ITEM 6. SELECTED FINANCIAL DATA
You should read the following selected consolidated financial data for the
five-year period ended March 31, 2002 in conjunction with our Consolidated
Financial Statements and Notes thereto and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included in Item 7 of this
Form 10-K. Our consolidated income statement data for each of the years in the
three-year period ended March 31, 2002, and the balance sheet data as of March
31, 2002 and 2001, are derived from our audited consolidated financial
statements, included in Item 8 of this Form 10-K.
We effected a 3-for-2 stock split, in the form of a stock dividend, on May
8, 2002. All references in this report to the number of shares and earnings per
share have been adjusted to reflect this stock split.
THE REMAINDER OF THIS PAGE IS LEFT BLANK INTENTIONALLY
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Year Ended March 31,
----------------------------------------------------------------------
2002 2001 2000 1999 1998
----------- ----------- ----------- ----------- -----------
(in thousands, except per share data)
Income Statement Data(1):
Net sales ......................... $ 571,254 $ 715,730 $ 553,051 $ 460,723 $ 452,329
Cost of sales ..................... 284,518 335,016 269,611 240,170 230,713
Research and development .......... 81,650 78,595 52,365 46,375 43,817
Selling, general and administrative 82,615 102,620 86,750 72,502 77,079
Special charges (2) ............... -- 17,358 (2,131) 34,495 13,264
----------- ----------- ----------- ----------- -----------
Operating income .................. 122,471 182,141 146,456 67,181 87,456
Interest income (expense), net .... 4,344 12,741 1,569 (1,824) 1,505
Other income (expense), net ....... 376 2,080 770 665 (71)
Net loss in equity investment (2) . -- (2,190) -- -- --
Gain on sale of investment (2) .... -- 1,427 5,819 -- --
----------- ----------- ----------- ----------- -----------
Income before income taxes ........ 127,191 196,199 154,614 66,022 88,890
Provision for income taxes ........ 32,377 53,363 39,441 19,481 26,226
----------- ----------- ----------- ----------- -----------
Net income ........................ $ 94,814 $ 142,836 $ 115,173 $ 46,541 $ 62,664
=========== =========== =========== =========== ===========
Basic net income per share ........ $ 0.48 $ 0.74 $ 0.63 $ 0.25 $ 0.32
Diluted net income per share ...... $ 0.45 $ 0.70 $ 0.59 $ 0.24 $ 0.31
Basic common shares outstanding ... 199,184 193,632 183,471 185,250 193,011
Diluted common shares outstanding . 208,907 205,190 195,509 193,323 202,925
Year Ended March 31,
----------------------------------------------------------------------
2002 2001 2000 1999 1998
----------- ----------- ----------- ----------- -----------
(in thousands)
Balance Cheet Data(1)
Working capital ................... $ 381,211 $ 176,936 $ 225,504 $ 110,888 $ 79,852
Total assets ...................... 1,275,600 1,161,349 861,352 546,396 578,427
Long-term obligations, less current
portion ......................... -- -- -- 27,678 12,230
Stockholders' equity .............. 1,075,779 942,848 662,878 384,715 403,729
(1) On January 16, 2001, we merged with TelCom and accounted for the
merger as a pooling-of-interests. Accordingly, the selected financial
data has been restated to include the operations of TelCom for all
periods presented. TelCom had a December 31 fiscal year end, thus the
selected financial data presented for March 31, 2000, 1999 and 1998
have been combined with the operations of TelCom as of and for the
years ended December 31, 1999, 1998 and 1997. We have conformed the
TelCom financial data to a March 31 year end for the March 31, 2001
fiscal year.
(2) There were no special charges during the fiscal year ended March 31,
2002. Detailed discussions of the special charges, net loss in equity
investment, and gain on sale of investment for the fiscal years ended
March 31, 2001 and 2000 are contained in Note 2 to the Consolidated
Financial Statements. Detailed explanations of the special charges for
the fiscal years ended March 31, 1999 and 1998 are provided below. The
following table presents a summary of special charges for the
four-year period ended March 31, 2001:
18
Year Ended March 31,
2001 2000 1999 1998
(in thousands)
Restructuring charges ................. $ 6,049 $ 269 $20,908 $ --
TelCom merger charges ................. 10,949 -- -- --
Intellectual property settlement ...... -- (3,600) 5,105 5,000
Legal charges ......................... -- 1,200 -- --
Keeloq acquisition .................... -- -- 7,632 --
Sales restructuring ................... -- -- 850 --
Loss on foundry investment ............ -- -- -- 8,264
Totals ................................ $17,358 $ 2,131 $34,495 $13,624
FISCAL 1999
We implemented two restructuring actions during the quarter ended March 31,
1999. First, we eliminated our 5-inch wafer fabrication line, which resulted in
a restructuring charge of $7.6 million in the March 1999 quarter. We also
decided to restructure our test operations by closing our Taiwan facility and
migrating that test capacity to our lower-cost Thailand facility. This action
resulted in a restructuring charge of $6.1 million in the March 1999 quarter.
These two restructuring actions were undertaken to improve manufacturing
flexibility, close our least cost-effective production capacity, and thereby
reduce operating costs.
Included in the restructuring charges resulting from elimination of the
5-inch production capacity was:
* $6.8 million related to equipment that was written off
* $0.3 million related to employee severance costs, and
* $0.5 million related to other restructuring costs.
Included in the restructuring charges resulting from the closure of the
Taiwan facility was $5.6 million related to employee severance costs and $0.5
million related to other restructuring costs.
Included in the special charge recorded in the quarter ended March 31, 1999
was $1.8 million related to two legal settlements associated with intellectual
property matters, and $0.4 million related to the restructure of a portion of
our sales infrastructure.
During the quarter ended June 30, 1998, we recognized a special charge of
$3.8 million, which was comprised of a $3.3 million legal settlement with
another company involving an intellectual property dispute and a $0.5 million
charge associated with the restructuring of a portion of our sales
infrastructure. We also incurred charges of $1.7 million for the write-off of
obsolete products due to the introduction of newer products, charging this to
cost of goods sold.
In August 1998, TelCom announced plans to shut down its 5-inch wafer
fabrication facility in Mountain View, California and use third party foundries
for all of its wafer fabrication requirements. In conjunction with the shut-down
of its wafer fabrication facility, TelCom recorded fab closure charges totaling
$6.5 million, predominately associated with the write-down and write-off of
manufacturing equipment and facilities improvements. TelCom recorded one-time
charges associated with its manufacturing restructuring of $0.7 million. All
restructuring reserves relating to these charges have been fully utilized.
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KEELOQ(R) HOPPING CODE
On November 17, 1995, we acquired the KEELOQ(R) hopping code technology and
patents developed by Nanoteq Ltd. of the Republic of South Africa, and marketing
rights related thereto. The acquisition of KEELOQ was treated as an asset
purchase for accounting purposes. The amount paid for KEELOQ, including related
costs, was $12.9 million. In December 1995, we wrote off $11.4 million, which
represented the portion of the purchase price relating to in-process R&D costs,
as well as all acquisition-related expenses. The remaining $1.5 million was
capitalized as purchased technology. The amount of the purchased technology was
determined by applying a discounted cash flow model to the expected future
revenue stream of the products acquired.
In March 1999, a second cash payment of $10.3 million was made in
accordance with the terms of the original purchase agreement, and was
capitalized as purchased technology. In addition, $1.1 million of legal costs
paid to defend the KEELOQ intellectual property was also capitalized, resulting
in a total net carrying amount of $11.9 million including the $0.5 million of
residual asset value capitalized a part of the initial payment, as of March 31,
1999. Although we were obligated to make the second payment, we were concerned
that the recoverability of the carrying amount of the technology asset might not
be recoverable due to change in the forecasted cash flows related to the KEELOQ
products. In accordance with SFAS 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG
LIVED ASSETS AND FOR LONG LIVED ASSETS TO BE DISPOSED OF, paragraphs 4 through
11, we prepared an undiscounted cash flow analysis at March 31, 1999, which
determined that the value of the KEELOQ technology was impaired. We measured the
impairment using a discounted cash flow analysis to determine the fair value of
the asset, which was deemed to be $4.3 million, resulting in an impairment
write-down of $7.6 million. The value of the purchased technology remaining at
March 31, 1999 of $4.3 million was amortized over 3 years, the remaining life of
the technology.
All restructuring reserves relating to the fiscal 1999 actions have been
fully utilized.
FISCAL 1998
On January 13, 1998, we finalized a settlement of patent litigation with
Lucent Technologies Inc. resulting in a $5.0 million special charge during the
quarter ended December 31, 1997. This settlement is described in more detail at
page 27, below, and in Note 2 to the Consolidated Financial Statements.
In November 1995, TelCom entered into certain agreements with IC WORKS,
Inc., a privately held company located in San Jose, California under which
TelCom purchased $3.0 million of IC WORKS preferred stock and provided $10.4
million in capital equipment. In return for this investment, TelCom received a
five-year guarantee of submicron wafer fabrication capacity at specified prices,
which was projected to start in late 1997. The shortage of wafer capacity that
was projected in late 1995 had diminished and following late 1995, substantial
foundry capacity was available worldwide while the overall demand had not
increased proportionately. Consequently, wafer pricing had decreased
dramatically, which changed the economic viability of IC WORKS investment. As a
result, in fiscal 1998, TelCom recorded a loss of $8.3 million on its IC WORKS
investment consisting of:
* $3.0 million write-down of the preferred stock
* $5.2 million loss on the sale of capital equipment, and
* $0.1 million of costs associated with prepayment penalties on the
financing of the capital equipment and legal fees.
All restructuring reserves relating to the fiscal 1998 actions have been
fully utilized.
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