements. IXYS' change in the
cumulative translation adjustment represents the only component of
comprehensive income which is excluded from net income for 2000 and prior
years. IXYS' comprehensive income has been presented in the consolidated
financial statements.
Business Risks:
Dependence on Third Parties for Wafer Fabrication and Assembly: IXYS
manufactures approximately 50% of its wafers, an integral component of its
products, in its wholly owned facility in Germany. IXYS purchases the remaining
50% of its wafers from other suppliers. There can be no assurance that material
disruptions in supply will not occur in the future. In such event, IXYS may
have to identify and secure additional foundry capacity and may be unable to
identify or secure additional foundry capacity from another manufacturer,
particularly at the levels that IXYS currently anticipates such foundries to
provide. Even if such capacity is available from another manufacturer, the
qualification process could take six months or longer. If IXYS were unable to
qualify alternative manufacturing sources for existing or new products in a
timely manner or if such sources were unable to produce semiconductor devices
with acceptable manufacturing yields and at acceptable prices, IXYS' business,
financial condition and results of operations would be materially and adversely
affected.
Dependence on Suppliers: IXYS purchases silicon wafers from four vendors
with whom IXYS does not have long term supply agreements. Any of these
suppliers could eliminate or terminate IXYS' supply of wafers at any time.
IXYS' reliance on a limited number of suppliers involves several risks,
including potential inability to obtain an adequate supply of silicon wafers
and reduced control over the price, timely delivery, reliability and quality of
the silicon wafers. There can be no assurance that problems will not occur in
the future with suppliers.
F-12
<PAGE>
IXYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Included in IXYS' consolidated balance sheet at March 31, 2000 are the
net assets, at book value, of IXYS' manufacturing operation in Germany, which
total approximately $6.13 million.
Concentration of Credit Risk:
IXYS invests its excess cash primarily in short-term time deposit
accounts with a major German bank and money market accounts with a U.S. bank.
These securities typically mature within ninety days and bear minimal credit
risk. IXYS has not experienced any losses on such investments.
IXYS sells its products primarily through distributors, sales
representatives and directly to original equipment manufacturers. IXYS performs
ongoing credit evaluations of its customers and generally does not require
collateral. An allowance for potential credit losses is maintained by IXYS, and
such losses have not been material.
At March 31, 2000, two distributors each accounted for 11% of accounts
receivable. As of March 31, 1998 and 1999, there were no distributors who
accounted for more than 10% of accounts receivable. At June 30, 2000
(unaudited), two distributors accounted for 17% and 12%, respectively, of
accounts receivable.
Fair Value of Financial Instruments:
Carrying amounts of certain of IXYS' financial instruments including cash
and cash equivalents, accounts receivable and accounts payable approximate fair
value due to their short maturities. Based on borrowing rates currently
available to IXYS for loans with similar terms, the carrying value of notes
payable approximates fair value.
Financial instruments that potentially subject IXYS to concentrations of
credit risks comprise principally cash, investments and trade accounts
receivable. IXYS invests its excess cash in accordance with its investment
policy that has been approved by the board of directors and is reviewed
periodically to minimize credit risk.
Stock-Based Compensation Plans
IXYS accounts for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees." Under APB No. 25, compensation cost
is measured as the excess, if any, of the quoted market price of IXYS' stock at
the date of grant over the exercise price of the option granted. Compensation
cost for stock options, if any, is recognized ratably over the vesting period.
IXYS' policy is to grant options with an exercise price equal to the quoted
market price of IXYS' stock on the grant date. Accordingly, no compensation has
been recognized for its stock option plans. IXYS provides additional pro forma
disclosures as required under SFAS No. 123, "Accounting for Stock-Based
Compensation."
3. INVENTORIES:
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
March 31,
----------------
June 30,
1999 2000 2000
------- ------- -----------
(Unaudited)
<S> <C> <C> <C>
Raw materials............................... $ 3,368 $ 3,299 $ 4,277
Work in process............................. 13,654 13,943 13,910
Finished goods.............................. 9,172 9,159 10,880
------- ------- -------
26,194 26,401 29,067
Less inventory reserve...................... (6,027) (4,924) (5,045)
------- ------- -------
$20,167 $21,477 $24,022
======= ======= =======
</TABLE>
F-13
<PAGE>
IXYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. PLANT AND EQUIPMENT:
Plant and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
March 31,
---------------- June 30,
1999 2000 2000
------- ------- -----------
(Unaudited)
<S> <C> <C> <C>
Buildings.................................. $ 5,038 $ 4,950 $ 4,928
Equipment--owned........................... 15,017 14,774 15,065
Equipment--capital leases.................. 7,400 7,524 8,736
Leasehold improvements..................... 38 38 38
------- ------- -------
27,493 27,286 28,767
Accumulated depreciation and amortization--
owned plant and equipment................ (11,662) (12,015) (12,449)
Accumulated amortization--capital leases... (4,508) (5,096) (5,556)
------- ------- -------
$11,323 $10,175 $10,762
======= ======= =======
</TABLE>
5. ACCRUED EXPENSES AND OTHER LIABILITIES:
Accrued expenses and other liabilities consist of the following (in
thousands):
<TABLE>
<CAPTION>
March 31,
-------------- June 30,
1999 2000 2000
------ ------- -----------
(Unaudited)
<S> <C> <C> <C>
Accrued patent and licenses..................... $ 16 $ -- $ --
Personnel accruals.............................. 1,610 1,651 1,232
Warranty and loss accrual....................... 957 410 1,079
Income taxes.................................... 737 2,141 3,489
Other........................................... 3,634 6,143 6,143
------ ------- -------
$6,954 $10,345 $11,943
====== ======= =======
</TABLE>
6. BORROWING AND CAPITAL LEASE ARRANGEMENTS:
Borrowings and capital lease arrangements consist of the following (in
thousands):
<TABLE>
<CAPTION>
March 31,
---------------- June 30,
1999 2000 2000
------- ------- -----------
(Unaudited)
<S> <C> <C> <C>
Notes payable to banks...................... $10,580 $ 8,333 $ 8,278
Capitalized lease obligations............... 3,297 3,148 3,849
------- ------- -------
13,877 11,481 12,127
Less current portion...................... (5,471) (4,154) (4,529)
------- ------- -------
$ 8,406 $ 7,327 $ 7,598
======= ======= =======
</TABLE>
IXYS entered into a loan and security agreement with a U.S. bank to
borrow up to an aggregate amount not to exceed $5 million. The loan bears
interest at the bank's prime rate (9% at March 31, 2000 and 9.5% at June 30,
2000), payable monthly, and matures in December 2000. The loan is
collateralized by certain
F-14
<PAGE>
IXYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
assets and contains certain general and financial covenants. At March 31, and
June 30, 2000 (unaudited), IXYS had drawn $2.1 million against the loan.
IXYS entered into a loan agreement with a German bank to finance the
acquisition of the Lampertheim facility (the "Facility") from ABB, a
stockholder. The loan was for the total amount of DM 13.3 million ($7.2
million), payable in monthly installments of DM 125,226 ($65,908 at March 31,
2000) and DM 125,226 ($60,751) at June 30, 2000 (unaudited) and is due no
later than October 31, 2009. The loan, which is collateralized by the
Facility, bears interest at the annual rate of 5.40% through August 2001, at
which time the interest rate will be adjusted to market rates in accordance
with the terms of the loan agreement. The acquisition of the Facility closed
in January 1998, at which time the proceeds were drawn against the loan. At
March 31, 2000, the amount outstanding under the loan agreement was DM 11.4
million ($5.5 million) and DM 11.1 million ($5.5 million) at June 30, 2000
(unaudited).
IXYS leases certain equipment under capital lease arrangements expiring
through fiscal 2001 at interest rates of 4.9% to 8.9%.
Future minimum payments under capital lease obligations and notes
payable are (in thousands):
<TABLE>
<CAPTION>
Capital Notes
Leases Payable
------- -------
<S> <C> <C>
Fiscal year ending March 31,
2001.................................................... $1,365 $2,789
2002.................................................... 1,162 459
2003.................................................... 403 469
2004.................................................... 190 495
2005.................................................... 19 522
Thereafter.............................................. 9 3,599
------ ------
$3,148 $8,333
====== ======
</TABLE>
7. COMMITMENTS AND CONTINGENCIES:
Commitments:
IXYS rents certain of its facilities under operating leases which expire
in 2004. IXYS is responsible for insurance and property taxes. Future minimum
lease payments are as follows (in thousands):
<TABLE>
<S> <C>
Fiscal year ending March 31,
2001............................................................ $ 313
2002............................................................ 325
2003............................................................ 338
2004 and thereafter............................................. 291
------
$1,267
======
</TABLE>
Rent expense for fiscal years ended March 31, 1998, 1999 and 2000
amounted to $571,000, $358,000, and $388,000 respectively, and for the periods
ended June 30, 1999 (unaudited) and 2000 (unaudited), rent expense was
$774,000 and $82,900,respectively.
As of March 31, 1999 and 2000 and June 30, 2000 (unaudited) IXYS had
cash deposits with a financial institution of $1.4 million and $304,000 and
$291,000 respectively, which were restricted as to use and represent
compensating balances for current or future discounted acceptances and letters
of credit.
F-15
<PAGE>
IXYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
IXYS entered into a guaranty on December 6, 1999, in favor of Commerzbank
AG to secure a loan in an amount of $2.5 million, granted by Commerzbank AG to
IXYS Semiconductor GmbH.
Litigation
On August 12, 1996, IXYS and Robert McClelland, Richard A. Veldhouse and
Chiang Lam (the "Paradigm Defendants") were named (along with others
subsequently dismissed from the case) as defendants in a purported class action
(entitled Bulwa et al. v. Paradigm Technology, Inc. et. al., Santa Clara County
Superior Court Case No. CV759991) brought on behalf of stockholders who
purchased IXYS' stock between November 20, 1995 and March 22, 1996 (the "Class
Period"). The complaint asserted violations of California Corporations Code
sections 25400 and 25500 ("Sections 25400 and 25500") along with other causes
of action that have been dismissed. Plaintiffs have served the Paradigm
Defendants with discovery requests for production of documents and
interrogatories, to which the Paradigm Defendants have responded. Plaintiffs
have also subpoenaed documents from various third parties. Plaintiffs have also
taken the depositions of four former employees of IXYS including defendant
Richard Veldhouse, former outside director Defendant Chiang Lam and the analyst
who covered IXYS for Smith Barney. Plaintiffs have noticed the depositions of
Robert McClelland, Michael Gulett, IXYS' auditors and another former employee.
The Paradigm Defendants have served the plaintiffs with an initial set of
discovery requests, to which plaintiffs have responded and have propounded
further discovery requests, to which plaintiffs have not responded. The
Paradigm Defendants also took the depositions of the named plaintiffs.
On February 9, 1998 the Court certified a class consisting only of
California purchasers of IXYS' stock during the Class Period. Following the
California Supreme Court decision in Diamond Multimedia Systems, Inc. v.
Superior Court, 19 Cal. 4th 1036 (1999), plaintiffs moved to modify the prior
class certification ruling to include also non-California purchasers. The Court
granted this motion on April 28, 1999. There can be no assurance that IXYS will
be successful in the defense of this action. If unsuccessful in the defense of
any such claim, IXYS' business, operating results and cash flows could be
materially adversely affected.
On May 19, 1998, the law firm that filed the Bulwa, et al. action
described above filed an additional securities class action lawsuit against
IXYS, Michael Gulett, Robert McClelland, Richard A. Veldhouse and Chiang Lam,
this time in the United States District Court of the Northern District of
California. The complaint alleged violations of section 10(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Commission Rule 10b-
5 and section 20(a) of the Exchange Act. Plantiff alleged the same class and
the same substantive factual allegations that are contained in the Bulwa, et
al. action as amended. Defendants responded to the complaint on July 27, 1998
by filing a motion to dismiss the complaint for failure to state claims upon
which relief can be granted and for various pleading inadequacies. In lieu of
opposing the motion, plaintiff filed a first amended compalint. Defendants
renewed their motion to dismiss and on January 20, 1999 the Court issued an
order granting the motion and dismissing plaintiff's action and entered
judgment thereon. On February 3, 1999, the Court entered an amended judgment
clarifying that the judgment is with prejudice. On March 12, 1999, plaintiff
filed a notice of appeal. Plaintiff then agreed to dismiss the appeal in
exchange for defendants' agreement not to seek to recover defendants' costs
incurred in responding to the appeal and agreement not to pursue any action
against the plaintiff for having filed the action. The appeal was dismissed.
IXYS is involved in various other litigation and potential claims. Due to
the inherent uncertainty of litigation, management is not able to reasonably
estimate losses that may be incurred in relation to this litigation. Although
no assurance can be given as to the results of these cases, based on the
present status, management does not believe that results of the aforementioned
actions will have a material adverse effect on IXYS' financial condition or
results of operations.
F-16
<PAGE>
IXYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. COMMON STOCK:
A two-for-one split of IXYS' common stock was effected on August 10, 2000
and was applicable to stockholders of record on July 20, 2000. References to
share and per share data in the accompanying Consolidated Financial Statements
give effect to the stock split.
Warrants:
IXYS has outstanding warrants as follows:
<TABLE>
<CAPTION>
Number of
Shares Under
Expiration Date the Warrants Exercise Price
--------------- ------------ -----------------
<S> <C> <C> <C>
June 2002............... Convertible into common stock 266 $225.00 per share
April 2001.............. Convertible into common stock 279,984 $ 0.43 per share
</TABLE>
Stock Purchase and Incentive Stock Option Plans:
IXYS has a 1994 Stock Option Plan and a 1999 Equity Incentive Plan (the
"Plans") under which incentive stock options may be granted not less than 85%
of fair market value at the time of grant. The options once granted expire ten
years from the date of grant. The board of directors has the full power to
determine the provisions of each option issued under the Plans.
Stock option activity under the Plans is summarized below (in thousands,
except share data):
<TABLE>
<CAPTION>
Options Outstanding
------------------------------- Weighted
Shares Available Number of Exercise Average
for Grant Shares Price Total Exercise Price
---------------- --------- ------------- ------ --------------
<S> <C> <C> <C> <C> <C>
Balances, March 31,
1997................... 308 639,484 $0.01--$ 3.81 100 $0.15
Options exercised....... -- (4,048) $0.43--$ 1.30 -- $0.06
Options canceled........ 85,606 (85,606) $ 3.46 (17) $0.20
---------- --------- ------------- ------ -----
Balances, March 31,
1998................... 85,914 549,830 $0.01--$ 3.81 83 $0.15
New authorized.......... 230,520 -- -- 1 $0.08
Options granted......... (199,800) 213,132 $1.69--$ 1.86 348 $1.74
Options exercised....... -- (50,258) $0.01--$ 0.43 (2) $0.04
Options cancelled....... 7,810 (7,810) $0.01--$ 2.16 (1) $0.08
Options expired......... (93,682) -- $ -- -- --
---------- --------- ------------- ------ -----
Balances, March 31,
1999................... 30,762 704,894 $0.01-- $1.86 $ 429 $0.61
New authorized.......... 5,000,000 -- -- -- --
Options granted......... (2,790,000) 2,790,000 $2.13--$ 3.63 8,585 $3.11
Options exercised....... -- (51,034) $0.01--$ 1.30 (32) $0.62
Options cancelled....... 150,000 (150,000) $ 2.13 -- --
---------- --------- ------------- ------ -----
Balances, March 31,
2000................... 2,390,762 3,293,860 $0.01--$ 1.59 8,950 $0.71
Options granted
(unaudited)............ -- -- -- -- --
Options exercised
(unaudited)............ -- (51,016) $0.01--$ 2.22 (160) $1.69
Options cancelled
(unaudited)............ -- -- -- -- --
---------- --------- ------------- ------ -----
Balances, June 30, 2000
(unaudited)............ 2,390,762 3,242,844 $0.01--$ 3.81 $8,790 $3.03
========== ========= ============= ====== =====
</TABLE>
Expired options in 1999 represent options under the IXYS plan established
in 1989, which ceased in fiscal year 1999.
F-17
<PAGE>
IXYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Had compensation cost for the Plans been determined based on the fair
value at the grant date for awards in fiscal years 1998, 1999 and 2000
consistent with the provisions of SFAS No. 123, IXYS' net income and net income
per share for fiscal years 1998, 1999 and 2000 would have decreased to the pro
forma amounts indicated below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Year Ended March 31,
----------------------
1998 1999 2000
------ ------- ------
<S> <C> <C> <C>
Net income (loss)--as reported.......................... $6,084 $(5,238) $6,899
====== ======= ======
Net income (loss)--pro forma............................ $5,996 $(5,285) $6,146
====== ======= ======
Net income (loss) per share--basic--as reported......... $ 0.72 $ (0.28) $ 0.29
====== ======= ======
Net income (loss) per share--basic--pro forma........... $ 0.72 $ (0.28) $ 0.26
====== ======= ======
Net income (loss) per share--diluted--as reported....... $ 0.72 $ (0.28) $ 0.28
====== ======= ======
Net income (loss) per share--diluted--pro forma......... $ 0.72 $ (0.28) $ 0.25
====== ======= ======
</TABLE>
In future years, annual compensation expense will vary relative to the
vesting of options granted in those future years.
The fair value of option grants has been estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted
average assumptions:
<TABLE>
<CAPTION>
Year Ended March 31,
----------------------------------
1998 1999 2000
---- -------------- --------------
<S> <C> <C> <C>
Risk-free interest rate...................... -- 4.33% to 5.67% 5.95% to 6.65%
Expected term................................ -- 4 years 4 years
Volatility................................... -- 83% 91%
Dividend yield............................... -- 0% 0%
</TABLE>
No dividend yield is assumed as we have not paid dividends and have no
plans to do so.
The weighted average expected life was calculated based on the vesting
period and the expected life at the date of the grant. The risk free interest
rate was calculated based on rates prevailing during grant periods and the
expected life of the options at the date of grants. The weighted average fair
values of options granted to employees during the years ended March 31, 1999
and 2000 were $1.74 and $3.11, respectively. There were no grants made during
the year ended March 31, 1998.
On September 14, 1995, IXYS' board of directors authorized stock grants,
made pursuant to certain stock purchase agreements, to Dr. Zommer and Messrs.
Agbayani, Fassler and Ingram. In connection with these stock grants, an
aggregate of 7,410,134 shares of IXYS' common stock were granted to these
individuals. The shares were paid for with recourse promissory notes in an
aggregate principal amount of $832,716 and are currently fully vested. The note
terms provide that between September 15, 2003 and September 15, 2005, quarterly
installments of principal and accrued interest are due, and all principal of
the notes, plus accrued interest, is due and payable September 15, 2005. The
notes bear interest at a simple interest rate of 6.25% per annum. In the event
any of these individuals sells shares of our common stock currently held by
them, a mandatory prepayment in an amount equal to 30.0% of the net sale
proceeds is due. In the event of termination of employment, any unpaid
principal and interest become due and payable. In the event of a change of
control, the notes mature within 12 months provided the change of control
occurs before September 15, 2004.
In May 1999, IXYS approved an Employee Stock Purchase Plan ("Purchase
Plan"). There are 500,000 shares of common stock reserved for issuance under
the Purchase Plan. As of March 31, 2000, there were no purchases made under the
Purchase Plan. There were 40,924 shares purchased as of June 30, 2000
(unaudited).
F-18
<PAGE>
IXYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9. EMPLOYEE SAVINGS AND RETIREMENT PLAN:
IXYS has a 401K plan, known as the "IXYS Corporation and Subsidiary
Employee Savings and Retirement Plan." Eligibility to participate in the plan
is subject to certain minimum service requirements. Employees may voluntarily
contribute up to 20% of yearly compensation, and IXYS may make matching
contributions as determined by the board of directors in a resolution on or
before the end of the fiscal year. Employees are 100% vested immediately. For
the years ended March 31, 1998, 1999 and 2000, IXYS contributed $96,000,
$113,000 and $129,000, respectively, to the plan.
10. RELATED PARTY TRANSACTIONS:
ABB is a principal stockholder of IXYS. In fiscal year 2000, IXYS
generated revenues of $653,000 from sales of products to ABB and to ABB's
affiliates for use as components in their products.
11. PENSION PLANS:
Employees of IXYS GmbH participate in a number of employee retirement
plans, including a defined benefit pension plan, the benefits for which will be
paid out of the general assets of IXYS GmbH, as well as other government
sponsored retirement plans to which IXYS GmbH and eligible employees are
required to contribute.
In addition to providing income at retirement, many of these plans also
provide survivor, termination and disability benefits. The defined benefit
pension plan of IXYS GmbH covers substantially all its employees, and benefits
are based on years of service and the employee's compensation.
Net Period Pension Cost
The net periodic pension expense for 1999 and 2000 included the following
components:
<TABLE>
<CAPTION>
Year Ended
March 31,
------------
1999 2000
----- -----
(in
thousands)
<S> <C> <C>
Service Cost................................................. $ 94 $ 107
Interest Cost on Projected Benefit Obligation................ 340 279
Expected Return on Plan Assets............................... (31) (28)
----- -----
Amortization of Prior Service Cost........................... 1 1
Recognized Actuarial Loss.................................... -- 12
----- -----
Net Periodic Pension Expense................................. $ 404 $ 371
===== =====
</TABLE>
F-19
<PAGE>
IXYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Funded Status
<TABLE>
<CAPTION>
Year Ended
March 31,
----------------
1999 2000
------- -------
(in thousands)
<S> <C> <C>
Change in benefit obligation
Benefit obligation at the beginning of year............ $5,112 $5,284
Service cost........................................... 94 99
Interest cost.......................................... 340 279
Actuarial loss (gain).................................. 394 5
Benefits paid.......................................... (164) (161)
Foreign currency translation adjustment................ (492) (89)
------- -------
Benefit obligation at the end of the year.............. $ 5,284 $ 5,417
======= =======
</TABLE>
<TABLE>
<CAPTION>
Year Ended
March 31,
----------------
1999 2000
------- -------
(in thousands)
<S> <C> <C>
Change in plan assets
Fair value of plan assets at the beginning of the
year............................................... $ 581 $ 585
Actual return on plan assets......................... 34 24
Employer contribution................................ 137 187
Benefits paid........................................ (164) (161)
Foreign currency translation adjustement............. (3) (75)
------- -------
Fair value of plan assets at the end of the year..... $ 585 $ 560
======= =======
</TABLE>
<TABLE>
<CAPTION>
Year Ended
March 31,
----------------
1999 2000
------- -------
(in thousands)
<S> <C> <C>
Status of plan
Plan obligations in excess of plan assets............. $(4,699) $(4,857)
Unrecognized net obligation (asset) at transition..... 16 13
Net (gains)/losses.................................... (705) (11)
------- -------
Accrued benefit ...................................... $(5,388) $(4,855)
======= =======
</TABLE>
<TABLE>
<S> <C>
Reconciliation of funded status (in thousands)
Accrued pension cost at March 31, 1999......................... $(5,388)
Net period pension cost........................................ (371)
Cash contribution in fiscal year 2000.......................... 174
Foreign currency translation adjustment........................ 700
-------
Accrued pension cost at March 31, 2000......................... $(4,885)
=======
</TABLE>
F-20
<PAGE>
IXYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Year
Ended
March 31,
----------
1999 2000
---- ----
<S> <C> <C>
Assumptions
. Discount rate.................................................. 6% 6%
. Expected long-term rate of return on assets.................... 5% 5%
. Salary scale................................................... 3% 3%
</TABLE>
12. INCOME TAXES:
Income (loss) before income tax provision consists of the following (in
thousands):
<TABLE>
<CAPTION>
Year Ended March 31,
------------------------
1998 1999 2000
------- ------- -------
<S> <C> <C> <C>
Domestic.......................................... $ 8,250 $(3,260) $ 9,149
International..................................... 2,063 105 1,638
------- ------- -------
$10,313 $(3,155) $10,787
======= ======= =======
</TABLE>
IXYS' provision for income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
Year Ended March 31,
------------------------
1998 1999 2000
------- ------- ------
<S> <C> <C> <C>
Current:
Federal....................................... $ (175) $ 234 $2,867
State......................................... (398) (40) 643
Foreign....................................... (904) (44) 672
------- ------- ------
(1,477) 150 4,182
------- ------- ------
Deferred:
Federal....................................... (2,590) (2,042) (220)
State......................................... (147) (191) (74)
Foreign....................................... (15) -- --
------- ------- ------
(2,752) (2,233) (294)
------- ------- ------
Total income tax provision (benefit).......... $(4,229) $(2,083) $3,888
======= ======= ======
</TABLE>
IXYS' effective tax rate differs from the statutory federal income tax
rate for the years ended March 31, as shown in the following table:
<TABLE>
<CAPTION>
1998 1999 2000
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate........................ 34% (34)% 34%
State taxes, net of federal tax benefit.................. 4 4 4
Foreign taxes at higher rates............................ 2 1 1
Acquired technology...................................... -- 94 --
Other items.............................................. 1 1 (3)
--- --- ---
Effective tax rate....................................... 41% 66 % 36 %
=== === ===
</TABLE>
F-21
<PAGE>
IXYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The components of net deferred income tax assets are as follows (in
thousands):
<TABLE>
<CAPTION>
March 31,
-------------
1999 2000
------ ------
<S> <C> <C>
Deferred tax assets:
Other liabilities and accruals............................ $1,117 $ 905
Depreciable assets........................................ 538 1,380
Net operating loss carryforwards.......................... 659 --
Alternative minimum tax carryforward...................... 342 124
------ ------
Net deferred tax asset.................................... $2,656 $2,409
====== ======
</TABLE>
At March 31, 2000, IXYS had federal alternative minimum tax credit
carryforwards of approximately $124,000. The alternative minimum tax credit
carryforwards can be carried forward indefinitely.
13. COMPUTATION OF NET INCOME (LOSS) PER SHARE:
Basic and diluted earnings per share are calculated as follows (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
Three Months
Year Ended March 31, Ended
------------------------ June 30,
1998 1999 2000 2000
------ -------- ------- ------------
(Unaudited)
<S> <C> <C> <C> <C>
BASIC:
Weighted average shares......... 8,354 18,746 23,970 23,984
Net income (loss)............... $6,084 $ (5,238) $ 6,899 $ 3,694
====== ======== ======= =======
Net income (loss) per share..... $ 0.73 $ (0.28) $ 0.29 $ 0.15
====== ======== ======= =======
DILUTED:
Weighted average shares......... 8,354 18,746 23,970 23,984
Common equivalent shares from
stock options and warrants.... 38 -- 856 406
------ -------- ------- -------
Shares used in per share
calculation................... 8,392 18,746 24,826 24,390
====== ======== ======= =======
Net income (loss)............... $6,084 $ (5,238) $ 6,899 3,694
====== ======== ======= =======
Net income (loss) per share..... $ 0.72 $ (0.28) $ 0.28 $ 0.15
====== ======== ======= =======
</TABLE>
F-22
<PAGE>
IXYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
14. SEGMENT AND GEOGRAPHIC INFORMATION:
IXYS operates in a single industry segment comprising power
semiconductors used primarily in controlling energy in motor drives, power
conversion (including uninterruptible power supplies (UPS) and switch mode
power supplies (SMPS)) and medical electronics. IXYS' sales by major geographic
area (based on destination) were as follows (in thousands):
<TABLE>
<CAPTION>
Three Months
Year Ended March 31, Ended June 30,
----------------------- --------------
1998 1999 2000 1999 2000
------- ------- ------- ------- ------
(Unaudited)
<S> <C> <C> <C> <C> <C>
North America:
United States..................... $21,134 $23,734 $28,987 $ 6,615 $8,430
Total North America................. $21,134 $23,734 $28,987 $ 6,615 $8,430
Europe............................ 29,239 36,054 36,463 8,059 10,947
Japan............................. 953 480 569 187 163
Asia Pacific...................... 5,530 6,255 10,608 2,211 3,734
------- ------- ------- ------- ------
Total.......................... $56,856 $66,523 $76,627 $17,072 23,274
======= ======= ======= ======= ======
</TABLE>
There was no single end customer providing more than 10% of IXYS' sales
for years ended March 31, 1998, 1999 and 2000.
IXYS' foreign operations consist of those of its subsidiary IXYS GmbH in
Germany. The following table summarizes the sales, income and total assets of
IXYS' U.S. and German operations (in thousands):
<TABLE>
<CAPTION>
Three Months
Year Ended March 31, Ended June 30,
------------------------ ---------------
1998 1999 2000 1999 2000
------- ------- ------- ------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Sales:
IXYS GmbH...................... $35,722 $36,534 $38,272 $ 8,449 $11,188
IXYS USA....................... 21,134 29,989 38,355 8,623 12,086
------- ------- ------- ------- -------
$56,856 $66,523 $76,627 $17,072 $23,274
======= ======= ======= ======= =======
Net Income (Loss):
IXYS GmbH...................... $ 2,010 $(1,438) $ 925 $ 125 $ 293
IXYS USA....................... 4,074 (3,800) 5,974 1,037 3,401
------- ------- ------- ------- -------
$ 6,084 $(5,238) $ 6,899 $ 1,162 $ 3,694
======= ======= ======= ======= =======
Total Assets:
IXYS GmbH...................... $27,008 $26,503 $21,056 $18,996 $21,963
IXYS USA....................... 27,332 30,597 41,989 44,049 49,436
------- ------- ------- ------- -------
$54,340 $57,100 $63,045 $63,045 $71,399
======= ======= ======= ======= =======
</TABLE>
There were no significant export sales for the U.S. during the years
ended March 31, 1998, 1999 and 2000 or during the period ended June 30, 2000.
F-23
<PAGE>
IXYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
16. RECENT LEGAL PROCEEDINGS:
On June 22, 2000, International Rectifier Corporation (International
Rectifier) filed an action for patent infringement against us in the United
States District Court for the Central District of California, alleging that
certain of our products sold in the United States, including but not limited to
four specified power MOSFET parts, infringe at least five identified U.S.
patents owned by International Rectifier. International Rectifier's complaint
against IXYS alleges that IXYS' infringement of its patents has been and
continues to be willful and deliberate, seeks to enjoin IXYS from further
infringement, and requests an award of unspecified, actual monetary damages,
but no less than a reasonable royalty on the products that we sell which are
claimed to infringe International Rectifier's patents. International Rectifier
also seeks to have the claimed damages trebled. IXYS has answered the
complaint, denied any infringement and has asserted that International
Rectifier's patents are invalid and unenforceable for, among other reasons,
failure of International Rectifier to properly disclose known prior art during
its prosecution of the patents in suit, and that International Rectifier's
claims are barred by reason of the doctrines of estoppel and laches. In prior
years, International Rectifier has approached IXYS on several occasions and
requested that IXYS enter into royalty-bearing license agreements with them,
covering the technology identified in their patents. IXYS has declined to do
so, based upon its belief that its products do not infringe the International
Rectifier patents. The suit is in the early stages of discovery, and it is
IXYS' intent to vigorously contest the claims of International Rectifier. It is
possible that as discovery progresses International Rectifier may expand its
assertions to include additional products IXYS sells, other than those
specified in the complaint. While management believes IXYS' defenses to the
infringement claims are meritorious, there can be no assurance of a favorable
outcome in this suit. In the event of an adverse outcome, any damages awarded
by the court could be materially adverse to IXYS' financial condition and
results of operations.
17. ACQUISITION OF DIRECTED ENERGY (Unaudited):
IXYS completed the acquisition of Directed Energy in a stock acquisition
in May 2000. In connection with the acquisition, IXYS issued 250,370 shares of
IXYS common stock in exchange for all the issued and outstanding capital stock
of Directed Energy. The shares issued reflect the agreed upon per share value
of IXYS and a total purchase price of $2.8 million.
The acquisition was accounted for using the purchase method of
accounting, and accordingly, the recognized purchase price was allocated to the
tangible and identifiable intangible assets acquired and liabilities assumed on
the basis of their fair values on the acquisition date of May 16, 2000. The
purchase price in excess of the fair value of identified tangible and
intangible assets and liabilities assumed in the amount of $2.3 million was
allocated to goodwill and is being amortized over its estimated useful life of
ten years.
F-24
<PAGE>
On the inside back cover of the prospectus is artwork depicting a magnified
silicon wafer upon which has been superimposed an array of IXYS Corporation
power semiconductor products. Below this artwork is the phrase, "Delivering
Power Excellence."
<PAGE>
[IXYS LOGO]
---------------
PROSPECTUS
---------------
Stephens Inc.
CIBC World Markets
Needham & Company, Inc.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by IXYS in connection with the sale of the
common stock being registered. All the amounts shown are estimates except for
the SEC registration fee, the NASD filing fee and the Nasdaq additional listing
fee.
<TABLE>
<S> <C>
SEC registration fee............................................. $ 43,112
NASD filing fee.................................................. $ 16,830
NASDAQ additional listing fee.................................... $ 40,000
Printing and engraving expenses.................................. $150,000
Legal fees and expenses.......................................... $350,000
Accounting fees and expenses..................................... $125,000
Transfer agent and registrar fees and expenses................... $ 10,000
Blue Sky fees and expenses....................................... $ 5,000
Miscellaneous expenses........................................... $ 60,058
--------
Total.......................................................... $800,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the Delaware General Corporation Law, the Registrant
has broad powers to indemnify its directors and officers against liabilities
they may incur in such capacities, including liabilities under the Securities
Act of 1933, as amended ("Securities Act"). The Registrant's Bylaws also
provide that the Registrant will indemnify its directors and executive officers
and may indemnify its other officers, employees and other agents to the fullest
extent permitted by Delaware law.
The Registrant's Certificate of Incorporation, as amended ("Certificate")
provides that the liability of its directors for monetary damages shall be
eliminated to the fullest extent permissible under Delaware law. Pursuant to
Delaware law, this includes elimination of liability for monetary damages for
breach of the directors' fiduciary duty of care to the Registrant and its
stockholders. These provisions do not eliminate the directors' duty of care
and, in appropriate circumstances, equitable remedies such as injunctive or
other forms of non-monetary relief will remain available under Delaware law. In
addition, each director will continue to be subject to liability for breach of
the director's duty of loyalty to the Registrant, for acts or omissions not in
good faith or involving intentional misconduct, for knowing violations of law,
for any transaction from which the director derived an improper personal
benefit, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
effect a director's responsibilities under any other laws, such as federal
securities laws or state or federal environmental laws.
The Registrant has entered into agreements with its directors and
officers that require the Registrant to indemnify such persons to the fullest
extent authorized or permitted by the provisions of the Certificate and
Delaware law against expenses, judgements, fines, settlements and other amounts
actually and responsibly incurred (including expenses of a derivative action)
in connection with any proceeding, whether actual or threatened, to which any
such person may be made a party by reason of the fact that such person is or
was a director, officer, employee or other agent of the Registrant or any of
its affiliated enterprises. Delaware law permits such indemnification, provided
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interest of the Registrant and, with
respect to any criminal proceeding, had no reasonable cause to believe his or
her conduct was unlawful. The indemnification agreements also set forth certain
procedures that will apply in the event of a claim for indemnification
thereunder.
II-1
<PAGE>
At present, there is no pending litigation or proceeding involving a
director or officer of the Registrant as to which indemnification is being
sought nor is the Registrant aware of any threatened litigation that may result
in claims for indemnification by any officer or director.
The underwriting agreement (Exhibit 1.1) will provide for indemnification
by the underwriters of the registrant, its directors, its officers who sign the
registration statement, the selling stockholders and the registrant's
controlling person for some liabilities, including liabilities arising under
the Securities Act.
ITEM 16. EXHIBITS.
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement
5.1* Opinion of Cooley Godward LLP
10.1* Amendment to Stock Purchase Agreement, dated September 15, 2000, by and
between IXYS and Nathan Zommer.
10.2* Amendment to Stock Purchase Agreement, dated September 15, 2000, by and
between IXYS and Arnold Agbayani.
10.3* Amendment to Stock Purchase Agreement, dated September 15, 2000, by and
between IXYS and Peter Ingram.
23.1 Consent of PricewaterhouseCoopers LLP, Independent Auditors
23.2 Consent of Cooley Godward LLP (included in Exhibit 5.1)
24.1 Power of Attorney (see page II-4)
</TABLE>
--------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to section 13(a) or section 15(d) of the Securities Exchange
Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(2) To deliver or cause to be delivered with the prospectus, to
each person to whom the prospectus is sent or given, the latest annual
report to security holders that is incorporated by reference in the
prospectus and furnished pursuant to and meeting the requirements of
Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and,
where interim financial information required to be presented by Article
3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or
given, the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial
information.
(3) That, for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the time
it was declared effective.
(4) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-2
<PAGE>
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the SEC this form of indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against these
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by a
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of this issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Santa Clara, State of California, on September
27, 2000.
IXYS CORPORATION
/s/ Nathan Zommer
By: _________________________________
Nathan Zommer
President, Chief Executive
Officer and Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Nathan Zommer and Arnold Agbayani, and
each or any one of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and any registration
statement related to this offering contemplated by this registration statement
that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act of 1933, as amended, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in connection therewith, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or any of them, or
their or his substitutes or substitute, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Nathan Zommer President, Chief Executive September 27, 2000
_________________________________ Officer and Director (Principal
(Nathan Zommer) Executive Officer)
/s/ Arnold Agbayani Vice President and Chief September 27, 2000
_________________________________ Financial Officer (Principal
(Arnold Agbayani) Financial Officer)
Director September , 2000
_________________________________
(Andreas Hartmann)
/s/ Samuel Kory Director September 27, 2000
_________________________________
(Samuel Kory)
/s/ S. Joon Lee Director September 27, 2000
_________________________________
(S. Joon Lee)
Director September , 2000
_________________________________
(Donald L. Feucht)
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement
5.1* Opinion of Cooley Godward LLP
10.1* Amendment to Stock Purchase Agreement, dated September 15, 2000, by
and between IXYS and Nathan Zommer.
10.2* Amendment to Stock Purchase Agreement, dated September 15, 2000, by
and between IXYS and Arnold Agbayani.
10.3* Amendment to Stock Purchase Agreement, dated September 15, 2000, by
and between IXYS and Peter Ingram.
23.1 Consent of PricewaterhouseCoopers LLP, Independent Auditors
23.2 Consent of Cooley Godward LLP (included in Exhibit 5.1)
24.1 Power of Attorney (see page II-4)
</TABLE>
--------
* To be filed by amendment.
