Since inception, the Company's principal sources of funding have been its
cash from operations, bank borrowings and sales of common stock. Principal
sources of liquidity at December 31, 1999 consisted of cash and short-term
investments of $51.7 million and borrowing facilities consisting of (i) $5.0
million under a revolving line of credit, of which all was unused and
available at December 31, 1999, and (ii) $20.0 million under a non-revolving
line of credit of which $9.9 million was unused and available at December 31,
1999. The two lines of credit are covered by the same loan and security
agreement and expire March 31, 2000 and are subject to automatic renewal on a
month to month basis thereafter unless terminated by either party upon 30 days
notice. Borrowings are collateralized by substantially all of the Company's
assets. The agreement contains certain restrictive covenants that include a
restriction on the declaration and payment of dividends without the lender's
consent. The Company was in compliance with all such covenants at December 31,
1999.
The non-revolving bank line of credit that is covered by the loan agreement
described above, can be used to fund purchases of capital equipment whereby
the Company may borrow up to 100% of the acquisition cost. Amounts borrowed
under this credit line are automatically converted to four-year installment
notes. All equipment notes are collateralized by substantially all of the
Company's manufacturing equipment and bear interest rates of, at the Company's
election, the prime rate (8.50% at December 31, 1999), a fixed rate based on
the four-year U.S. Treasury Bill rate (6.34% at December 31, 1999) plus 3.0%
or an annual adjustable rate based on the one-year U.S. Treasury Bill rate
(5.98% at December 31, 1999) plus 3.0%.
On March 8, 2000, the loan agreements described above were subsequently
replaced with a new loan and security agreement. Under the new agreement, the
revolving line of credit remained at $5 million and the non-revolving line of
credit was increased to $40 million dollars. The new agreement expires April
30, 2001 and is subject to automatic renewal on a month to month basis
thereafter unless terminated by either party upon 30 days notice. Borrowings
under the new revolving line of credit bear interest rates of, at the
Company's election, the prime rate (8.50% at December 31, 1999), or the bank's
revolving offshore rate, which approximates LIBOR (5.82% at December 31, 1999)
plus 2.0%. Borrowings under the new non-revolving line of credit bear interest
rates of, at the Company's election, the prime rate (8.50% at December 31,
1999), the bank's non-revolving offshore rate, which approximates LIBOR (5.82%
at December 31, 1999) plus 2.13%, a fixed rate based on the four-year U.S.
Treasury Bill rate (6.34% at December 31, 1999) plus 2.75% or an annual
adjustable rate based on the one-year U.S. Treasury Bill rate (5.98% at
December 31, 1999) plus 2.75%. All other terms and conditions remain
substantially unchanged from the prior agreement.
As of December 31, 1999, the Company had $14.0 million outstanding under
term notes that are collateralized by substantially all of the Company's
manufacturing equipment.
The Company's working capital increased by $32.8 million to $83.7 million
as of December 31, 1999 from $50.9 million as of December 31, 1998. The
increase was primarily attributable to increases in cash, cash equivalents and
short-term investments of $23.3 million, accounts receivable of $15.4 million,
inventories of $7.8 million, and decreases in other accrued liabilities of
$1.3 million which were partially offset by increases in income taxes payable
of $7.9 million, accounts payable of $3.2 million, deferred income of
$2.1 million, and accrued compensation of $1.4 million. The Company's short-
term investments were principally invested in investment grade, interest-
bearing securities.
23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
The Company's cash flows provided by operating activities increased to
$51.7 million for the year ended December 31, 1999 from $40.6 million for the
year ended December 31, 1998 primarily as a result of increased net income and
income taxes payable, partially offset by increases in accounts receivable and
inventories. The Company's cash flows provided by operating activities in the
year ended December 31, 1999 were primarily attributable to net income of
$53.5 million after adding back non-cash activities, an $8.0 million tax
benefit from employee stock transactions combined with a $7.9 million increase
in income taxes payable, accounts payable of $3.2 million, deferred income of
$2.1 million, and accrued compensation of $1.4 million which were partially
offset by increases in accounts receivable of $15.4 million and inventories of
$7.8 million which increased with higher revenues.
The Company's investing activities during the year ended December 31, 1999
used cash of $52.5 million as compared to $38.6 million of cash used for
investing activities during the year ended December 31, 1998. Cash used for
investing activities during the year ended December 31, 1999 resulted
primarily from net purchases of $29.4 million of property, plant and equipment
principally associated with the Company's conversion to six-inch wafer
production and additional wafer fab and testing equipment to increase
production capacity, combined with net purchases of $21.3 million of short-
term investments, and $1.8 million for the purchase of Altos Semiconductor.
The Company's financing activities during the year ended December 31, 1999
provided cash of approximately $2.7 million as compared to cash provided of
$8.8 million during the year ended December 31, 1998. Cash provided by
financing activities during the year ended December 31, 1999 was the result of
$8.3 million in proceeds from the issuance of common stock through the
exercise of employee stock options and employee stock purchase plan activity
and proceeds from long-term borrowings of $2.1 million, which was partially
offset by $7.7 million net repayments of long-term debt.
The Company currently intends to spend up to approximately $100 million
during the next twelve months primarily for the purchase of additional wafer
and test manufacturing equipment and leasehold improvements. The Company
expects that its cash requirements through 2000 will be met by its cash from
operations, existing cash balances and short-term investments, and its
existing credit facilities.
Factors That May Affect Operating Results
The statements contained in this Report on Form 10-K that are not purely
historical are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, including statements regarding the Company's expectations, hopes,
intentions or strategies regarding the future. Forward-looking statements
include: statements regarding future revenue levels and income, statements
regarding future products or product development; statements regarding future
research and development spending and the Company's product development
strategy; statements regarding the levels of international sales; statements
regarding future expenditures; statements regarding the impact of Year 2000 on
the Company, statements regarding Year 2000 compliance costs; and statements
regarding current or future acquisitions. All forward-looking statements
included in this document are based on information available to the Company on
the date hereof, and the Company assumes no obligation to update any such
forward-looking statements. It is important to note that the Company's actual
results could differ materially from those in such forward-looking statements.
Some of the factors that could cause actual results to differ materially are
set forth in Item 1. "Business", Item 3. "Legal Proceedings", Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Operations" and in the additional factors set forth below.
The Company may experience significant fluctuations in its results of
operations. Factors that affect the Company's results of operations include
the volume and timing of orders received, changes in the mix of products sold,
market acceptance of the Company's and its customers' products, competitive
pricing pressures, the Company's ability to timely acquire and install capital
equipment to expand manufacturing capacity to meet increasing demand,
availability of production capacity at assembly subcontractors, the Company's
ability to introduce new products on a timely basis, the timing of new product
announcements and introductions by the Company or its competitors, the timing
and extent of research and development expenses, fluctuations in manufacturing
yields, cyclical semiconductor industry conditions, the Company's ability to
hire and retain key technical and management personnel, the Company's access
to advanced process technologies and the timing and extent of process
development costs. As a result of the foregoing or other factors, there can be
no assurance that the Company will not experience material fluctuations in
future operating results on a quarterly or annual basis, which would
materially and adversely affect the Company's business, financial condition,
results of operations or cash flows.
The Company believes that a substantial portion of its net revenues in the
future will continue to depend upon standard products sales. As compared with
the custom and foundry products business, the standard products business is
characterized by shorter product lifecycles, greater pricing pressures, larger
competitors and more rapid technological change. Generally, the standard
products market is a rapidly changing market in which the Company faces the
risk that, as the market changes, its product offerings will become obsolete.
The Company competes in the standard products market with established
companies, most of which have substantially greater financial, engineering,
manufacturing and marketing resources than the Company. No assurance can be
given that the Company will be able to compete successfully in the standard
products market or that it will be able to successfully introduce new standard
products in the future. The failure of the Company to compete successfully in
the standard products business would materially and adversely affect the
Company's financial condition, results of operations, or cash flows.
The semiconductor industry is highly competitive and subject to rapid
technological change. Significant competitive factors include product
features, performance, price, timing of product introductions, emergence of
new computer standards, quality and customer support. Because the standard
products market for integrated circuits is diverse and highly fragmented, the
Company encounters different competitors in its various market areas. Most of
these competitors have substantially greater technical, financial and
marketing resources and greater name recognition than the Company. Due to the
increasing demands for integrated circuits, the Company expects intensified
competition from existing integrated circuit suppliers and the entry of new
competition. Increased competition could adversely affect the Company's
financial condition or results of operations. There can be no assurance that
the Company will be able to compete successfully in either the standard
products or custom and foundry products business in the future or that
competitive pressures will not adversely affect the Company's financial
condition, results of operations, or cash flows.
The semiconductor industry is characterized by frequent litigation
regarding patent and other intellectual property rights (see Note 11 of Notes
to Consolidated Financial Statements contained in Item 8). There can be no
assurance that these existing claims or any other assertions (or claims for
indemnity resulting from infringement claims) will not materially adversely
affect the Company's business, financial condition, results of operations, or
cash flows.
25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
The Company's future success depends in part upon its intellectual
property, including patents, trade secrets, know-how and continuing technology
innovation. There can be no assurance that the steps taken by the Company to
protect its intellectual property will be adequate to prevent misappropriation
or that others will not develop competitive technologies or products. There
can be no assurance that any patent owned by the Company will not be
invalidated, circumvented or challenged, that the rights granted thereunder
will provide competitive advantages to the Company or that any of the
Company's pending or future patent applications will be issued with the scope
of the claims sought by the Company, if at all. Furthermore, there can be no
assurance that others will not develop technologies that are similar or
superior to the Company's technology, duplicate the Company's technology or
design around the patents owned by the Company.
The Company has generated a substantial portion of its net revenues from
export sales (see Note 12 of Notes to Consolidated Financial Statements
contained in Item 8). The Company believes that a substantial portion of its
future net revenues will depend on export sales to customers in international
markets including Asia. International markets are subject to a variety of
risks, including changes in policy by foreign governments, social conditions
such as civil unrest, and economic conditions including high levels of
inflation, fluctuation in the value of foreign currencies and currency
exchange rates and trade restrictions or prohibitions. In addition, the
Company sells to domestic customers that do business worldwide and cannot
predict how the businesses of these customers may be affected by economic
conditions in Asia or elsewhere. Such factors could adversely affect the
Company's future revenues, financial condition, results of operations or cash
flows.
Historically, the Company has not experienced significant individual
product gross margin differences on export sales compared to domestic sales.
However, as a result of the foregoing international market risks or other
factors, there can be no assurance that the Company will not experience
material gross margin fluctuations in the future, which could materially and
adversely affect the Company's business, financial condition, results of
operations or cash flows.
The fabrication of integrated circuits is a highly complex and precise
process. Minute impurities, contaminants in the manufacturing environment,
difficulties in the fabrication process, defects in the masks used to print
circuits on a wafer, manufacturing equipment failures, wafer breakage or other
factors can cause a substantial percentage of wafers to be rejected or
numerous die on each wafer to be nonfunctional. Moreover, there can be no
assurance that the Company will be able to maintain acceptable manufacturing
yields in the future.
Readiness Disclosure for Year 2000
The Year 2000 issue refers to whether computer systems will properly
recognize two digit year values as the year 2000 versus the year 1900. Systems
that do not properly recognize such information could generate erroneous data
or cause a system to fail. During the past year, the Company has implemented a
Year 2000 project designed to identify and assess the risks associated with
its information systems, products, operations and infrastructure, suppliers
and customers that are not Year 2000 compliant, and to develop, implement and
test remediation and contingency plans to mitigate these risks. To date, the
Company has not experienced any significant disruptions related to the Year
2000 issue and has not been informed of any failures of the Company's products
related to the year 2000 issue.
26
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At December 31, 1999, the Company held $36.3 million in short-term
investments consisting of corporate debt securities (commercial paper) with
maturities of less than one year. These available-for-sale securities are
subject to interest rate risk and will fall in value if market interest rates
increase. If market interest rates were to increase immediately and uniformly
by 10 percent from levels at December 31, 1999, the fair value of the short-
term investments would decline by an immaterial amount. The Company generally
expects to have the ability to hold its fixed income investments until maturity
and therefore would not expect operating results or cash flows to be affected
to any significant degree by the effect of a sudden change in market interest
rates on short-term investments.
At December 31, 1999, the Company had fixed rate long-term debt of
approximately $9.5 million. A hypothetical 10 percent decrease in interest
rates would not have a material impact on the fair market value of this debt.
The Company does not hedge any interest rate exposures.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's financial statements are set forth on pages 33 through 54,
which follow Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
27
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning the directors of the Company is included in the
Company's Proxy Statement to be filed in connection with the Company's 2000
annual meeting of shareholders under the caption "Election of Directors" and
is incorporated herein by reference. The information concerning the executive
officers of the Company required by this item is as follows:
EXECUTIVE OFFICERS
The executive officers of the Company, and their ages as of December 31,
1999, are as follows:
Name Age Position
--------------------- ----- -------------------------------------------
Raymond D. Zinn 62 President, Chief Executive Officer
Warren H. Muller 60 Chief Technical Officer, Secretary
Robert Whelton 60 Executive Vice President of Operations
Richard D. Crowley, Jr. 43 Vice President, Finance and Chief
Financial Officer
Barry Small 51 Vice President, Wafer Fab
Scott Ward 45 Vice President, Test Operations
George T. Anderl 60 Vice President, Sales and Marketing
Carlos Mejia 49 Vice President, Human Resources
Mr. Zinn is a co-founder of the Company and has been its President, Chief
Executive Officer and Chairman of its Board of Directors since its
incorporation in 1978. Prior to co-founding Micrel, Mr. Zinn held various
management and manufacturing executive positions in the semiconductor industry
at Electromask TRE, Electronic Arrays, Inc., Teledyne, Inc., Fairchild
Semiconductor Corporation and Nortek, Inc. He holds a B.S. in Industrial
Management from Brigham Young University and a M.S. in Business Administration
from San Jose State University.
Mr. Muller is a co-founder of the Company and has served as a member of the
Company's Board of Directors and as its Vice President of Test Operations
since its incorporation in 1978. In 1999, Mr. Muller assumed the position of
Chief Technical Officer. He was previously employed in various positions in
semiconductor processing and testing at Electronic Arrays, Inc. and General
Instruments Corporation. Mr. Muller holds a B.S.E.E. from Clarkson College.
Mr. Whelton joined the Company as Executive Vice President of Operations in
January 1998. From 1996 to 1997, Mr. Whelton was employed by Micro Linear
Corp., where he held the position of Executive Vice President in charge of
operations, design, sales and marketing. Prior to Micro Linear, Mr. Whelton
was employed by National Semiconductor Corp., from 1985 to 1996 where he held
the position of Vice President of the Analog Division. Mr. Whelton holds a
B.S.E.E. from U.C. Berkeley, and a M.S.E.E. from the University of Santa
Clara.
28
Mr. Crowley joined the Company as Vice President, Finance and Chief
Financial Officer in September 1999. From December 1998 until he joined
Micrel, Mr. Crowley was employed by Vantis Corporation as its Vice President,
Chief Financial Officer. From 1980 to 1998 Mr. Crowley was employed by
National Semiconductor Corporation, where his last position was Vice
President, Corporate Controller. He holds a B.B.A. in Finance from the
University of Notre Dame and a Masters in Management in Accounting and Finance
from Northwestern University.
Mr. Small joined the Company in April 1998 as its Vice President, Wafer
Fab. Prior to joining the Company, Mr. Small was employed by IC Works from
1996 to 1998, where he was Vice President of Operations. From 1971 to 1995,
Mr. Small was employed by National Semiconductor Corp. where he held the
position of Vice President of Linear Standard Products. Mr. Small holds a
B.A. in Physics from U.C. Berkeley and an M.A. in Physics and an M.B.A. from
University of California at Los Angeles.
Mr. Anderl joined the Company in June 1996 as its Vice President, Sales and
Marketing. From 1991 until he joined Micrel, Mr. Anderl was employed by
Quality Semiconductor, where his last position was Vice President, Worldwide
Sales. His prior employers include Austek Microsystems, Advanced Micro
Devices, and Monolithic Memories. Mr. Anderl holds a B.S.E.E. degree from
Purdue University and a M.S.E.E. from Santa Clara University.
Mr. Ward joined the Company in August 1999 as Vice President, Test
Division. From 1997 until he joined Micrel, Mr. Ward was employed by
QuickLogic Corporation as Vice President of Engineering. From 1980 to 1997,
Mr. Ward was employed by National Semiconductor Corporation where he held
various Product Line Director positions in the Analog Division. Mr. Ward holds
a B.S.E.T. degree from California Polytechnic University at San Luis Obispo.
Mr. Mejia joined the Company in June 1999 as Vice President, Human
Resources. From 1976 until he joined Micrel, Mr. Mejia was employed by Analog
Devices, Inc. where his last position was Director, Human Resources. Prior to
Analog Devices, Inc., Mr. Mejia held various human resource positions at ROHR
Industries and California Computer Products. He holds a B.S. in Industrial
Technology and a M.A.H.R. from the University of Redlands.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is included under the caption
"Executive Compensation" and "Stock Option Grants and Exercise" in the
Company's Proxy Statement to be filed in connection with the Company's 2000
annual meeting of shareholders and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this item is included under the caption
"Security Ownership of Certain Beneficial Owners and Management" in the
Company's Proxy Statement to be filed in connection with the Company's 2000
annual meeting of shareholders and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is included under the caption "Certain
Transactions" in the Company's Proxy Statement to be filed in connection with
the Company's 2000 annual meeting of shareholders and is incorporated herein by
reference.
29
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
1. Financial Statements. The following financial statements of
the Company and the Report of Deloitte & Touche LLP, Independent
Auditors, are included in this Report on the pages indicated:
Page
----
Independent Auditors' Report............................ 33
Consolidated Balance Sheets as of December 31,
1999 and 1998........................................ 34
Consolidated Income Statements for the Years ended
December 31, 1999, 1998 and 1997..................... 35
Consolidated Statements of Shareholders' Equity and
Comprehensive Income for the Years ended December 31,
1999, 1998 and 1997.................................. 36
Consolidated Statements of Cash Flows for the Years
ended December 31, 1999, 1998 and 1997.............. 37
Notes to Consolidated Financial Statements.............. 38
2. Financial Statement Schedules. The following financial
statement schedule of the Company for the years ended
December 31, 1999, 1998 and 1997 is filed as part of this report
on Form 10-K and should be read in conjunction with the financial
statements.
Schedule Title Page
-------- ------------------------------------ -----
Independent Auditors' Report.................... 53
II Valuation and Qualifying Accounts............... 54
Schedules not listed above have been omitted because they are not
applicable, not required, or the information required to be set
forth therein is included in the Consolidated Financial
Statements or notes thereto.
3. Exhibits. See Exhibit Index on page 31 hereof for a list of
exhibits filed or incorporated by reference as a part of this
report.
(b) Reports on Form 8-K. No report on Form 8-K was filed by the Company in
the quarter ended December 31, 1999.
30
(c) Exhibits Pursuant to Item 601 of Regulation S-K
Exhibit
Number Description
------- ----------------------------------------------------------------
2.1 Merger Agreement dated October 21, 1998, by and between Micrel,
Incorporated, MISYN Acquisition Corp. and Synergy Semiconductor
Corporation. (1)
2.2 Letter agreement dated November 9, 1998, between Micrel,
Incorporated, MISYN Acquisition Corp. and Synergy Semiconductor
Corporation. (1)
2.3 Escrow Agreement dated November 9, 1998, between Micrel,
Incorporated, John F. Stockton, as representative of the former
Synergy shareholders, and Bank of the West. (1)
3.1 Amended and Restated Articles of Incorporation of the
Registrant. (2)
3.2 Certificate of Amendment of Articles of Incorporation of the
Registrant. (3)
3.3 Amended and Restated Bylaws of the Registrant. (3)
4.1 Certificate for Shares of Registrant's Common Stock. (4)
10.1 Indemnification Agreement between the Registrant and each of its
officers and directors. (3)
10.2 1989 Stock Option Plan and form of Stock Option Agreement. (2) *
10.3 1994 Stock Option Plan and form of Stock Option Agreement. (2) *
10.4 1994 Stock Purchase Plan. (4)
10.6 Lease Agreement dated June 24, 1992 between the Registrant and
GOCO Realty Fund I, as amended August 6, 1992 and February 5,
1993. (2)
10.7 Amended and Restated Loan and Security Agreement dated
November 29, 1990 between the Registrant and Bank of the West, as
amended February 11, 1991, August 6, 1991, October 31, 1991,
June 24, 1992, September 24, 1992, August 16, 1993, April 29,
1994, July 2, 1994, August 23, 1994, September 30, 1994,
October 24, 1994. (2)
10.8 Form of Domestic Distribution Agreement. (3)
10.9 Form of International Distributor Agreement. (3)
10.10 Second Amendment dated February 20, 1995 between the Registrant
and TR Brell Cal Corporation to Lease Agreement dated June 24,
1992 between the Registrant and GOCO Realty Fund I, as amended
August 6, 1992 and February 5, 1993. (4)
10.11 Amended and Restated Loan and Security Agreement dated
November 29, 1990 between the Registrant and Bank of the West, as
amended March 31, 1995. (5)
10.12 Amended and Restated Loan and Security Agreement dated
November 29, 1990 between the Registrant and Bank of the West, as
amended September 30, 1996. (6)
10.13 Amended and Restated 1994 Employee Stock Purchase Plan, as
amended January 1, 1996. (7)
10.14 Commercial Lease between Harris Corporation and Synergy
Semiconductor Corporation dated February 29, 1996. (8)
10.15 Amended and Restated Loan and Security Agreement dated
November 29, 1990 between the Registrant and Bank of the West, as
amended October 6, 1997. (9)
23.1 Independent Auditors' Consent.
24.1 Power of Attorney. (See Signature Page.)
27.0 Financial Data Schedule.
* Management contract or compensatory plan or agreement.
(1) Incorporated herein by reference to the Company's Current Report on Form
8-K dated November 9, 1998 filed with the Commission on November 23,
1998 in which this exhibit bears the same number, unless otherwise
indicated.
31
(2) Incorporated herein by reference to the Company's Registration Statement
on Form S-1 ("Registration Statement"), File No. 33-85694, in which this
exhibit bears the same number, unless otherwise indicated.
(3) Incorporated by reference to Amendment No. 1 to the Registration
Statement, in which this exhibit bears the same number, unless otherwise
indicated.
(4) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995, in which this exhibit bears the same
number, unless otherwise indicated.
(5) Incorporated by reference to exhibit 10.1 filed with the Company's
quarterly report on Form 10-Q for the period ended March 31, 1995.
(6) Incorporated by reference to exhibit 10.1 filed with the Company's
quarterly report on Form 10-Q for the period ended September 30, 1996.
(7) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1996, in which this exhibit bears the number
10.14.
(8) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1998, in which this exhibit bears the same
number, unless otherwise indicated.
(9) Incorporated by reference to exhibit 10.1 filed with the Company's
quarterly report on Form 10-Q for the period ended September 30, 1997.
(d) Financial Statement Schedules. The financial statement schedule
required by this Item is listed under Item 14(a)(2) above.
32
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Micrel, Incorporated:
We have audited the accompanying consolidated balance sheets of Micrel,
Incorporated and its subsidiaries as of December 31, 1999 and 1998, and the
related consolidated statements of income, shareholders' equity and
comprehensive income, and of cash flows for each of the three years in the
period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company and its subsidiaries
at December 31, 1999 and 1998, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1999
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
San Jose, California
January 24, 2000
33
MICREL, INCORPORATED
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(In thousands, except share amounts)
_______________________________________________________________________________
1999 1998
---------- ----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 15,360 $ 13,415
Short-term investments 36,337 15,029
Accounts receivable, less allowances:
1999, $2,547; 1998, $1,613 39,472 24,079
Inventories 23,851 16,069
Prepaid expenses and other 1,108 693
Deferred income taxes 11,388 11,967
---------- ----------
Total current assets 127,516 81,252
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET 67,162 54,920
INTANGIBLE ASSETS, NET 7,933 8,878
OTHER ASSETS 483 320
---------- ----------
TOTAL $ 203,094 $ 145,370
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 11,241 $ 7,942
Accrued compensation 5,272 3,899
Accrued commissions 1,952 1,510
Income taxes payable 12,230 4,316
Other accrued liabilities 1,442 2,724
Deferred income on shipments to distributors 6,541 4,414
Current portion of long-term debt 5,132 5,579
---------- ----------
Total current liabilities 43,810 30,384
LONG-TERM DEBT 8,854 14,007
DEFERRED RENT 624 790
DEFERRED INCOME TAXES 1,137 4,478
COMMITMENTS AND CONTINGENCIES (Notes 8 and 11)
SHAREHOLDERS' EQUITY:
Preferred stock, no par value - authorized:
5,000,000 shares; issued and outstanding: none - -
Common stock, no par value - authorized:
100,000,000 shares; issued and outstanding:
1999 - 41,417,576; 1998 - 40,182,392 51,954 35,660
Accumulated other comprehensive income 15 10
Retained earnings 96,700 60,041
---------- ----------
Total shareholders' equity 148,669 95,711
---------- ----------
TOTAL $ 203,094 $ 145,370
========== ==========
See notes to consolidated financial statements.
34
MICREL, INCORPORATED
CONSOLIDATED INCOME STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(In thousands, except per share amounts)
_______________________________________________________________________________
1999 1998 1997
--------- --------- ---------
NET REVENUES $ 195,122 $ 140,508 $ 104,158
COST OF REVENUES 85,629 69,324 48,641
--------- --------- ---------
GROSS PROFIT 109,493 71,184 55,517
--------- --------- ---------
OPERATING EXPENSES:
Research and development 26,328 18,931 13,986
Selling, general and administrative 28,157 21,658 17,128
Purchased in-process technology 603 3,737 -
--------- --------- ---------
Total operating expenses 55,088 44,326 31,114
--------- --------- ---------
INCOME FROM OPERATIONS 54,405 26,858 24,403
--------- --------- ---------
OTHER INCOME (EXPENSE):
Interest income 2,049 1,507 1,088
Interest expense (1,468) (416) (161)
Other income, net 29 1 44
--------- --------- ---------
Total other income, net 610 1,092 971
--------- --------- ---------
INCOME BEFORE INCOME TAXES 55,015 27,950 25,374
PROVISION FOR INCOME TAXES 18,356 10,774 8,627
--------- --------- ---------
NET INCOME $ 36,659 $ 17,176 $ 16,747
========= ========= =========
NET INCOME PER SHARE:
Basic $ 0.90 $ 0.43 $ 0.44
========= ========= =========
Diluted $ 0.82 $ 0.41 $ 0.40
========= ========= =========
SHARES USED IN COMPUTING PER SHARE
AMOUNTS:
Basic 40,830 39,610 38,138
========= ========= =========
Diluted 44,896 42,406 41,644
========= ========= =========
See notes to consolidated financial statements.
35
MICREL, INCORPORATED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(In thousands, except share amounts)
________________________________________________________________________________________________________________
Accumulated
Common Stock Other Total
------------------- Comprehensive Retained Shareholders' Comprehensive
Shares Amount Income (Loss) Earnings Equity Income
---------- --------- ------------- --------- ------------- -------------
Balances, January 1, 1997 37,322,572 $ 21,315 $ (2) $ 26,118 $ 47,431
Net income - - - 16,747 16,747 $ 16,747
Other comprehensive income,
net of tax - Change in net
unrealized gains from
short-term investments - - 2 - 2 2
---------
Comprehensive income $ 16,749
=========
Employee stock transactions 1,644,066 2,748 - - 2,748
Tax benefit of employee stock
transactions - 3,640 - - 3,640
---------- --------- --------- --------- ---------
Balances, December 31, 1997 38,966,638 27,703 - 42,865 70,568
Net income - - - 17,176 17,176 $ 17,176
Other comprehensive income,
net of tax - Change in net
unrealized gains from
short-term investments - - 10 - 10 10
---------
Comprehensive income $ 17,186
=========
Employee stock transactions 1,215,754 4,088 - - 4,088
Tax benefit of employee stock
transactions - 3,869 - - 3,869
---------- --------- --------- --------- ---------
Balances, December 31, 1998 40,182,392 35,660 10 60,041 95,711
Net income - - - 36,659 36,659 $ 36,659
Other comprehensive income,
net of tax - Change in net
unrealized gains from
short-term investments - - 5 - 5 5
---------
Comprehensive income $ 36,664
=========
Employee stock transactions 1,235,184 8,301 - - 8,301
Tax benefit of employee stock
transactions - 7,993 - - 7,993
---------- --------- --------- --------- ---------
Balances, December 31, 1999 41,417,576 $ 51,954 $ 15 $ 96,700 $ 148,669
========== ========= ========= ========= =========
See notes to consolidated financial statements.
36
MICREL, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(In thousands)
_______________________________________________________________________________
1999 1998 1997
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 36,659 $ 17,176 $ 16,747
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 19,267 12,332 6,509
Purchased in-process technology 603 3,737 -
Gain on disposal of assets (31) (3) (44)
Deferred rent (166) (126) (1)
Deferred income taxes (2,848) (3,642) (990)
Changes in operating assets and
liabilities, net of effects of
acquisition:
Accounts receivable (15,393) (4,896) (8,190)
Inventories (7,782) 4,553 3,258
Prepaid expenses and other assets (415) (149) 114
Accounts payable 3,249 2,893 449
Accrued compensation 1,373 364 475
Accrued commissions 442 299 289
Income taxes payable 15,908 7,033 3,879
Other accrued liabilities (1,282) 61 55
Deferred income on shipments to
distributors 2,127 997 760
--------- --------- ---------
Net cash provided by operating
activities 51,711 40,629 23,310
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and leasehold
improvements, net (29,364) (30,880) (21,410)
Purchases of short-term investments (65,321) (38,754) (37,531)
Proceeds from sales and maturities of
short-term investments 44,018 41,300 33,300
Purchase of company, net of cash acquired (1,800) (10,271) -
--------- --------- ---------
Net cash used in investing
activities (52,467) (38,605) (25,641)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of short-term borrowings - (3,132) -
Proceeds from long-term borrowings 2,100 12,000 -
Repayments of long-term debt (7,700) (4,146) (1,075)
Proceeds from the issuance of common stock 8,301 4,088 2,748
--------- --------- ---------
Net cash provided by financing
activities 2,701 8,810 1,673
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 1,945 10,834 (658)
CASH AND CASH EQUIVALENTS - Beginning of year 13,415 2,581 3,239
--------- --------- ---------
CASH AND CASH EQUIVALENTS - End of year $ 15,360 $ 13,415 $ 2,581
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest $ 1,468 $ 291 $ 152
========= ========= =========
Income taxes $ 5,293 $ 7,384 $ 5,625
========= ========= =========
See notes to consolidated financial statements.
37
MICREL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999, 1998 and 1997
1. SIGNIFICANT ACCOUNTING POLICIES
Nature of Business - Micrel, Incorporated and wholly-owned subsidiaries
(the "Company") develops, manufactures and markets analog and mixed-signal
semiconductor devices. The Company also provides custom and foundry
services which include silicon wafer fabrication, integrated circuit
assembly and testing. The Company's standard integrated circuits are sold
principally in North America, Asia, and Europe for use in a variety of
products, including those in the computer, communication, and industrial
markets. The Company's custom circuits and wafer foundry services are
provided to a wide range of customers that produce electronic systems for
communications, consumer, automotive and military applications. The
Company produces the majority of its wafers at the Company's wafer
fabrication facilities located in San Jose and Santa Clara, California.
After wafer fabrication, the completed wafers are then separated into
individual circuits and packaged at independent assembly and final test
contract facilities primarily located in Malaysia.
Principles of Consolidation - The accompanying consolidated financial
statements include the accounts of Micrel, Incorporated and its wholly-
owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
Use of Estimates - In accordance with generally accepted accounting
principles, management utilizes certain estimates and assumptions that
affect the reported amounts of 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 differ from those
estimates.
Cash Equivalents - The Company considers all highly liquid debt
instruments purchased with remaining maturities of three months or less to
be cash equivalents.
Short-term Investments - Short-term investments consist primarily of
highly liquid debt instruments purchased with remaining maturity dates of
greater than three months. Short-term investments are classified as
available-for-sale securities and are stated at market value with
unrealized gains and losses included in shareholders' equity, net of
income taxes. At December 31, 1999 and 1998, short-term investments
consisted of corporate debt securities (commercial paper) with maturities
of less than one year.
Short-term investments include the following available-for-sale securities
at December 31, 1999 and 1998 (in thousands):
MICREL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 1999, 1998 and 1997
Certain Significant Risks and Uncertainties - Financial instruments that
potentially subject the Company to concentrations of credit risk consist
of cash and cash equivalents, short-term investments, and accounts
receivable. Risks associated with cash are mitigated by banking with
creditworthy institutions. Cash equivalents and short-term investments
consist primarily of commercial paper and bank certificates of deposit and
are regularly monitored by management. Credit risk with respect to the
trade receivables is spread over a large number of geographically diverse
customers, who make up the Company's customer base. At December 31, 1999,
two customers accounted for 10% or more of total accounts receivable. At
December 31, 1998, no customer accounted for 10% or more of total accounts
receivable.
The Company participates in a dynamic high technology industry and
believes that changes in any of the following areas could have a material
adverse effect on the Company's future financial position, results of
operations, or cash flows: advances and trends in new technologies and
industry standards; competitive pressures in the form of new products or
price reductions on current products; changes in product mix; changes in
the overall demand for products offered by the Company; changes in third-
party manufacturers; changes in key suppliers; changes in certain
strategic relationships or customer relationships; litigation or claims
against the Company based on intellectual property, patents (Note 11),
product, regulatory or other factors; risk associated with necessary
components; risks associated with the Company's ability to attract and
retain employees necessary to support its growth.
Inventories - Inventories are stated at the lower of cost (first-in,
first-out method) or market.
Equipment and Leasehold Improvements - Equipment and leasehold improvements
are stated at cost. Depreciation on equipment is computed using the
straight-line method over estimated useful lives of three to five years.
Leasehold improvements are amortized over the shorter of the lease term or
the useful lives of the improvements.
Intangible Assets - Intangible assets (net of accumulated amortization of
1999, $2.3 million; 1998 $300,000) at December 31, consist of the following
(in thousands):
Impairment of Long-Lived Assets - Long-lived assets and certain
intangibles held and used by the Company are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of the asset may not be recoverable.
39
MICREL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 1999, 1998 and 1997
Revenue Recognition - Revenues from products sold directly to customers is
recognized upon shipment. A portion of the Company's sales are made to
United States, Canadian and certain other international distributors under
agreements allowing certain rights of return and price protection on
merchandise unsold by these distributors. Accordingly, the Company defers
recognition of such revenues until the merchandise is sold by the
distributors to their customers. The Company records a provision for
estimated returns, allowances and warranty costs at the time revenue is
recognized. Warranty costs have not been material in any period
presented.
Research and Development Expenses - Research and development expenses
include costs associated with the development of new wafer fabrication
processes and the definition, design and development of standard products.
The Company also expenses prototype wafers and new production mask sets
related to new products as research and development costs until products
based on new designs are fully characterized by the Company and are
demonstrated to support published data sheets and satisfy reliability
tests.
Income Taxes - Income taxes are provided at current rates. Deferred
income taxes reflect the net tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting
purposes and amounts used for income tax purposes.
Stock-based Awards - The Company accounts for stock-based awards to
employees using the intrinsic value method in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees".
Net Income per Share - Basic earnings per share ("EPS") is computed by
dividing net income by the number of weighted average common shares
outstanding. Diluted EPS reflects potential dilution from outstanding
stock options, using the treasury stock method.
Reconciliation of weighted average shares used in computing earnings per
share is as follows (in thousands):
Years Ended December 31,
---------------------------------
1999 1998 1997
--------- --------- ---------
Weighted average common shares
outstanding 40,830 39,610 38,138
Dilutive effect of stock options
outstanding, using the treasury
stock method 4,066 2,796 3,506
--------- --------- ---------
Shares used in computing diluted
earnings per share 44,896 42,406 41,644
========= ========= =========
Fair Value of Financial Instruments - Financial instruments included in
the Company's consolidated balance sheets at December 31, 1999 and 1998
consist of cash, cash equivalents, short-term investments and long-term
debt. For cash, the carrying amount is a reasonable estimate of the fair
value. The carrying amount for cash equivalents and short-term investments
approximates fair value because of the short maturity of those
investments. The fair value of long-term debt approximates the carrying
amount.
40
MICREL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 1999, 1998 and 1997
Comprehensive Income - Comprehensive income represents the change in net
assets during the period from nonowner sources. Consolidated statements
of comprehensive income for the years ended December 31, 1999, 1998, and
1997 have been included within the consolidated statements of
shareholders' equity and comprehensive income.
Geographic Operating Information - The Company reports segment data
pursuant to SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," which establishes annual and interim reporting
standards for an enterprise's business segments and related disclosures
about its products, services, geographic areas and major customers. The
Company operates in two reportable segments, standard products and custom
and foundry products (Note 12).
New Accounting Standards - In June 1998, the FASB issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and
for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. Adoption of this
statement is not expected to materially impact the Company's consolidated
financial position, results of operations or cash flows. The Company is
required to adopt this statement in the first quarter of fiscal year 2001,
with early adoption permitted.
2. ACQUISITIONS
On December 15, 1999, the Company acquired the outstanding capital stock
of Altos Semiconductor for a cash purchase price of $1.8 million. The
acquisition was accounted for as a purchase and, accordingly, the results
of operations of Altos from the date of acquisition forward have been
included in the Company's consolidated financial statements. Approximately
$1.7 million of the total purchase cost was allocated to intangible
assets. Of that amount, $603,000 was allocated to purchased in-process
technology, which has not reached technological feasibility and has no
alternative future use, for which the Company recorded charges in the year
ended December 31, 1999. The remaining intangible assets of $1.1 million,
consisting of existing technology, assembled workforce, and patents, are
included in intangible assets in the accompanying balance sheets and are
being amortized over their useful lives of five years.
On November 9, 1998, the Company acquired all outstanding shares of
Synergy Semiconductor ("Synergy") common stock for a cash purchase price
of $9.9 million plus $1.6 million of transaction fees and direct merger
costs.
The acquisition was accounted for as a purchase and, accordingly,
the results of operations of Synergy from the date of acquisition forward
have been included in the Company's consolidated financial statements. In
connection with the acquisition, intangible assets of $12.9 million were
acquired, of which $3.7 million was reflected as a one-time charge to
operations for the write-off of purchased in-process technology that had
not reached technological feasibility and, in management's opinion, had no
probable alternative future use. The $3.7 million one-time charge for
purchased in-process technology has been reflected in the Company's fiscal
1998 consolidated income statement within operating expenses. The
remaining intangible assets of $9.2 million, consisting of existing
technology, assembled workforce, tradename and patents, and customer
relationships, are included in intangible assets in the accompanying
41
MICREL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 1999, 1998 and 1997
balance sheets and are being amortized over their useful lives of three to
five years.
In connection with the Synergy acquisition, net assets acquired were as
follows (in thousands):
Current assets $ 13,564
Equipment and other, net 5,074
Intangible assets, including purchased in-process technology 12,945
Liabilities assumed 20,110)
---------
Net assets acquired $ 11,473
=========
The following unaudited pro forma information shows the results of
operations for the two fiscal years ended December 31, 1998, as if the
Synergy acquisition had occurred at the beginning of the earliest period
presented and at the purchase price established in November 1998
(in thousands, except per share amounts):
Years ended December 31, 1998 1997
--------- ---------
Net revenues $ 163,819 $ 141,586
Net income $ 11,295 $ 16,769
Net income per share, basic $ 0.57 $ 0.88
Net income per share, diluted $ 0.53 $ 0.81
The pro forma results are not necessarily indicative of what would have
occurred had the acquisition actually been made at the beginning of the
earliest period presented or of future operations of the combined
companies. The pro forma results combine the Company's results of
operations for the two fiscal years ended December 31, 1998, with the
results of Synergy through the date of acquisition and give effect to
certain adjustments, including the amortization of intangible assets,
changes in cost of revenues and depreciation expense associated with the
allocation of purchase price to inventory and fixed assets, interest
income associated with funding the acquisition, and related tax benefits.
The $3.7 million charge for purchased in-process technology has been
excluded from the pro forma results as it is a non-recurring charge.
3. INVENTORIES
Inventories at December 31 consist of the following (in thousands):
1999 1998
---------- ----------
Finished goods $ 5,958 $ 4,540
Work in process 16,125 9,745
Raw materials 1,768 1,784
---------- ----------
$ 23,851 $ 16,069
========== ==========
42
MICREL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 1999, 1998 and 1997
4. EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements at December 31 consist of the
following (in thousands):
5. BORROWING ARRANGEMENTS
Under a revolving line of credit and security agreement, the Company can
borrow up to 80% of its eligible accounts receivable to a maximum of $5.0
million. Borrowings under the line of credit agreement bear interest rates
of, at the Company's election, the prime rate (8.50% at December 31, 1999)
or the bank's offshore rate, which approximates LIBOR (5.82% at
December 31, 1999) plus 2.25%. Borrowings are collateralized by
substantially all of the assets of the Company. There were no borrowings
under this revolving line of credit at December 31, 1999.
Under the same security agreement, the Company has a non-revolving bank
line of credit of $20.0 million for funding purchases of capital equipment
under which the Company may borrow up to 100% of the cost of such
equipment of which $9.9 million was unused and available as of
December 31, 1999. Amounts borrowed under this credit line are converted
to four-year installment notes. All equipment notes are collateralized by
substantially all of the Company's manufacturing equipment and bear
interest rates of, at the Company's election, a fixed rate based on the
four-year U.S. Treasury Bill rate (6.34% at December 31, 1999) plus 3.0%
or an annual adjustable rate based on the one-year U.S. Treasury Bill rate
(5.98% at December 31, 1999) plus 3.0%.
The two lines of credit are covered by the same loan and security
agreement. The lines of credit expire March 31, 2000 and are subject to
automatic renewal on a month to month basis thereafter unless terminated
by either party upon 30 days notice.
The agreements contain certain restrictive covenants that include a
restriction on the declaration and payment of dividends without the
lender's consent. The Company was in compliance with all such covenants at
December 31, 1999.
On March 8, 2000, the loan agreements described above were subsequently
replaced with a new loan and security agreement. Under the new agreement,
the revolving line of credit remained at $5.0 million and the non-
revolving line of credit was increased to $40.0 million dollars. The new
agreement expires April 30, 2001 and is subject to automatic renewal on a
month to month basis thereafter unless terminated by either party upon 30
days notice. Borrowings under the new revolving line of credit bear
interest rates of, at the Company's election, the prime rate (8.50% at
December 31, 1999), or the bank's revolving offshore rate, which
approximates LIBOR (5.82% at December 31, 1999) plus 2.0%. Borrowings
under the new non-revolving line of credit bear interest rates of, at the
43
MICREL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 1999, 1998 and 1997
Company's election, the prime rate (8.50% at December 31, 1999), the
bank's non-revolving offshore rate, which approximates LIBOR (5.82% at
December 31, 1999) plus 2.13%, a fixed rate based on the four-year U.S.
Treasury Bill rate (6.34% at December 31, 1999) plus 2.75% or an annual
adjustable rate based on the one-year U.S. Treasury Bill rate (5.98% at
December 31, 1999) plus 2.75%. All other terms and conditions remain
substantially unchanged from the prior agreement.
Long-term debt at December 31, collateralized by equipment, consists of
the following (in thousands):
1999 1998
---------- ----------
Notes payable bearing interest at prime, payable
in monthly installments through September 2002 $ 2,639 $ 4,161
Notes payable bearing a fixed interest rate of
7.5%, payable in monthly installments through
November 2002 5,833 7,833
Notes payable bearing interest at annual
adjustable rate based on the one-year U.S.
Treasury Bill rate plus 3.0%, payable in monthly
installments through June 2003 1,838 -
Notes payable assumed from Synergy Semiconductor
bearing fixed rates ranging from 8.9% to 9.4%,
payable in monthly installments through
January 2003 3,676 7,592
---------- ----------
Total debt 13,986 19,586
Current portion (5,132) (5,579)
---------- ----------
Long-term debt $ 8,854 $ 14,007
========== ==========
Maturities of long-term debt subsequent to December 31, 1999 are as
follows (in thousands): $5,132 in 2000, $5,429 in 2001, $3,162 in 2002,
and $263 in 2003.
6. SHAREHOLDERS' EQUITY
Preferred Stock
The Company has authorized 5,000,000 shares of preferred stock, no par
value, of which none were issued or outstanding at December 31, 1999. The
preferred stock may be issued from time to time in one or more series.
The Board of Directors is authorized to determine or alter the rights,
preferences, privileges and restrictions of such preferred stock.
Stock Split
In September 1999, the Company effected a two-for-one stock split of the
outstanding shares of common stock. All share and per share amounts in
these consolidated financial statements have been adjusted to
retroactively give effect to the stock split for all periods presented.
Stock Option Plans
Under the Company's 1994 and 1989 Stock Option Plans (the "Option Plans"),
17,929,336 shares of common stock are authorized for issuance to key
employees. The Option Plans provide that the option price will be
determined by the Board of Directors at a price not less than the fair
44
MICREL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 1999, 1998 and 1997
value at the date of grant. Certain shareholder/employees of the Company
are granted options at 110% of the current fair market value. Options
granted become exercisable in not less than cumulative annual increments
of 20% per year from the date of grant. At December 31, 1999, 3,796,942
shares were available for future grants under the Option Plans and
10,894,574 total shares are reserved for future issuance.
Option activity under the Option Plans is as follows:
Weighted
Average
Number Exercise
of Shares Price
---------- ----------
Outstanding, January 1, 1997 (1,538,616
exercisable at a weighted average price of
$0.79 per share) 5,231,616 $ 2.45
Granted 1,730,500 12.80
Exercised (1,566,700) 1.34
Canceled (283,800) 3.57
---------- ---------
Outstanding, December 31, 1997 (905,316
exercisable at a weighted average price of
$1.83 per share) 5,111,616 6.22
Granted 2,863,200 16.52
Exercised (1,142,700) 2.73
Canceled (199,200) 6.65
---------- ---------
Outstanding, December 31, 1998 (954,816
exercisable at a weighted average price of
$5.61 per share) 6,632,916 11.25
Granted 2,062,750 31.02
Exercised (1,184,434) 5.75
Canceled (413,600) 15.68
---------- ---------
Outstanding, December 31, 1999 7,097,632 $ 17.75
========== =========
Additional information regarding options outstanding as of
December 31, 1999 is as follows:
Stock Options Outstanding Options Exercisable
------------------------------- -----------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life (yrs) Price Exercisable Price
---------------- ----------- --------- ------- ----------- -------
$ 0.25 to $ 4.75 1,179,000 4.9 $ 3.57 547,600 $ 3.36
$ 4.76 to $ 9.50 289,800 6.7 $ 6.58 90,000 $ 6.32
$ 9.51 to $14.25 1,184,600 7.6 $ 12.75 263,200 $ 12.63
$14.26 to $19.00 2,460,982 8.4 $ 17.04 463,182 $ 17.02
$19.01 to $23.75 201,500 9.1 $ 22.56 2,400 $ 21.71
$23.76 to $28.50 810,500 9.2 $ 25.48 2,800 $ 24.25
$28.51 to $33.25 84,000 9.4 $ 29.56 - -
$33.26 to $38.00 200,500 9.6 $ 36.61 - -
$38.01 to $42.75 636,250 9.7 $ 40.12 - -
$42.76 to $47.50 50,500 9.9 $ 44.86 - -
--------- ---------
$ 0.25 to $47.50 7,097,632 7.9 $ 17.75 1,369,182 $ 10.03
45
MICREL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 1999, 1998 and 1997
Employee Stock Purchase Plan
Under the 1994 Employee Stock Purchase Plan, (the "Purchase Plan"),
eligible employees are permitted to have salary withholdings to purchase
shares of common stock at a price equal to 85% of the lower of the market
value of the stock at the beginning or end of each six-month offer period,
subject to an annual limitation. Shares of common stock issued under the
Purchase Plan were 50,750, 73,054, and 77,366, in 1999, 1998, and 1997,
respectively, at weighted average prices of $29.50, $13.25, and $8.375,
respectively. At December 31, 1999, there were 548,282 shares of common
stock issued under the Purchase Plan and 651,718 shares are reserved for
future issuance under the Purchase Plan. The Purchase Plan excludes all
Company Officers (as defined in the Purchase Plan) from participation in
the Purchase Plan.
Additional Stock - Based Award Information
As discussed in Note 1, the Company accounts for its stock-based awards
using the intrinsic value method in accordance with Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" and its
related interpretations. Accordingly, no compensation expense has been
recognized in the financial statements for employee stock arrangements.
SFAS No. 123, "Accounting for Stock-Based Compensation," requires the
disclosure of pro forma net income and earnings per share had the Company
adopted the fair value method as of the beginning of fiscal 1995. Under
SFAS 123, the fair value of stock-based awards to employees is calculated
through the use of option pricing models, even though such models were
developed to estimate the fair value of freely tradable, fully
transferable options without vesting restrictions, which significantly
differ from the Company's stock option awards. These models also require
subjective assumptions, including future stock volatility and expected
time to exercise, which greatly affect the calculated values. The
Company's calculations were made using the Black-Scholes option pricing
model with the following weighted average assumptions: expected life, 60
months; stock volatility, 70.7% in 1999, 74.1% in 1998, and 74.3% in 1997;
risk free interest rates, 5.46% in 1999, 5.36% in 1998, and 5.44% in 1997;
and no dividends during the expected term. The Company's calculations are
based on a multiple option valuation approach and forfeitures are
recognized as they occur. The weighted average fair value of options
granted under the stock option plans during 1999, 1998, and 1997 was
$10.85, $10.74, and $8.28 per share. If the computed fair values of the
1999, 1998 and 1997 awards under both the Option Plans and the Purchase
Plan had been amortized to expense over the vesting period of the awards,
pro forma net income and net income per share would have been as follows
(in thousands, except per share amounts):
Years Ended December 31,
---------------------------------
1999 1998 1997
--------- --------- ---------
Pro forma net income $ 21,854 $ 9,194 $ 13,975
Pro forma net income per share:
Basic $ 0.50 $ 0.24 $ 0.36
Diluted $ 0.48 $ 0.22 $ 0.35
46
MICREL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 1999, 1998 and 1997
The amounts used above are based on calculated tax effected values for
option awards in 1999, 1998 and 1997 aggregating $25.6 million. The impact
of outstanding stock options granted prior to 1995 has been excluded from
the pro forma calculation; accordingly, the pro forma adjustments are not
indicative of future period pro forma adjustments, when the calculation
will apply to all applicable stock options.
7. INCOME TAXES
The provision for income taxes for the years ended December 31 consists of
the following (in thousands):
1999 1998 1997
--------- --------- ---------
Currently payable:
Federal $ 19,873 $ 13,147 $ 9,617
State 1,331 1,269 -
--------- --------- ---------
Total currently payable 21,204 14,416 9,617
--------- --------- ---------
Deferred income taxes:
Federal 556 (2,987) (814)
State (3,404) (655) (176)
--------- --------- ---------
Total deferred (2,848) (3,642) (990)
--------- --------- ---------
Total provision $ 18,356 $ 10,774 $ 8,627
========= ========= =========
A reconciliation of the statutory federal income tax rate to the effective
tax rate for the years ended December 31 is as follows:
1999 1998 1997
------ ------ ------
Statutory federal income tax rate 35% 35% 35%
State income taxes (net of federal
income tax benefit) 2 1 1
Federal research and experimentation tax
credits (2) (2) (2)
Export sales tax credit (1) (2) (2)
Non-deductible purchased in-process technology - 5 -
Other (1) 2 2
------ ------ ------
Effective tax rate 33% 39% 34%
====== ====== ======
47
MICREL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 1999, 1998 and 1997
Temporary differences that give rise to deferred tax assets and
liabilities at December 31 are as follows (in thousands):
1999 1998
-------- --------
Deferred tax assets:
Accruals and reserves not currently deductible $ 6,133 $ 9,531
Deferred income 2,747 1,898
Tax net operating loss and credit carryforwards 6,691 4,514
Capitalized research and development 2,604 602
Valuation allowance - (3,563)
-------- --------
Total deferred tax asset 18,175 12,982
-------- --------
Deferred tax liabilities:
Depreciation (3,246) (1,500)
State income taxes (1,387) (175)
Intangible assets (3,291) (3,818)
-------- --------
Total deferred tax liability (7,924) (5,493)
-------- --------
Net deferred tax asset $ 10,251 $ 7,489
======== ========
Due to the Company's acquisition of Synergy, the Company has available
pre-ownership change federal and state net operating loss carryforwards of
approximately $7.0 million and $2.0 million, respectively, which expire
beginning in 2006 and 2000. These pre-ownership change net operating loss
carryforwards are subject under Section 382 of the Internal Revenue Code
to an annual limitation estimated to be approximately $500,000. In
addition, the Company has available federal research and state credit
carryforwards of approximately $800,000 and $2.9 million, respectively.
Regarding the state credit carryforwards, approximately $1.6 million
represents pre-ownership change carryforwards subject to the Section 382
annual limitation.
8. OPERATING LEASES
The Company leases its facilities under operating lease agreements that
expire in 2005 and 2006. The lease agreements provide for escalating
rental payments over the lease periods. Rent expense is recognized on a
straight-line basis over the term of the lease. Deferred rent represents
the difference between rental payments and rent expense recognized on a
straight-line basis. Future minimum payments under these agreements are
as follows (in thousands):
MICREL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 1999, 1998 and 1997
Rent expense under operating leases was (in thousands): $2,604, $1,346,
and $1,031 for the years ended December 31, 1999, 1998, and 1997,
respectively.
9. PROFIT-SHARING 401(k) PLAN
The Company has a profit-sharing plan and deferred compensation plan (the
"Plan"). All employees completing one month of service are eligible to
participate in the Plan. Participants may contribute 1% to 12% of their
annual compensation on a before tax basis, subject to Internal Revenue
Service limitations. Profit-sharing contributions by the Company are
determined at the discretion of the Board of Directors. The Company
accrued $830,000 in 1999, $870,000 in 1998, and $605,000 in 1997.
Participants vest in Company contributions ratably over six years of
service.
10. SIGNIFICANT CUSTOMERS
In 1999 and 1998, no single customer accounted for ten percent or more of
net revenues. In 1997 one customer accounted for $11.2 million (11%) of
net revenues.
11. LITIGATION
The semiconductor industry is characterized by frequent litigation
regarding patent and other intellectual property rights. To the extent
that the Company becomes involved in such intellectual property
litigation, it could result in substantial costs and diversion of
resources to the Company and could have a material adverse effect on the
Company's financial condition or results of operations.
On July 2, 1999, National Semiconductor Corporation ("National"), a
competitor of the Company, filed a complaint against the Company, entitled
National Semiconductor Corporation v. Micrel Semiconductor, Inc. in the
United States District Court, Northern District of California, in
San Jose, California, alleging that the Company infringes five National
Semiconductor patents. The complaint in the lawsuit seeks unspecified
compensatory damages for infringement, treble damages as well as permanent
injunctive relief against further infringement of the National patents at
issue.
On February 26, 1999, the Lemelson Medical, Education & Research
Foundation (the "Lemelson Partnership") filed a complaint which was served
on the Company on June 15, 1999, entitled Lemelson Medical, Education &
Research Foundation, Limited Partnership v. Lucent Technologies Inc.,
et al. in the United States District Court in Phoenix, Arizona, against
eighty-eight defendants, including the Company, alleging infringement of
Lemelson Foundation patents. The complaint in the lawsuit seeks
unspecified compensatory damages, treble damages and attorneys' fees, as
well as injunctive relief against further infringement of the Lemelson
patents at issue. The Company intends to defend itself against these
claims.
On May 9, 1994, Linear Technology Corporation ("Linear" or "LTC"), a
competitor of the Company, filed a complaint against the Company, entitled
Linear Technology Corporation v. Micrel, Incorporated, in the United
States District Court in San Jose, California, alleging patent and
49
MICREL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 1999, 1998 and 1997
copyright infringement and unfair competition. All claims, except the
patent infringement claim, have been settled or dismissed. In this
lawsuit, Linear claimed that two of the Company's products infringed one
of Linear's patents. The complaint in the lawsuit sought unspecified
compensatory damages, treble damages and attorneys' fees as well as
preliminary and permanent injunctive relief against infringement of the
Linear patent at issue. On August 20, 1999, the United States District
Court in San Jose adjudicated in favor of the Company in this patent
infringement suit brought by the plaintiff. The plaintiff alleged in the
suit that the Company had infringed upon U.S. Patent No. 4,755,741 which
covers design techniques used to increase the efficiency of switching
regulators. The United States District Court in San Jose found the patent
to be invalid under the "on sale bar" defense as the plaintiff had placed
integrated circuits containing the alleged invention on sale more than a
year before filing its patent application. The United States District
Court in San Jose dismissed the plaintiff's complaint on the merits of the
case and awarded the Company its legal costs. An appeal of the Judgment
was filed by Linear on September 17, 1999 and will be entered after the
judge signs the final Judgement order.
The Company believes that the ultimate outcome of the legal actions
discussed above will not result in a material adverse effect on the
Company's financial condition, results of operation or cash flows.
However, litigation is subject to inherent uncertainties, and no assurance
can be given that the Company will prevail in these lawsuits.
Accordingly, the pending lawsuits as well as potential future litigation
with other companies, could result in substantial costs and diversion of
resources and could have a material adverse effect on the Company's
financial condition, results of operations or cash flows.
Certain additional claims and lawsuits have arisen against the Company in
its normal course of business. The Company believes that these claims and
lawsuits will not have a material adverse effect on the Company's
financial condition, results of operation or cash flows.
In the event of an adverse ruling in any intellectual property litigation
that now exists or might arise in the future, the Company might be
required to discontinue the use of certain processes, cease the
manufacture, use and sale of infringing products, expend significant
resources to develop non-infringing technology or obtain licenses to the
infringing technology. There can be no assurance, however, that under such
circumstances, a license would be available under reasonable terms or at
all. In the event of a successful claim against the Company and the
Company's failure to develop or license substitute technology on
commercially reasonable terms, the Company's financial condition, results
of operations, or cash flows could be adversely affected.
12. SEGMENT REPORTING
SFAS No.131 requires disclosures regarding products and services,
geographic areas, and major customers. The Company operates in two
reportable segments: standard products and custom and foundry products.
For the year ended December 31, 1999, the Company recorded revenue from
customers throughout the United States; France, the U.K., Finland,
Germany, Italy, Switzerland, Israel, Spain, Ireland, Sweden, and The
Netherlands (collectively referred to as "Europe"); Korea; Japan; Taiwan;
Singapore, Hong Kong, China, and Malaysia (collectively referred to as
"Other Asian Countries"); and Canada.
50
MICREL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 1999, 1998 and 1997
Net Revenues by Segment (in thousands):
CAPTION>
Years Ended December 31,
---------------------------------
1999 1998 1997
--------- --------- ---------
Standard Products $ 151,085 $ 99,902 $ 79,203
Custom and Foundry Products 44,037 40,606 24,955
--------- --------- ---------
Total net revenues $ 195,122 $ 140,508 $ 104,158
========= ========= =========
Geographic Information (in thousands):
1999 1998 1997
------------------ ------------------ --------
Long- Long-
Total Lived Total Lived Total
Revenues Assets Revenues Assets Revenues*
-------- -------- -------- -------- --------
United States of America $ 80,695 $ 70,210 $ 76,731 $ 63,526 $ 52,275
Korea 30,037 13 15,441 56 11,898
Japan 14,147 - 12,887 - 8,256
Taiwan 19,112 14 12,444 3 13,300
Other Asian Countries 7,593 5,295 7,108 496 4,941
Europe 21,364 46 15,550 37 13,402
Canada 22,174 - 347 - 86
-------- -------- -------- -------- --------
Total $195,122 $ 75,578 $140,508 $ 64,118 $104,158
======== ======== ======== ======== ========
* Total revenues are attributed to countries based on "ship to" location
of customer.
13. QUARTERLY RESULTS - UNAUDITED
(in thousands, except per share amounts)
Three Months Ended
Mar. 31, June 30, Sep. 30, Dec. 31,
1999 1999 1999 1999
-------- -------- -------- --------
Net revenues $ 40,571 $ 44,178 $ 50,091 $ 60,282
Gross profit $ 22,626 $ 24,739 $ 28,128 $ 34,000
Net income $ 7,359 $ 8,139 $ 9,368 $ 11,793 (1)
Net income per share:
Basic $ 0.18 $ 0.20 $ 0.23 $ 0.29 (1)
Diluted $ 0.17 $ 0.18 $ 0.21 $ 0.26 (1)
Shares used in computing
per share amounts:
Basic 40,290 40,676 41,064 41,288
Diluted 43,830 44,452 45,352 45,949
Note (1): Consolidated financial results for the fourth quarter ended
December 31, 1999 reflect a charge of $603,000 related to purchased
in-process technology associated with the acquisition of Altos
Semiconductor.
51
MICREL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 1999, 1998 and 1997
Three Months Ended
Mar. 31, June 30, Sep. 30, Dec. 31,
1998 1998 1998 1998
-------- -------- -------- --------
Net revenues $ 32,659 $ 34,502 $ 35,426 $ 37,921
Gross profit $ 17,963 $ 19,122 $ 19,712 $ 14,387
Net income (loss) $ 5,726 $ 6,299 $ 6,597 $ (1,446) (1)
Net income (loss) per share:
Basic $ 0.15 $ 0.16 $ 0.17 $ (0.04) (1)
Diluted $ 0.14 $ 0.15 $ 0.16 $ (0.04) (1)
Shares used in computing per
share amounts:
Basic 39,166 39,472 39,764 40,024
Diluted 42,218 42,360 42,266 40,024
Note (1): Consolidated financial results for the fourth quarter ended
December 31, 1998 reflect the write-off of approximately $7.0 million
in excess inventory and a charge of approximately $3.7 million related
to purchased in-process technology associated with the acquisition of
Synergy Semiconductor.
52
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Micrel, Incorporated:
We have audited the consolidated financial statements of Micrel, Incorporated
as of December 31, 1999 and 1998, and for each of the three years in the
period ended December 31, 1999, and have issued our report thereon dated
January 24, 2000. Our audits also included the financial statement schedule
of Micrel, Incorporated, listed in Item 14 (a) (2). This financial statement
schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
DELOITTE & TOUCHE LLP
San Jose, California
January 24, 2000
53
SCHEDULE II
MICREL, INCORPORATED
VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1999, 1998, and 1997
(Amounts in thousands)
Balance at Additions Write-offs
Beginning and Charges and Balance at
Description of Year to Expenses Deductions End of Year
---------------------------- ---------- ----------- ---------- -----------
Year Ended December 31, 1999
----------------------------
Accounts receivable allowance $ 1,613 $ 941 $ (7) $ 2,547
Year Ended December 31, 1998
----------------------------
Accounts receivable allowance $ 2,015 $ - $ (402) $ 1,613
Year Ended December 31, 1997
----------------------------
Accounts receivable allowance $ 1,224 $ 863 $ (72) $ 2,015
54
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized, in San Jose,
California on the 24th day of March, 2000.
MICREL, INCORPORATED
By /S/ RAYMOND D. ZINN
---------------------
Raymond D. Zinn
President and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Raymond D. Zinn and Richard D. Crowley, Jr., and
each of them, his attorneys-in-fact, each with the power of substitution, for
him in any and all capacities, to sign any amendments to this Report on Form
10-K and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/S/ RAYMOND D. ZINN President, Chief Executive March 24, 2000
--------------------------- Officer and Chairman of the
Raymond D. Zinn Board of Directors (Principal
Executive Officer)
/S/ RICHARD D. CROWLEY, JR. Vice President, Finance and March 24, 2000
--------------------------- Chief Financial Officer
Richard D. Crowley, Jr. (Principal Financial and
Accounting Officer)
/S/ WARREN H. MULLER Vice President, Secretary March 24, 2000
--------------------------- and Director
Warren H. Muller
/S/ GEORGE KELLY Director March 24, 2000
---------------------------
George Kelly
/S/ DALE L. PETERSON Director March 24, 2000
---------------------------
Dale L. Peterson
/S/ LARRY L. HANSEN Director March 24, 2000
---------------------------
Larry L. Hansen
55
Micrel, Incorporated
Exhibits Pursuant to Item 601 of Regulation S-K
Exhibit
Number Description
------- ----------------------------------------------------------------
2.1 Merger Agreement dated October 21, 1998, by and between Micrel,
Incorporated, MISYN Acquisition Corp. and Synergy Semiconductor
Corporation. (1)
2.2 Letter agreement dated November 9, 1998, between Micrel,
Incorporated, MISYN Acquisition Corp. and Synergy Semiconductor
Corporation. (1)
2.3 Escrow Agreement dated November 9, 1998, between Micrel,
Incorporated, John F. Stockton, as representative of the former
Synergy shareholders, and Bank of the West. (1)
3.1 Amended and Restated Articles of Incorporation of the
Registrant. (2)
3.2 Certificate of Amendment of Articles of Incorporation of the
Registrant. (3)
3.3 Amended and Restated Bylaws of the Registrant. (3)
4.1 Certificate for Shares of Registrant's Common Stock. (4)
10.1 Indemnification Agreement between the Registrant and each of its
officers and directors. (3)
10.2 1989 Stock Option Plan and form of Stock Option Agreement. (2) *
10.3 1994 Stock Option Plan and form of Stock Option Agreement. (2) *
10.4 1994 Stock Purchase Plan. (4)
10.6 Lease Agreement dated June 24, 1992 between the Registrant and
GOCO Realty Fund I, as amended August 6, 1992 and February 5,
1993. (2)
10.7 Amended and Restated Loan and Security Agreement dated
November 29, 1990 between the Registrant and Bank of the West, as
amended February 11, 1991, August 6, 1991, October 31, 1991,
June 24, 1992, September 24, 1992, August 16, 1993, April 29,
1994, July 2, 1994, August 23, 1994, September 30, 1994,
October 24, 1994. (2)
10.8 Form of Domestic Distribution Agreement. (3)
10.9 Form of International Distributor Agreement. (3)
10.10 Second Amendment dated February 20, 1995 between the Registrant
and TR Brell Cal Corporation to Lease Agreement dated June 24,
1992 between the Registrant and GOCO Realty Fund I, as amended
August 6, 1992 and February 5, 1993. (4)
10.11 Amended and Restated Loan and Security Agreement dated
November 29, 1990 between the Registrant and Bank of the West, as
amended March 31, 1995. (5)
10.12 Amended and Restated Loan and Security Agreement dated
November 29, 1990 between the Registrant and Bank of the West, as
amended September 30, 1996. (6)
10.13 Amended and Restated 1994 Employee Stock Purchase Plan, as
amended January 1, 1996. (7)
10.14 Commercial Lease between Harris Corporation and Synergy
Semiconductor Corporation dated February 29, 1996. (8)
10.15 Amended and Restated Loan and Security Agreement dated
November 29, 1990 between the Registrant and Bank of the West, as
amended October 6, 1997. (9)
23.1 Independent Auditors' Consent.
24.1 Power of Attorney. (See Signature Page.)
27.0 Financial Data Schedule.
* Management contract or compensatory plan or agreement.
(1) Incorporated herein by reference to the Company's Current Report on Form
8-K dated November 9, 1998 filed with the Commission on November 23,
1998 in which this exhibit bears the same number, unless otherwise
indicated.
(2) Incorporated herein by reference to the Company's Registration Statement
on Form S-1 ("Registration Statement"), File No. 33-85694, in which this
exhibit bears the same number, unless otherwise indicated.
(3) Incorporated by reference to Amendment No. 1 to the Registration
Statement, in which this exhibit bears the same number, unless otherwise
indicated.
(4) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995, in which this exhibit bears the same
number, unless otherwise indicated.
(5) Incorporated by reference to exhibit 10.1 filed with the Company's
quarterly report on Form 10-Q for the period ended March 31, 1995.
(6) Incorporated by reference to exhibit 10.1 filed with the Company's
quarterly report on Form 10-Q for the period ended September 30, 1996.
(7) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1996, in which this exhibit bears the number
10.14.
(8) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1998, in which this exhibit bears the same
number, unless otherwise indicated.
(9) Incorporated by reference to exhibit 10.1 filed with the Company's
quarterly report on Form 10-Q for the period ended September 30, 1997.
INDEPENDENT AUDITORS' CONSENT EXHIBIT 23.1
We consent to the incorporation by reference in Registration Statements Nos.
33-87222, 33-90396, 333-10167 and 333-89223 of Micrel, Incorporated on Form
S-8 of our reports dated January 24, 2000, appearing in this Annual Report on
Form 10-K of Micrel, Incorporated for the year ended December 31, 1999.
DELOITTE & TOUCHE LLP
San Jose, California
March 24, 2000
ARTICLE 5
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MICREL, INC.
FORM 10-K FOR THE PERIOD ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
MULTIPLIER: 1000
PERIOD TYPE
12 MOS
FISCAL YEAR END
DEC 31 1999
PERIOD START
JAN 01 1999
PERIOD END
DEC 31 1999
CASH
15,360
SECURITIES
36,337
RECEIVABLES
39,472
ALLOWANCES
2,547
INVENTORY
23,851
CURRENT ASSETS
127,516
PP&E
67,162
1
DEPRECIATION
0
TOTAL ASSETS
203,094
CURRENT LIABILITIES
43,810
BONDS
0
PREFERRED MANDATORY
0
PREFERRED
0
COMMON
51,954
OTHER SE
96,715
TOTAL LIABILITY AND EQUITY
203,094
SALES
195,122
TOTAL REVENUES
195,122
CGS
85,629
TOTAL COSTS
85,629
OTHER EXPENSES
55,088
LOSS PROVISION
0
INTEREST EXPENSE
1,468
INCOME PRETAX
55,015
INCOME TAX
18,356
INCOME CONTINUING
36,659
DISCONTINUED
0
EXTRAORDINARY
0
CHANGES
0
NET INCOME
36,659
EPS BASIC
0.90
2
EPS DILUTED
0.82
1
Item shown net of depreciation, consistent with the balance sheet presentation.
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