UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
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(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
March 31,
2010
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or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission file number
000-26124
IXYS Corporation
(Exact name of Registrant as
specified in its charter)
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Delaware
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77-0140882
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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1590 Buckeye Drive
Milpitas, California
95035-7418
(Address of principal executive
offices and zip code)
(408) 457-9000
(Registrants telephone
number, including area code)
Securities registered pursuant
to Section 12(b) of the Act:
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Common stock, par value $0.01
per share
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The NASDAQ Global Select
Market
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(Title of Each Class)
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(Name of Each Exchange on Which Registered)
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Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
Note Checking the box above will not relieve any
registrant required to file reports pursuant to Section 13
or 15(d) of the Exchange Act from their obligations under those
Sections.
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such files).
Yes o No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
(§ 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this
Form 10-K
or any amendment to this
Form 10-K. Yes o No þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated
filer o
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Accelerated
filer þ
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Non-accelerated
filer o
(Do not check if a smaller
reporting company)
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Smaller reporting
company o
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). Yes o No þ
The aggregate market value of the common stock held by
non-affiliates of the registrant, computed by reference to the
last sale price on the NASDAQ Global Select Market on
September 30, 2009, was approximately $204,615,453. For
purpose of this calculation, shares held or controlled by
directors and executive officers have been excluded because they
may be deemed to be affiliates. This determination
is used for convenience and is not conclusive for any purpose.
The number of shares of the registrants Common Stock
outstanding as of June 2, 2010 was 31,399,902.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions of the registrants Proxy Statement relating to
its Annual Meeting of Stockholders to follow its fiscal year
ended March 31, 2010, to be filed subsequently
Part III of this Annual Report on
Form 10-K.
IXYS
CORPORATION
ANNUAL REPORT ON
FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 31, 2010
TABLE OF CONTENTS
2
FORWARD-LOOKING
STATEMENTS
This Annual Report on
Form 10-K
contains forward-looking statements that include, but are not
limited to, statements concerning projected revenues, expenses,
gross profit and income and the need for additional capital.
These forward-looking statements are based on our current
expectations, estimates and projections about our industry,
managements beliefs and certain assumptions made by us. In
some cases, these statements may be identified by terminology,
such as may, will, should,
expects, plans, anticipates,
believes, estimates,
predicts, potential, or
continue or the negative of such terms and other
comparable expressions. These statements involve known and
unknown risks and uncertainties that may cause our results,
levels of activity, performance or achievements or our industry
to be materially different than those expressed or implied by
the forward-looking statements. Factors that may cause or
contribute to such differences include, but are not limited to,
our ability to compete successfully in our industry, to continue
to develop new products on a timely basis, cancellation of
customer orders and other factors discussed below and under the
caption Risk Factors in Item 1A. We disclaim
any obligation to update any of the forward-looking statements
contained in this report to reflect any future events or
developments, except as may be required by law.
PART I
We are a multi-market integrated semiconductor company. We
specialize in the development, manufacture and marketing of high
performance power semiconductors, advanced mixed signal
integrated circuits, or ICs, application specific integrated
circuits, or ASICs, systems and radio frequency, or RF, power
semiconductors.
Our power semiconductors improve system efficiency and
reliability by converting electricity at relatively high voltage
and current levels into the finely regulated power required by
electronic products. We focus on the market for power
semiconductors that are capable of processing greater than 200
watts of power.
Our power semiconductor products have historically been divided
into two primary categories, power MOS, or metal oxide silicon,
and power bipolar products. Our power semiconductors are sold as
individual units and are also packaged in high power modules
that frequently consist of multiple semiconductor die. In our
fiscal year ended March 31, 2010, or fiscal 2010, power
semiconductors constituted approximately 72.3% of our revenues,
which included 28.4% of revenues from power MOS transistors and
43.9% of revenues from bipolar products. References to revenues
in this Annual Report on
Form 10-K
constitute references to net revenues, except where the context
otherwise requires.
Our power semiconductor products are used primarily to control
electricity in:
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power conversion systems, including uninterruptible power
supplies, or UPS, and switch mode power supplies, or SMPS, for
applications such as communications infrastructure, including
wireless base stations, network servers and telecommunication
switching stations;
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motor drives for industrial applications, such as industrial
transportation, robotics, automation and process control
equipment;
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medical electronics for sophisticated applications, such as
defibrillators and MRI equipment; and
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renewable energy sources such as wind turbines and solar systems.
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We design and sell ICs that have applications in
telecommunications, display, power management, security systems
and appliances. In fiscal 2010, ICs constituted approximately
19.8% of our revenues. In February 2010, we acquired Zilog,
Inc., or Zilog, which is a supplier of microcontroller
semiconductor products.
Our mixed signal ICs are used in telecommunications products,
central office switching equipment, customer premises equipment,
set top boxes, remote meter reading equipment, security systems,
advanced flat displays, medical electronics and defense
aerospace systems. Our microcontroller semiconductor products
are designed for a variety of applications, including consumer
electronics, home appliances and security systems.
3
Our systems include laser diode drivers, high voltage pulse
generators and modulators, and high power subsystems, sometimes
known as stacks, that are principally based on our high power
semiconductor devices. We also design and sell RF power
semiconductors that switch electricity at the high rates
required by circuitry that generates radio frequencies. Our RF
power devices are used in wireless infrastructure, industrial RF
applications, medical systems and defense and space electronics.
In fiscal 2010, system and RF semiconductors constituted
approximately 7.9% of our revenues.
We design our power semiconductor, IC and system and RF
semiconductor products primarily for industrial and business
applications, rather than for use in consumer electronics.
In fiscal 2010, our products were used by over 2,000 end
customers worldwide. Our major end customers include ABB, Boston
Scientific, Delta Electronics, Emerson, Medtronic and Siemens.
We were founded in 1983 and are incorporated in the state of
Delaware.
Background
and Industry
The worldwide demand for electrical energy is currently
increasing due to:
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proliferation of technology-driven products that require
electricity, including computers, telecommunications equipment
and the infrastructure to support portable electronics;
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increased use of electronic content in traditional products such
as airplanes, automobiles and home appliances;
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increased use of automation and electrical processes in industry
and mass transit systems;
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growth of the Internet and mobile telecommunications
demand; and
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penetration of technology into developing countries.
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Not only is demand increasing, but the requirements for
electricity are also changing. Electronic products in all
markets are becoming increasingly sophisticated, offering more
intelligence through the use of microprocessors and
additional solid-state components. The increasing complexity of
such products requires more precisely regulated power quality
and greater power reliability. In addition, the increasing costs
of electricity, coupled with governmental regulations and
environmental concerns, have caused an increased demand for
energy efficiency.
Power semiconductors are used to provide the precisely regulated
power required by sophisticated electronic products and
equipment and address the growing demand for energy efficiency.
In most cases, power semiconductors:
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convert, or rectify, alternating current, or AC,
power delivered by electrical utilities to the direct current,
or DC, power that is required by most electronic equipment;
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convert DC power at a certain voltage level to DC power at a
different voltage level to meet the specific voltage requirement
for an application;
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invert DC power to high frequency AC power to permit the
processing of power through the use of substantially smaller
electronic components; or
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rectify high frequency AC power from switch mode power supplies
to meet the specific DC voltage and frequency required by an
application.
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Power semiconductors improve system efficiency and reliability
by processing and converting electrical energy into more usable,
higher quality power. Specifically, our power semiconductors are
used primarily in controlling energy in power conversion
systems, including switch-mode power supplies and
uninterruptible power supplies, and in motor drive controls.
Switch-mode power supplies efficiently convert power to meet the
specific voltage requirements of an application, such as
communications equipment. Uninterruptible power supplies provide
a short-term backup of electricity in the event of power
failure. Motor drive controls regulate the voltage, current and
frequency of power to a motor.
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With the growth in telecommunications, data communications and
wireless communications, the demand for analog and mixed signal
ICs and RF power semiconductors has grown. Our mixed signal ICs
address the interface between telecommunication and data
communication components, both in the central office and in
gateway applications, especially with the increased use of the
Internet protocol, or IP. Our RF power semiconductors are used
in wireless infrastructure and in other microwave communication
applications. Technical advancement in the communication
industries is expected, in part, to drive the demand for higher
performance semiconductors.
Power
Semiconductors
Our power semiconductor products have historically been divided
into two primary categories: power MOS transistors and bipolar
products. Our power semiconductors are sold separately and are
also packaged in high power modules that frequently consist of
multiple semiconductor dies. In fiscal 2010, power
semiconductors constituted approximately 72.3% of our revenues,
which included about 28.4% of revenues from power MOS
transistors and about 43.9% of revenues from bipolar products.
In fiscal year ended March 31, 2009, or fiscal 2009, power
semiconductors constituted approximately 79.3% of our revenues,
which included about 29.7% of revenues from power MOS
transistors and about 49.6% of revenues from bipolar products.
In fiscal year ended March 31, 2008, or fiscal 2008, power
semiconductors constituted approximately 77.7% of our revenues,
which included about 34.0% of revenues from power MOS
transistors and about 43.7% of revenues from bipolar products.
Power MOS
Transistors.
Power MOS transistors operate at much greater switching speeds
than bipolar transistors, allowing the design of smaller and
less costly end products. Power MOS transistors are activated by
voltage rather than current, so they require less external
circuitry to operate, making them more compatible with IC
controls. Power MOS transistors also offer more reliable long
term performance and are more rugged than traditional bipolar
transistors, permitting them to better withstand adverse
operating conditions. Our power MOS transistors consist of power
MOSFETs and IGBTs.
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Power MOSFETs. A power MOSFET, or metal oxide
silicon field effect transistor, is a switch controlled by
voltage at the gate. Power MOSFETs are used in combination with
passive components to vary the amperage and frequency of
electricity by switching on and off at high frequency. Our power
MOSFETs are used primarily in power conversion systems and are
focused on higher voltage applications ranging from 40 to 1,700
volts.
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IGBTs. IGBTs, or insulated gate bipolar
transistors, also are used as switches. IGBTs have achieved many
of the advantages of power MOSFETs and of traditional bipolar
technology by combining the voltage-controlled switching
features of power MOSFETs with the superior conductivity and
energy efficiency of bipolar transistors. For a given
semiconductor die size, IGBTs can operate at higher currents and
voltages, making them more cost-effective devices for high
energy applications than power MOSFETs.
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Since our inception, we have developed IGBTs for high voltage
applications. Our current products are focused on voltage
applications ranging from 300 volts to 4,500 volts. Our IGBTs
are used principally in AC motor drives, power systems and
defibrillators.
Bipolar
Products.
Bipolar products are also used to process electricity, but are
activated by current rather than voltage. Bipolar products are
capable of switching electricity at substantially higher power
levels than power MOS transistors. However, switching speeds of
bipolar products are slower than those of power MOS transistors
and, as a result, bipolar products are preferred where very high
power is required. Our bipolar products consist of rectifiers
and thyristors.
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Rectifiers. Rectifiers convert AC power to DC
power and are used primarily in input and output rectification
and inverters. Our rectifiers are used in DC and AC motor
drives, power supplies, lighting and heating controls and
welding equipment.
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A subset of our rectifier product group is a very fast switching
device known as a FRED, or fast recovery epitaxial diode. FREDs
limit spikes in voltage across the power switch to reduce power
dissipation and electromagnetic interference. Our FREDs are used
principally in AC motor drives and power supplies.
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Thyristors. Thyristors are switches that can
be turned on by a controlled signal and turned off only when the
output current is reduced to zero, which occurs in the flow of
AC power. Thyristors are preferred over power MOSFETs and IGBTs
in high voltage, low frequency AC applications because their on
state resistance is lower than the on state resistance of power
MOSFETs and IGBTs. Our thyristors are used in motor drives,
defibrillators, power supplies, lighting and heating controls.
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Integrated
Circuits
Our integrated circuits address the demand for analog, mixed
signal and digital interface solutions in the communication and
other industries and include mixed signal application specific
ICs, as designed for specific customers and as standard
products, power management and control ICs and microcontrollers.
ICs accounted for 19.8% of our revenues in fiscal 2010, 11.8% of
our revenues in fiscal 2009 and 13.5% of our revenues in fiscal
2008.
Solid
State Relays.
We manufacture solid state relays, or SSRs, that isolate the low
current communication signal from the higher power circuit,
while also switching to control the flow of current. Our SSRs,
which include high voltage analog components, optocouplers and
integrated packages, are utilized principally in
telecommunication and video and data communication applications,
as well as instrumentation, industrial control and aerospace and
automotive applications.
LCAS and
DAA integrated products.
A line card access switch, or LCAS, is a solid state solution
for a switching function traditionally performed by
electromagnetic devices. Our LCAS products are used in central
office switching applications to enable data and voice
telephony. Data access arrangements, or DAAs, integrate a number
of discrete components and are principally used in analog data
communications that interface with telephone network
applications. Our
Litelinktm
products are DAAs for applications such as Voice over IP, wired
communication lines and set top boxes.
Application
Specific Integrated Circuits.
We design high voltage, analog and mixed signal ASICs for a
variety of applications. Applying our technological expertise in
ASICs, we also design and sell application specific standard
products. In this regard, we have developed a line of source and
gate drivers.
Power
Management and Control ICs.
We also make and sell power management and control ICs, such as
current regulators, motion controllers, digital power modulators
and drivers for power MOSFETs and IGBTs. These ICs typically
manage, control or regulate power semiconductors and the
circuits and subassemblies that incorporate them.
Microcontrollers
With our acquisition of Zilog, we have added microcontrollers to
our product lines. A microcontroller is a
computer-on-a-chip
that is optimized to control electronic devices, such as motors
and user interfaces on appliances. A microcontroller typically
includes a central processing unit, non-volatile program memory,
random access memory for data storage and various peripheral
capabilities. The microcontroller is offered as a complete
solution because it incorporates application-specific software
provided by the customer and may include specialized peripheral
device controllers and internal or external non-volatile memory
components to enable the storage and access of additional
program software.
Microcontroller devices have been incorporated into a wide
variety of products in markets including consumer electronics,
home appliances and security systems. Microcontrollers are
generally segmented by word length,
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which is measured in bits ranging from 4-bit through 32-bit
architectures. Although 4-bit microcontrollers are relatively
inexpensive, they generally lack the minimum performance and
features required for product differentiation and are typically
used only to produce basic functionality in products. While
traditional 16-bit and 32-bit architectures are typically higher
performance, they can be too expensive for many high volume
embedded control applications, typically costing two to four
times the cost of an 8-bit microcontroller. Our microcontroller
product lines are focused on 8-bit microcontrollers.
Manufacturers will choose the appropriate microcontrollers based
on cost, performance and functionality requirements.
Microcontrollers are used broadly in over 100 different market
categories for specific and general purpose applications.
RF Power
Semiconductors
Our RF power devices switch electricity at the high rates
necessary to enable the amplification or reception of radio
frequencies. Our products include field effect transistors, or
FETs, pseudomorphic high electron mobility transistors, or
PHEMTs, and Gunn diodes. These products are principally gallium
arsenide devices, which remain efficient at the high heat and
energy levels inherent in RF applications.
Systems
and Other Products
We manufacture and sell laser diode drivers, high voltage pulse
generators and modulators, and high power subsystems, sometimes
known as modules or stacks, that are principally based on our
high power semiconductor devices. Additionally, we manufacture
our proprietary direct copper bond, or DCB, substrates for use
in our own semiconductor products as well as for sale to a
variety of customers, including those in the power semiconductor
industry. DCB technology cost-effectively provides excellent
thermal transfer while maintaining high electrical isolation.
Products
and Applications
Our power semiconductors are used primarily to control
electricity in power conversion systems, motor drives and
medical electronics. Our ICs are used to interface with
telecommunication lines, control power semiconductors and drive
medical equipment and displays, as well as offer our customers
the ability to integrate peripheral functions such as network
connectivity, timers, serial communication, analog to digital
conversion and display drivers on our micrologic devices. Our RF
power semiconductors enable the amplification and reception of
radio frequencies in telecommunication, industrial, defense and
space applications. The following table summarizes the primary
categories of uses for our products, some products used within
the categories and some of the applications served within the
categories:
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Category
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Our Products
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End User Applications
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Power Conversion Systems
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FRED
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SMPS and UPS for:
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IGBT
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Wireless base stations
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Module
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Internet facilities
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MOSFET
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Storage area networks
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Rectifier
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RF generators
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IC Driver
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Renewable energy systems
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Embedded Flash Microcontrollers
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Low-power controllers
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Core 8-bit Microcontrollers
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Industrial controllers
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Battery chargers
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Motor Drives
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FRED
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Automation
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IGBT
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Robotics
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Module
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Process control equipment
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MOSFET
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Machine tools
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Thyristor
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Electric trains
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IC Driver
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7
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Category
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Our Products
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End User Applications
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Medical Electronics
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IGBT
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Defibrillators
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MOSFET
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Medical imaging devices
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Thyristor
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Laser power supplies
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IC
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Ultrasound
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GaAs FET
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Telecommunications
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SSR
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Point-of-sale terminals
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LCAS
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Modems
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GaAs FET
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Set top boxes
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DAA
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Wireless base stations
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Core 8-bit Microcontrollers
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Central office
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Serial Communication Controllers
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Security systems
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Telephone switches/PBX
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Consumer Products
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Display Driver ICs
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Cell phones
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Core 8-bit Microcontrollers
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Appliances
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Embedded Flash Microcontrollers
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We also sell our power semiconductor chips and DCB substrates to
other power semiconductor companies for use in their modules.
Sales and
Marketing
We sell our products through a worldwide selling organization
that includes direct sales personnel, independent
representatives and distributors. As of March 31, 2010, we
employed 80 people in sales, marketing and customer support
and used 40 sales representative organizations and 12
distributors in the United States and 132 sales representative
organizations and distributors in the rest of the world. Sales
to distributors accounted for approximately 51.4% of net
revenues in fiscal 2010, 46.8% of net revenues in fiscal 2009
and 48.3% of net revenues in fiscal 2008. One distributor,
Allied Group (Hong Kong) Ltd, accounted for 10.9% of net
revenues in fiscal 2010.
In fiscal 2010, United States sales represented approximately
29.8%, and international sales represented approximately 70.2%,
of our net revenues. Of our international sales in fiscal 2010,
approximately 47.4% were derived from sales in Europe and the
Middle East, approximately 46.5% were derived from sales in Asia
and approximately 6.1% were derived from sales in Canada and the
rest of the world. For financial information about geographic
areas for each of our last three fiscal years, see Note 15,
Segment and Geographic Information in the Notes to
Consolidated Financial Statements in Item 8 of this Annual
Report on
Form 10-K,
which information is incorporated by reference into this
Item 1. For a discussion of the risks attendant to our
foreign operations, see Item 1A, Risk Factors-Our
international operations expose us to material risks,
which information is incorporated by reference into this
Item 1.
We market our products through advertisements, technical
articles and press releases that appear regularly in a variety
of trade publications, as well as through the dissemination of
brochures, data sheets and technical manuals. We also have a
presence on the Internet through a worldwide web page that
enables engineers to access and download technical information
and data sheets.
Research
and Development
We believe that we successfully compete in our markets, in part
because of our ability to design, develop and introduce to the
market on a timely basis new products offering technological
improvements. While the time from initiation of design to volume
production of new semiconductors often takes 18 months or
longer, our power semiconductors typically have a product life
of several years. Our research and development expenses were
approximately $20.1 million in fiscal 2010,
$19.9 million in fiscal 2009, and $21.1 million in
fiscal 2008. As of March 31, 2010, we employed
141 people in engineering and research and development
activities.
8
We are engaged in ongoing research and development efforts
focused on enhancements to existing products and the development
of new products. Currently, we are pursuing research and
development projects with respect to:
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developing new power semiconductors for defibrillators;
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increasing the operating range of our MOS and bipolar products;
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developing new gallium arsenide monolithic microwave ICs, or
MMICs;
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developing new light emitting diode drivers;
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developing higher power IGBT modules;
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developing power solid state relays;
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developing power management ICs based on our high voltage
silicon on insulator IC, or HVIC, technology;
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developing trench MOSFETs for automotive and portable equipment
markets;
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developing module products for automotive markets;
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developing module products for solar inverters and wind power
generators;
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developing stacks for renewable energy markets;
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developing ICs for telecommunications and flexible display
drivers;
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developing solar powered battery charging devices, products and
circuits; and
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developing 8 and 16-bit embedded flash-based microcontrollers,
including our Z8 Encore!, Z8 Encore XP, ZNEO, eZ80 Acclaim! and
Z-dot families of products and solutions.
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Research and development activities are conducted in
collaboration with manufacturing activities to help expedite new
products from the development phase to manufacturing and to more
quickly implement new process technologies. From time to time,
our research and development efforts have included participation
in technology collaborations with universities and research
institutions.
Patents
and Other Intellectual Property Rights
As of March 31, 2010, we held 322 issued patents, of which
278 were issued in the U.S. and 44 were issued in
international jurisdictions. We rely on a combination of patent
rights, copyrights and trade secrets to protect the proprietary
elements of our products. Our policy is to file patent
applications to protect technology, inventions and improvements
that are important to our business. We also seek to protect our
trade secrets and proprietary technology, in part through
confidentiality agreements with employees, consultants and other
parties. While we believe that our intellectual property rights
are valuable, we also believe that other factors, such as
innovative skills, technical expertise, the ability to adapt
quickly to evolving customer requirements and new technologies,
product support and customer relations, are of greater
competitive significance.
Manufacturing
and Facilities
The production of our products is a highly complex and precise
process. We manufacture our products in our own manufacturing
facilities, utilize external wafer foundries and subcontract
assembly facilities. We divide our manufacturing operations into
three key areas: wafer fabrication, assembly and test.
Wafer
Fabrication.
The first step in our manufacturing process for our power
semiconductors is the deposition of a layer of epitaxy on the
substrates we purchase from third parties. This deposition
occurs at external facilities and at our facility in
Santa Clara, California. The substrates are then sent for
fabrication.
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We have four facilities which perform fabrication. We own an
approximately 170,000 square-foot facility in Lampertheim,
Germany, where we fabricate bipolar products and an
approximately 83,000 square-foot facility in Beverly,
Massachusetts, capable of manufacturing HVICs. We also lease an
approximately 30,000 square-foot facility in Fremont,
California, where we manufacture gallium arsenide RF power
semiconductors, and an approximately 100,000 square-foot
facility in Chippenham, England, where we fabricate very high
power bipolar devices. We believe that our internal fabrication
capabilities enable us to more quickly bring products to the
market, retain certain proprietary aspects of our process
technology and develop new innovations.
In addition to maintaining our own fabrication facilities, we
have established alliances with selected foundries for wafer
fabrication. This approach allows us to reduce substantial
capital spending and manufacturing overhead expenses, obtain
competitive pricing and technologies and expand manufacturing
capacity more rapidly than could be achieved with internal
foundries alone. In some cases, we retain the flexibility to
shift the production of our products to different or additional
foundries for cost or performance reasons. Our product designs
enable the production of our devices at multiple foundries using
well-established and cost-effective processes.
Measured in dollars, we relied on external foundries for
approximately 38.8% of our wafer fabrication requirements in
fiscal 2010. We have arrangements with a number of external
wafer foundries, both for power semiconductors and ICs. Our
principal external foundry for power semiconductors is Samsung
Electronics facility located in Kiheung, South Korea. Our
relationship with Samsung Electronics extends for more than two
decades. We provide our foundries forecasts for wafer
fabrication six months in advance and make firm purchase
commitments one to two months in advance of delivery.
Wafer fabrication of power semiconductors generally employs
process technology and equipment already proven in IC
manufacturing. Power semiconductors are manufactured using
fabrication equipment that is one or more generations behind the
equipment used to fabricate leading edge ICs. Used fabrication
equipment can be obtained at prices substantially less than the
original cost of such equipment or the cost of current equipment
applying the latest technology. Consequently, the fabrication of
power semiconductors is less capital intensive than the
fabrication of leading edge ICs.
For a discussion of risks attendant to our use of external
foundries, see Risk Factors-We depend on external
foundries to manufacture many of our products, provided in
Item 1A of this Annual Report on
Form 10-K,
which information is incorporated by reference into this
Item 1. For a discussion of risks attendant to our
acquisition of substrates prior to wafer fabrication, see
Risk Factors-We depend upon a limited number of suppliers
for our substrates, most of whom we do not have long term
agreements with, provided in Item 1A of this Annual
Report on
Form 10-K,
which information is incorporated by reference into this
Item 1. For a discussion of environmental risks attendant
to our business, see Risk Factors-We may be affected by
environmental laws and regulations, provided in
Item 1A of this Annual Report on
Form 10-K,
which information is incorporated by reference into this
Item 1.
Assembly.
Packaging, or assembly, refers to the sequence of production
steps that divide the wafer into individual chips and enclose
the chips in external structures, called packages, which make
them useable in a circuit. Manufacturing typically involves the
assembly and packaging of single semiconductor, or die, devices.
Module manufacturing involves the assembly of multiple devices
within a single package. SSR products involve multiple chip
assembly on a specialized lead frame. The resulting packages
vary in configuration, but all have leads that are used to mount
the package through holes in the customers printed circuit
boards.
Most of our wafers are sent to subcontract assembly facilities.
We use assembly subcontractors located in Asia and Europe in
order to take advantage of low assembly costs. Measured in
dollars, approximately 61.2% of our products were, during fiscal
2010, assembled at external assembly facilities, and the rest
were assembled in our Lampertheim, Chippenham and Fremont
facilities.
Test.
Generally, each die on our wafers is electrically tested for
performance after wafer fabrication. Following assembly, our
products undergo testing and final inspection, either internally
or externally, prior to shipment to
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customers. Our test operations are performed by subcontractors
located throughout Asia and at our facilities in the United
States and Europe.
Competition
The semiconductor industry is intensely competitive and is
characterized by price competition, technological change,
limited fabrication capacity, international competition and
manufacturing yield problems. The competitive factors in the
market for our products include:
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price;
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proper new product definition;
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product quality, reliability and performance;
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product features;
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timely delivery of products;
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breadth of product line;
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design and introduction of new products;
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market acceptance of our products and those of our customers;
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support tools;
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familiarity with micrologic architecture;
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existing customer investment in system software based on a
particular architecture; and
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technical support and service.
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Regarding these factors, we view our competitive advantage as an
ability to respond quickly to customer requests for new product
development. On the other hand, we rarely consider our company
to be among the most aggressive in pricing. We believe that we
are one of a limited group of companies focused on the
development and marketing of high power, high performance
semiconductors capable of performing all of the basic functions
of power semiconductor design and manufacture. Our primary power
semiconductor competitors include Fairchild Semiconductor, Fuji,
Hitachi, Infineon, International Rectifier, Microsemi,
Mitsubishi, On Semiconductor, Powerex, Renesas Technology,
Semikron International, STMicroelectronics, Toshiba and Vishay
Intertechnology. Our IC products compete principally with those
of Atmel, Cypress Semiconductor, Freescale Semiconductor,
Matsushita, Microchip, NEC, Silicon Labs and Supertex. Our RF
power semiconductor competitors include RF Micro Devices.
Backlog
Backlog is influenced by several factors including market
demand, pricing and customer order patterns in reaction to
product lead times. In the semiconductor industry, backlog
quantities and shipment schedules under outstanding purchase
orders are frequently revised to reflect changes in customer
needs. Purchase orders or agreements calling for the sale of
specific quantities are either contractually subject to quantity
revisions or, as a matter of industry practice, often not
enforced. Therefore, a significant portion of our order backlog
may be cancelable. For these reasons, the amount of backlog as
of any particular date may not be an accurate indicator of
future results. At March 31, 2010, our backlog of orders
was approximately $125.5 million, as compared with
$76.9 million at March 31, 2009. Backlog represents
existing orders from customers expected to be shipped within the
12 months following March 31, 2010.
Our trade sales are made primarily pursuant to standard purchase
orders that are booked months in advance of delivery. Generally,
prices and quantities are fixed at the time of booking.
We sell products to key customers pursuant to contracts that
allow us to schedule production capacity in advance and allow
the customers to manage their inventory levels consistent with
just-in-time
principles while
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shortening the cycle times required to produce ordered product.
However, these contracts are typically amended to reflect
changes in customer demand and periodic price renegotiations.
Employees
At March 31, 2010, we employed 1,157 employees, of
whom 141 were primarily engaged in engineering and research and
development activities, 80 in marketing, sales and customer
support, 841 in manufacturing and 95 in administration and
finance. Of these employees, 218 hold engineering or science
degrees, including 22 Ph.D.s. Certain employees at our
Lampertheim and Chippenham facilities are subject to collective
bargaining agreements. There have been no work stoppages at any
of our facilities to date. We believe that our employee
relations are good.
Seasonality
Over the years, we have experienced a pattern, although not
consistently, in our September and December quarters of reduced
revenues or reduced growth in revenues from quarter to
sequential quarter because of summer vacation and year-end
holiday schedules in our and our customers facilities,
particularly in our European operations.
Available
Information
We currently make available, through our website at
http://www.ixys.com,
free of charge, copies of our Annual Report on
Form 10-K,
our quarterly reports on
Form 10-Q
and our current reports on
Form 8-K,
and amendments to those reports, as soon as reasonably
practicable after submitting the information to the Securities
and Exchange Commission, or SEC. None of the information posted
on our website is incorporated by reference into this Annual
Report on
Form 10-K.
You can also request free copies of such documents by contacting
us at
408-457-9000
or by sending an
e-mail to
investorrelations@ixys.net.
RISK
FACTORS
In addition to the other information in this Annual Report on
Form 10-K,
the following risk factors should be considered carefully in
evaluating our business and our company. Additional risks not
presently known to us or that we currently believe are not
serious may also impair our business and our financial condition.
Fluctuations
in demand for our products may harm our financial results and
are difficult to forecast.
Current uncertainty in global economic conditions poses a risk
to the overall economy and to our business, as our customers may
defer purchases in response to tighter credit and negative
financial news, which could negatively affect product demand and
other related matters. If demand for our products fluctuates, as
a result of economic conditions or otherwise, our revenue and
gross margin could be harmed. Important factors that could cause
demand for our products to fluctuate include:
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changes in business and economic conditions, including a
downturn in demand or decrease in the rate of growth in demand,
whether in the global economy, a regional economy or in the
semiconductor industry;
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changes in consumer and business confidence caused by changes in
market conditions, including changes in the credit market,
change in currency exchange rates, expectations for inflation
and energy prices;
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competitive pressures, particularly pricing pressures;
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changes in customer product needs;
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changes in the level of customers component
inventory; and
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strategic actions taken by our competitors.
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If product demand decreases, our manufacturing or assembly and
test capacity could be underutilized, and we may be required to
record an impairment on our long-lived assets including
facilities and equipment, as well as intangible assets, which
would increase our expenses. In addition, factory planning
decisions may shorten the useful lives of long-lived assets,
including facilities and equipment, and cause us to accelerate
depreciation. These changes in demand for our products and in
our customers product needs could have a variety of
negative effects on our competitive position and our financial
results, and, in certain cases, may reduce our revenue, increase
our costs, lower our gross margin percentage or require us to
recognize impairments of our assets. In addition, if product
demand decreases or we fail to forecast demand accurately, we
could be required to write off inventory or record
underutilization charges, which would have a negative impact on
our gross margin.
Our
operating results fluctuate significantly because of a number of
factors, many of which are beyond our control.
Given the nature of the markets in which we participate, we
cannot reliably predict future revenues and profitability and
unexpected changes may cause us to adjust our operations. Large
portions of our costs are fixed, due in part to our significant
sales, research and development and manufacturing costs. Thus,
small declines in revenues could seriously negatively affect our
operating results in any given quarter. Our operating results
may fluctuate significantly from quarter to quarter and year to
year. For example, from fiscal 2005 to fiscal 2006 and from
fiscal 2008 to fiscal 2009, net income in one year shifted to
net loss in the next year. Some of the factors that may affect
our quarterly and annual results are:
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the reduction, rescheduling or cancellation of orders by
customers;
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fluctuations in timing and amount of customer requests for
product shipments;
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changes in the mix of products that our customers purchase;
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loss of key customers;
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the cyclical nature of the semiconductor industry;
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competitive pressures on selling prices;
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market acceptance of our products and the products of our
customers;
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fluctuations in our manufacturing yields and significant yield
losses;
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difficulties in forecasting demand for our products and the
planning and managing of inventory levels;
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the availability of production capacity, whether internally or
from external suppliers;
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the availability of raw materials, supplies and manufacturing
services from third parties;
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the amount and timing of investments in research and development;
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damage awards or injunctions as the result of litigation;
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changes in our product distribution channels and the timeliness
of receipt of distributor resale information;
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the impact of vacation schedules and holidays, largely during
the second and third fiscal quarters of our fiscal year; and
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the amount and timing of costs associated with product returns.
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As a result of these factors, many of which are difficult to
control or predict, as well as the other risk factors discussed
in this Annual Report on
Form 10-K,
we may experience materially adverse fluctuations in our future
operating results on a quarterly or annual basis.
Our
backlog may not result in future revenues.
Customer orders typically can be cancelled or rescheduled
without penalty to the customer. Further, in periods of
increasing demand, particularly when production is allocated or
delivery delayed, customers of semiconductor
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companies have on occasion placed orders without expectation of
accepting delivery to increase their share of allocated product,
or in an effort to improve the timeliness of delivery. While we
are attuned to the potential for such behavior and attempt to
identify such orders, we could accept orders of this nature and
subsequently experience order cancellation unexpectedly. As a
result, our backlog at any particular date is not necessarily
indicative of actual revenues for any succeeding period. A
reduction of backlog during any particular period, or the
failure of our backlog to result in future revenues, could harm
our results of operations.
Our
international operations expose us to material
risks.
For the fiscal year ended March 31, 2010, our product sales
by region were approximately 29.8% in the United States,
approximately 33.3% in Europe and the Middle East, approximately
32.6% in Asia Pacific and approximately 4.3% in Canada and the
rest of the world. We expect revenues from foreign markets to
continue to represent a significant portion of total revenues.
We maintain significant operations in Germany and the United
Kingdom and contracts with suppliers and manufacturers in South
Korea, Japan and elsewhere in Europe and Asia Pacific. Some of
the risks inherent in doing business internationally are:
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foreign currency fluctuations, particularly in the Euro and the
British pound;
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longer payment cycles;
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challenges in collecting accounts receivable;
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changes in the laws, regulations or policies of the countries in
which we manufacture or sell our products;
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trade restrictions;
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cultural and language differences;
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employment regulations;
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limited infrastructure in emerging markets;
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transportation delays;
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seasonal reduction in business activities;
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work stoppages;
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labor and union disputes;
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electrical outages;
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terrorist attack or war; and
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economic or political instability.
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Our sales of products manufactured in our Lampertheim, Germany
facility and our costs at that facility are primarily
denominated in Euros, and sales of products manufactured in our
Chippenham, U.K. facility and our costs at that facility are
primarily denominated in British pounds. Fluctuations in the
value of the Euro and the British pound against the
U.S. dollar could have a significant adverse impact on our
balance sheet and results of operations. We generally do not
enter into foreign currency hedging transactions to control or
minimize these risks. Reductions in the value of the Euro or
British pound would reduce our revenues recognized in
U.S. dollars, all other things being equal. Fluctuations in
currency exchange rates could cause our products to become more
expensive to customers in a particular country, leading to a
reduction in sales or profitability in that country. If we
expand our international operations or change our pricing
practices to denominate prices in other foreign currencies, we
could be exposed to even greater risks of currency fluctuations.
Our financial performance is dependent on economic stability and
credit availability in international markets. Actions by
governments to address deficits or sovereign debt issues could
adversely affect gross domestic product or currency exchange
rates in countries where we operate, which in turn could
adversely affect our financial results.
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If our customers or suppliers are unable to obtain the credit
necessary to fund their operations, we could experience
increased bad debts, reduced product orders and interruptions in
supplier deliveries leading to delays or stoppages in our
production. For example, the recent sovereign debt crisis in
Europe has led to a decline in the Euro/ U.S. dollar
currency exchange rate, which may adversely affect our revenues.
In addition, the laws of certain foreign countries may not
protect our products or intellectual property rights to the same
extent as do U.S. laws regarding the manufacture and sale
of our products in the U.S. Therefore, the risk of piracy
of our technology and products may be greater when we
manufacture or sell our products in these foreign countries.
The
semiconductor industry is cyclical, and an industry downturn
could adversely affect our operating results.
Business conditions in the semiconductor industry may rapidly
change from periods of strong demand and insufficient production
to periods of weakened demand and overcapacity. The industry in
general is characterized by:
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changes in product mix in response to changes in demand;
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alternating periods of overcapacity and production shortages,
including shortages of raw materials supplies and manufacturing
services;
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cyclical demand for semiconductors;
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significant price erosion;
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variations in manufacturing costs and yields;
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rapid technological change and the introduction of new
products; and
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significant expenditures for capital equipment and product
development.
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These factors could harm our business and cause our operating
results to suffer.
Fluctuations
in the mix of products sold may adversely affect our financial
results.
Changes in the mix and types of products sold may have a
substantial impact on our revenues and gross profit margins. In
addition, more recently introduced products tend to have higher
associated costs because of initial overall development costs
and higher
start-up
costs. Fluctuations in the mix and types of our products may
also affect the extent to which we are able to recover our fixed
costs and investments that are associated with a particular
product, and, as a result, can negatively impact our financial
results.
Our
dependence on subcontractors to assemble and test our products
subjects us to a number of risks, including an inadequate supply
of products and higher materials costs.
We depend on subcontractors for the assembly and testing of our
products. The substantial majority of our products are assembled
by subcontractors located outside of the United States. Assembly
subcontractors generally work on narrow margins and have limited
capital. We have experienced assembly subcontractors who have
ceased or reduced production because of financial problems. We
engage assembly subcontractors who operate while in insolvency
proceedings or whose financial stability is uncertain. The
unexpected cessation of production by one or more of our
assembly subcontractors could adversely affect our production,
our customer relations, our revenues and our financial
condition. Our reliance on these subcontractors also involves
the following significant risks:
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reduced control over delivery schedules and quality;
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the potential lack of adequate capacity during periods of excess
demand;
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difficulties selecting and integrating new subcontractors;
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limited or no warranties by subcontractors or other vendors on
products supplied to us;
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potential increases in prices due to capacity shortages and
other factors;
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potential misappropriation of our intellectual property; and
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economic or political instability in foreign countries.
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These risks may lead to delayed product delivery or increased
costs, which would harm our profitability and customer
relationships.
In addition, we use a limited number of subcontractors to
assemble a significant portion of our products. If one or more
of these subcontractors experience financial, operational,
production or quality assurance difficulties, we could
experience a reduction or interruption in supply. For example,
two of our recent assembly subcontractors have either ceased
operations or entered into insolvency proceedings. Although we
believe alternative subcontractors are available, our operating
results could temporarily suffer until we engage one or more of
those alternative subcontractors. Moreover, in engaging
alternative subcontractors in exigent circumstances, our
production costs could increase markedly.
Semiconductors
for inclusion in consumer products have short product life
cycles.
We believe that consumer products are subject to shorter product
life cycles, because of technological change, consumer
preferences, trendiness and other factors, than other types of
products sold by our customers. Shorter product life cycles
result in more frequent design competitions for the inclusion of
semiconductors in next generation consumer products, which may
not result in design wins for us.
We may
not be successful in our acquisitions.
We have in the past made, and may in the future make,
acquisitions of other companies and technologies. These
acquisitions involve numerous risks, including:
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failure to retain key personnel of the acquired business;
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diversion of managements attention during the acquisition
process;
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disruption of our ongoing business;
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the potential strain on our financial and managerial controls
and reporting systems and procedures;
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unanticipated expenses and potential delays related to
integration of an acquired business;
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the risk that we will be unable to develop or exploit acquired
technologies;
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failure to successfully integrate the operations of an acquired
company with our own;
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the challenges in achieving strategic objectives, cost savings
and other benefits from acquisitions;
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the risk that our markets do not evolve as anticipated and that
the technologies acquired do not prove to be those needed to be
successful in those markets;
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the risks of entering new markets in which we have limited
experience;
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difficulties in expanding our information technology systems or
integrating disparate information technology systems to
accommodate the acquired businesses;
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the challenges inherent in managing an increased number of
employees and facilities and the need to implement appropriate
policies, benefits and compliance programs;
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customer dissatisfaction or performance problems with an
acquired companys products or personnel;
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adverse effects on our relationships with suppliers;
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the reduction in financial stability associated with the
incurrence of debt or the use of a substantial portion of our
available cash;
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the costs associated with acquisitions, including in-process
R&D charges and amortization expense related to intangible
assets, and the integration of acquired operations; and
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assumption of known or unknown liabilities or other
unanticipated events or circumstances.
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We cannot assure that we will be able to successfully acquire
other businesses or product lines or integrate them into our
operations without substantial expense, delay in implementation
or other operational or financial problems.
As a result of an acquisition, our financial results may differ
from the investment communitys expectations in a given
quarter. Further, if market conditions or other factors lead us
to change our strategic direction, we may not realize the
expected value from such transactions. If we do not realize the
expected benefits or synergies of such transactions, our
consolidated financial position, results of operations, cash
flows or stock price could be negatively impacted.
We
depend on external foundries to manufacture many of our
products.
Of our revenues for our fiscal year ended March 31, 2010,
38.8% came from wafers manufactured for us by external
foundries. Our dependence on external foundries may grow. We
currently have arrangements with a number of wafer foundries,
three of which produce the wafers for power semiconductors that
we purchase from external foundries. Samsung Electronics
facility in Kiheung, South Korea is our principal external
foundry.
Our relationships with our external foundries do not guarantee
prices, delivery or lead times or wafer or product quantities
sufficient to satisfy current or expected demand. These
foundries manufacture our products on a purchase order basis. We
provide these foundries with rolling forecasts of our production
requirements. However, the ability of each foundry to provide
wafers to us is limited by the foundrys available
capacity. At any given time, these foundries could choose to
prioritize capacity for their own use or other customers or
reduce or eliminate deliveries to us on short notice. If growth
in demand for our products occurs, these foundries may be unable
or unwilling to allocate additional capacity to our needs,
thereby limiting our revenue growth. Accordingly, we cannot be
certain that these foundries will allocate sufficient capacity
to satisfy our requirements. In addition, we cannot be certain
that we will continue to do business with these or other
foundries on terms as favorable as our current terms. If we are
not able to obtain foundry capacity as required, our
relationships with our customers could be harmed, we could be
unable to fulfill contractual requirements and our revenues
could be reduced or growth limited. Moreover, even if we are
able to secure foundry capacity, we may be required, either
contractually or as a practical business matter, to utilize all
of that capacity or incur penalties or an adverse effect to the
business relationship. The costs related to maintaining foundry
capacity could be expensive and could harm our operating
results. Other risks associated with our reliance on external
foundries include:
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the lack of control over delivery schedules;
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the unavailability of, or delays in obtaining access to, key
process technologies;
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limited control over quality assurance, manufacturing yields and
production costs; and
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potential misappropriation of our intellectual property.
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Our requirements typically represent a small portion of the
total production of the external foundries that manufacture our
wafers and products. We cannot be certain these external
foundries will continue to devote resources to the production of
our wafers and products or continue to advance the process
design technologies on which the manufacturing of our products
is based. These circumstances could harm our ability to deliver
our products or increase our costs.
Our
success depends on our ability to manufacture our products
efficiently.
We manufacture our products in facilities that are owned and
operated by us, as well as in external wafer foundries and
subcontract assembly facilities. The fabrication of
semiconductors is a highly complex and precise
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process, and a substantial percentage of wafers could be
rejected or numerous dies on each wafer could be nonfunctional
as a result of, among other factors:
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contaminants in the manufacturing environment;
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defects in the masks used to print circuits on a wafer;
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manufacturing equipment failure; or
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wafer breakage.
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For these and other reasons, we could experience a decrease in
manufacturing yields. Additionally, if we increase our
manufacturing output, the additional demands placed on our
equipment and personnel or the addition of new equipment or
personnel may lead to a decrease in manufacturing yields. As a
result, we may not be able to cost-effectively expand our
production capacity in a timely manner.
Our
debt agreements contain certain restrictions that may limit our
ability to operate our business.
The agreements governing our debt contain, and any other future
debt agreement we enter into may contain, restrictive covenants
that limit our ability to operate our business, including, in
each case subject to certain exceptions, restrictions on our
ability to:
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incur additional indebtedness;
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grant liens;
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consolidate, merge or sell our assets, unless specified
conditions are met;
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acquire other business organizations;
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make investments;
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redeem or repurchase our stock; and
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change the nature of our business.
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In addition, our debt agreements contain financial covenants and
additional affirmative and negative covenants. Our ability to
comply with these covenants is dependent on our future
performance, which will be subject to many factors, some of
which are beyond our control, including prevailing economic
conditions. If we are not able to comply with all of these
covenants for any reason and we have debt outstanding at the
time of such failure, some or all of our outstanding debt could
become immediately due and payable and the incurrence of
additional debt under the credit facilities provided by the debt
agreements would not be allowed. If our cash is utilized to
repay any outstanding debt, depending on the amount of debt
outstanding, we could experience an immediate and significant
reduction in working capital available to operate our business.
As a result of these covenants, our ability to respond to
changes in business and economic conditions and to obtain
additional financing, if needed, may be significantly
restricted, and we may be prevented from engaging in
transactions that might otherwise be beneficial to us, such as
strategic acquisitions or joint ventures.
Our
gross margin is dependent on a number of factors, including our
level of capacity utilization.
Semiconductor manufacturing requires significant capital
investment, leading to high fixed costs, including depreciation
expense. We are limited in our ability to reduce fixed costs
quickly in response to any shortfall in revenues. If we are
unable to utilize our manufacturing, assembly and testing
facilities at a high level, the fixed costs associated with
these facilities will not be fully absorbed, resulting in lower
gross margins. Increased competition and other factors may lead
to price erosion, lower revenues and lower gross margins for us
in the future.
We order materials and commence production in advance of
anticipated customer demand. Therefore, revenue shortfalls may
also result in inventory write downs.
We typically plan our production and inventory levels based on
our own expectations for customer demand. Actual customer
demand, however, can be highly unpredictable and can fluctuate
significantly. In response to
18
anticipated long lead times to obtain inventory and materials,
we order materials and production in advance of customer demand.
This advance ordering and production may result in excess
inventory levels or unanticipated inventory write downs if
expected orders fail to materialize. For example, additional
inventory write downs occurred in the quarter ended
March 31, 2009.
Changes
in our decisions about restructuring could affect our results of
operations and financial condition.
Factors that could cause actual results to differ materially
from our expectations about restructuring actions include:
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timing and execution of a plan that may be subject to local
labor law requirements, including consultation with appropriate
work councils;
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changes in assumptions related to severance costs;
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changes in employment levels and turnover rates; and
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changes in product demand and the business environment,
including changes in global economic conditions.
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Our
royalties are uncertain and unpredictable in
amount.
We are unable to discern a pattern in or otherwise predict the
amount of any royalty payments that we may receive.
Consequently, we are unable to plan on the receipt of royalties
and our results of operations may be adversely affected by a
reduction in the amount of royalties received in an
unanticipated manner.
Increasing
raw material prices could impact our
profitability.
Our products use large amounts of silicon, metals and other
materials. In recent periods, we have experienced price
increases for many of these items. If we are unable to pass
price increases for raw materials onto our customers, our gross
margins and profitability could be adversely affected.
Our
markets are subject to technological change and our success
depends on our ability to develop and introduce new
products.
The markets for our products are characterized by:
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changing technologies;
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changing customer needs;
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frequent new product introductions and enhancements;
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increased integration with other functions; and
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product obsolescence.
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To develop new products for our target markets, we must develop,
gain access to and use leading technologies in a cost-effective
and timely manner and continue to expand our technical and
design expertise. Failure to do so could cause us to lose our
competitive position and seriously impact our future revenues.
Products or technologies developed by others may render our
products or technologies obsolete or noncompetitive. A
fundamental shift in technologies in our product markets would
have a material adverse effect on our competitive position
within the industry.
Our
revenues are dependent upon our products being designed into our
customers products.
Many of our products are incorporated into customers
products or systems at the design stage. The value of any design
win largely depends upon the customers decision to
manufacture the designed product in production quantities, the
commercial success of the customers product and the extent
to which the design of the customers electronic system
also accommodates incorporation of components manufactured by
our competitors. In addition,
19
our customers could subsequently redesign their products or
systems so that they no longer require our products. The
development of the next generation of products by our customers
generally results in new design competitions for semiconductors,
which may not result in design wins for us, potentially leading
to reduced revenues and profitability. We may not achieve design
wins or our design wins may not result in future revenues.
We
could be harmed by intellectual property
litigation.
As a general matter, the semiconductor industry is characterized
by substantial litigation regarding patent and other
intellectual property rights. We have been sued on occasion for
purported patent infringement. In the future, we could be
accused of infringing the intellectual property rights of third
parties. We also have certain indemnification obligations to
customers and suppliers with respect to the infringement of
third party intellectual property rights by our products. We
could incur substantial costs defending ourselves and our
customers and suppliers from any such claim. Infringement claims
or claims for indemnification, whether or not proven to be true,
may divert the efforts and attention of our management and
technical personnel from our core business operations and could
otherwise harm our business. For example, in June 2000, we were
sued for patent infringement by International Rectifier
Corporation. The case was ultimately resolved in our favor, but
not until October 2008. In the interim, the U.S. District
Court entered multimillion dollar judgments against us on two
different occasions, each of which was subsequently vacated.
In the event of an adverse outcome in any intellectual property
litigation, we could be required to pay substantial damages,
cease the development, manufacturing, use and sale of infringing
products, discontinue the use of certain processes or obtain a
license from the third party claiming infringement with royalty
payment obligations upon us. An adverse outcome in an
infringement action could materially and adversely affect our
financial condition, results of operations and cash flows.
We may
not be able to protect our intellectual property rights
adequately.
Our ability to compete is affected by our ability to protect our
intellectual property rights. We rely on a combination of
patents, trademarks, copyrights, trade secrets, confidentiality
procedures and non-disclosure and licensing arrangements to
protect our intellectual property rights. Despite these efforts,
we cannot be certain that the steps we take to protect our
proprietary information will be adequate to prevent
misappropriation of our technology, or that our competitors will
not independently develop technology that is substantially
similar or superior to our technology. More specifically, we
cannot assure that our pending patent applications or any future
applications will be approved, or that any issued patents will
provide us with competitive advantages or will not be challenged
by third parties. Nor can we assure that, if challenged, our
patents will be found to be valid or enforceable, or that the
patents of others will not have an adverse effect on our ability
to do business. We may also become subject to or initiate
interference proceedings in the U.S. Patent and Trademark
Office, which can demand significant financial and management
resources and could harm our financial results. Also, others may
independently develop similar products or processes, duplicate
our products or processes or design their products around any
patents that may be issued to us.
Because
our products typically have lengthy sales cycles, we may
experience substantial delays between incurring expenses related
to research and development and the generation of
revenues.
The time from initiation of design to volume production of new
semiconductors often takes 18 months or longer. We first
work with customers to achieve a design win, which may take nine
months or longer. Our customers then complete the design,
testing and evaluation process and begin to ramp up production,
a period that may last an additional nine months or longer. As a
result, a significant period of time may elapse between our
research and development efforts and our realization of
revenues, if any, from volume purchasing of our products by our
customers.
20
We may
not be able to increase production capacity to meet the present
and future demand for our products.
The semiconductor industry has been characterized by periodic
limitations on production capacity. Although we may be able to
obtain the capacity necessary to meet present demand, if we are
unable to increase our production capacity to meet possible
future demand, some of our customers may seek other sources of
supply or our future growth may be limited.
The
markets in which we participate are intensely
competitive.
Many of our target markets are intensely competitive. Our
ability to compete successfully in our target markets depends on
the following factors:
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proper new product definition;
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product quality, reliability and performance;
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product features;
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price;
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timely delivery of products;
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technical support and service;
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design and introduction of new products;
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market acceptance of our products and those of our
customers; and
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breadth of product line.
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In addition, our competitors or customers may offer new products
based on new technologies, industry standards or end-user or
customer requirements, including products that have the
potential to replace our products or provide lower cost or
higher performance alternatives to our products. The
introduction of new products by our competitors or customers
could render our existing and future products obsolete or
unmarketable.
Our primary power semiconductor competitors include Fairchild
Semiconductor, Fuji, Hitachi, Infineon, International Rectifier,
Microsemi, Mitsubishi, On Semiconductor, Powerex, Renesas
Technology, Semikron International, STMicroelectronics, Toshiba
and Vishay Intertechnology. Our IC products compete principally
with those of Atmel, Cypress Semiconductor, Freescale
Semiconductor, Matsushita, Microchip, NEC, Silicon Labs and
Supertex. Our RF power semiconductor competitors include RF
Micro Devices. Many of our competitors have greater financial,
technical, marketing and management resources than we have. Some
of these competitors may be able to sell their products at
prices below which it would be profitable for us to sell our
products or benefit from established customer relationships that
provide them with a competitive advantage. We cannot assure that
we will be able to compete successfully in the future against
existing or new competitors or that our operating results will
not be adversely affected by increased price competition.
We
rely on our distributors and sales representatives to sell many
of our products.
Many of our products are sold to distributors or through sales
representatives. Our distributors and sales representatives
could reduce or discontinue sales of our products. They may not
devote the resources necessary to sell our products in the
volumes and within the time frames that we expect. In addition,
we depend upon the continued viability and financial resources
of these distributors and sales representatives, some of which
are small organizations with limited working capital. These
distributors and sales representatives, in turn, depend
substantially on general economic conditions and conditions
within the semiconductor industry. We believe that our success
will continue to depend upon these distributors and sales
representatives. If any significant distributor or sales
representative experiences financial difficulties, or otherwise
becomes unable or unwilling to promote and sell our products,
our business could be harmed. For example, All American
Semiconductor, Inc., one of our former distributors, filed for
bankruptcy in April 2007.
21
Our
future success depends on the continued service of management
and key engineering personnel and our ability to identify, hire
and retain additional personnel.
Our success depends upon our ability to attract and retain
highly skilled technical, managerial, marketing and finance
personnel, and, to a significant extent, upon the efforts and
abilities of Nathan Zommer, Ph.D., our Chief Executive
Officer, and other members of senior management. The loss of the
services of one or more of our senior management or other key
employees could adversely affect our business. We do not
maintain key person life insurance on any of our officers,
employees or consultants. There is intense competition for
qualified employees in the semiconductor industry, particularly
for highly skilled design, applications and test engineers. We
may not be able to continue to attract and retain engineers or
other qualified personnel necessary for the development of our
business or to replace engineers or other qualified individuals
who could leave us at any time in the future. If we grow, we
expect increased demands on our resources, and growth would
likely require the addition of new management and engineering
staff as well as the development of additional expertise by
existing management employees. If we lose the services of or
fail to recruit key engineers or other technical and management
personnel, our business could be harmed.
Acquisitions
and expansion place a significant strain on our resources,
including our information systems and our employee
base.
Presently, because of our acquisitions, we are operating a
number of different information systems that are not integrated.
In part because of this, we use spreadsheets, which are prepared
by individuals rather than automated systems, in our accounting.
In our accounting, we perform many manual reconciliations and
other manual steps, which result in a high risk of errors.
Manual steps also increase the possibility of control
deficiencies and material weaknesses.
We are also transferring some accounting functions to our
recently acquired Philippine subsidiary from other locations.
These transfers involve changing accounting systems and
implementing different software from that previously used.
If we do not adequately manage and evolve our financial
reporting and managerial systems and processes, our ability to
manage or grow our business may be harmed. Our ability to
successfully implement our goals and comply with regulations,
including those adopted under the Sarbanes-Oxley Act of 2002,
requires an effective planning and management system and
process. We will need to continue to improve existing, and
implement new, operational and financial systems, procedures and
controls to manage our business effectively in the future.
In improving or consolidating our operational and financial
systems, procedures and controls, we would expect to
periodically implement new or different software and other
systems that will affect our internal operations regionally or
globally. The conversion process from one system to another is
complex and could require, among other things, that data from
the existing system be made compatible with the upgraded or
different system. During any transition, we could experience
errors, delays and other inefficiencies, which could adversely
affect our business. Any delay in the implementation of, or
disruption in the transition to, any new, enhanced, or different
systems, procedures or controls, could harm our ability to
forecast sales demand, manage our supply chain, achieve accuracy
in the conversion of electronic data and record and report
financial and management information on a timely and accurate
basis. In addition, as we add or change functionality, problems
could arise that we have not foreseen. Such problems could
adversely impact our ability to do the following in a timely
manner: provide quotes; take customer orders; ship products;
provide services and support to our customers; bill and track
our customers; fulfill contractual obligations; and otherwise
run our business. Failure to properly or adequately address
these issues could result in the diversion of managements
attention and resources, impact our ability to manage our
business and our results of operations, cash flows and stock
price could be negatively impacted.
Any future growth would also require us to successfully hire,
train, motivate and manage new employees. In addition, continued
growth and the evolution of our business plan may require
significant additional management, technical and administrative
resources. We may not be able to effectively manage the growth
or the evolution of our current business.
22
We
depend on a limited number of suppliers for our substrates, most
of whom we do not have long term agreements with.
We purchase the bulk of our silicon substrates from a limited
number of vendors, most of whom we do not have long term supply
agreements with. Any of these suppliers could reduce or
terminate our supply of silicon substrates at any time. Our
reliance on a limited number of suppliers involves several
risks, including potential inability to obtain an adequate
supply of silicon substrates and reduced control over the price,
timely delivery, reliability and quality of the silicon
substrates. We cannot assure that problems will not occur in the
future with suppliers.
Costs
related to product defects and errata may harm our results of
operations and business.
Costs associated with unexpected product defects and errata
(deviations from published specifications) due to, for example,
unanticipated problems in our manufacturing processes, include
the costs of:
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writing off the value of inventory of defective products;
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disposing of defective products that cannot be fixed;
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recalling defective products that have been shipped to customers;
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providing product replacements for, or modifications to,
defective products; and/or
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defending against litigation related to defective products.
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These costs could be substantial and may, therefore, increase
our expenses and lower our gross margin. In addition, our
reputation with our customers or users of our products could be
damaged as a result of such product defects and errata, and the
demand for our products could be reduced. These factors could
harm our financial results and the prospects for our business.
We
face the risk of financial exposure to product liability claims
alleging that the use of products that incorporate our
semiconductors resulted in adverse effects.
Approximately 12.8% of our net revenues for the fiscal year
ended March 31, 2010 were derived from sales of products
used in medical devices, such as defibrillators. Product
liability risks may exist even for those medical devices that
have received regulatory approval for commercial sale. We cannot
be sure that the insurance that we maintain against product
liability will be adequate to cover our losses. Any defects in
our semiconductors used in these devices, or in any other
product, could result in significant product liability costs to
us.
If our
goodwill or long-lived assets become impaired, we may be
required to record a significant charge to
earnings.
Under generally accepted accounting principles, we review our
long-lived assets for impairment when events or changes in
circumstances indicate the carrying value may not be
recoverable. Goodwill is required to be tested for impairment at
least annually. Factors that may be considered a change in
circumstances indicating that the carrying value of our goodwill
or long-lived assets may not be recoverable include a decline in
stock price and market capitalization, future cash flows and
slower growth rates in our industry. In fiscal 2009, we recorded
an impairment charge for the entire goodwill balance of
$6.4 million, based on our estimates of the future
operating results and discounted cash flows of the reporting
units with goodwill.
We
estimate tax liabilities, the final determination of which is
subject to review by domestic and international taxation
authorities.
We are subject to income taxes and other taxes in both the
United States and the foreign jurisdictions in which we
currently operate or have historically operated. We are also
subject to review and audit by both domestic and foreign
taxation authorities. The determination of our worldwide
provision for income taxes and current and deferred tax assets
and liabilities requires significant judgment and estimation.
The provision for income taxes can be adversely affected by a
variety of factors, including but not limited to changes in tax
laws, regulations and accounting principles, including
accounting for uncertain tax positions, or interpretation of
those changes.
23
Significant judgment is required to determine the recognition
and measurement attributes prescribed in the authoritative
guidance issued by the Financial Accounting Standards Board, or
FASB, in connection with accounting for income taxes. Although
we believe our tax estimates are reasonable, the ultimate tax
outcome may materially differ from the tax amounts recorded in
our consolidated financial statements and may materially affect
our income tax provision, net income, goodwill or cash flows in
the period or periods for which such determination is made.
Our
results of operations could vary as a result of the methods,
estimates, and judgments that we use in applying our accounting
policies.
The methods, estimates, and judgments that we use in applying
our accounting policies have a significant impact on our results
of operations (see Critical Accounting Policies and
Significant Management Estimates in Part I,
Item 7 of this
Form 10-K).
Such methods, estimates, and judgments are, by their nature,
subject to substantial risks, uncertainties, and assumptions,
and factors may arise over time that lead us to change our
methods, estimates, and judgments. Changes in those methods,
estimates, and judgments could significantly affect our results
of operations.
We are
exposed to various risks related to the regulatory
environment.
We are subject to various risks related to: (1) new,
different, inconsistent or even conflicting laws, rules and
regulations that may be enacted by legislative bodies
and/or
regulatory agencies in the countries in which we operate;
(2) disagreements or disputes between national or regional
regulatory agencies; and (3) the interpretation and
application of laws, rules and regulations. If we are found by a
court or regulatory agency not to be in compliance with
applicable laws, rules or regulations, our business, financial
condition and results of operations could be materially and
adversely affected.
In addition, approximately 12.8% of our net revenues for the
fiscal year ended March 31, 2010 were derived from the sale
of products included in medical devices that are subject to
extensive regulation by numerous governmental authorities in the
United States and internationally, including the U.S. Food
and Drug Administration, or FDA. The FDA and certain foreign
regulatory authorities impose numerous requirements for medical
device manufacturers to meet, including adherence to Good
Manufacturing Practices, or GMP, regulations and similar
regulations in other countries, which include testing, control
and documentation requirements. Ongoing compliance with GMP and
other applicable regulatory requirements is monitored through
periodic inspections by federal and state agencies, including
the FDA, and by comparable agencies in other countries. Our
failure to comply with applicable regulatory requirements could
prevent our products from being included in approved medical
devices.
Our business could also be harmed by delays in receiving or the
failure to receive required approvals or clearances, the loss of
previously obtained approvals or clearances or the failure to
comply with existing or future regulatory requirements.
We
invest in companies for strategic reasons and may not realize a
return on our investments.
We make investments in companies to further our strategic
objectives and support our key business initiatives. Such
investments include investments in equity securities of public
companies and investments in non-marketable equity securities of
private companies, which range from early-stage companies that
are often still defining their strategic direction to more
mature companies whose products or technologies may directly
support a product or initiative. The success of these companies
is dependent on product development, market acceptance,
operational efficiency, and other key business success factors.
The private companies in which we invest may fail for
operational reasons or because they may not be able to secure
additional funding, obtain favorable investment terms for future
financings or take advantage of liquidity events such as initial
public offerings, mergers, and private sales. If any of these
private companies fail, we could lose all or part of our
investment in that company. If we determine that an
other-than-temporary
decline in the fair value exists for the equity securities of
the public and private companies in which we invest, we write
down the investment to its fair value and recognize the related
write-down as an investment loss. Furthermore, when the
strategic objectives of an investment have been achieved, or if
the investment or business diverges from our strategic
objectives, we may decide to dispose of the investment even
24
at a loss. Our investments in non-marketable equity securities
of private companies are not liquid, and we may not be able to
dispose of these investments on favorable terms or at all. The
occurrence of any of these events could negatively affect our
results of operations.
Our
ability to access capital markets could be
limited.
From time to time, we may need to access the capital markets to
obtain long term financing. Although we believe that we can
continue to access the capital markets on acceptable terms and
conditions, our flexibility with regard to long term financing
activity could be limited by our existing capital structure, our
credit ratings and the health of the semiconductor industry. In
addition, many of the factors that affect our ability to access
the capital markets, such as the liquidity of the overall
capital markets and the current state of the economy, are
outside of our control. There can be no assurance that we will
continue to have access to the capital markets on favorable
terms.
Geopolitical
instability, war, terrorist attacks and terrorist threats, and
government responses thereto, may negatively affect all aspects
of our operations, revenues, costs and stock
price.
Any such event may disrupt our operations or those of our
customers or suppliers. Our markets currently include South
Korea, Taiwan and Israel, which are currently experiencing
political instability. Additionally, our principal external
foundry is located in South Korea.
Business
interruptions may damage our facilities or those of our
suppliers.
Our operations and those of our suppliers are vulnerable to
interruption by fire, earthquake and other natural disasters, as
well as power loss, telecommunications failure and other events
beyond our control. We do not have a detailed disaster recovery
plan and do not have backup generators. Our facilities in
California are located near major earthquake faults and have
experienced earthquakes in the past. If any of these events
occur, our ability to conduct our operations could be seriously
impaired, which could harm our business, financial condition and
results of operations and cash flows. We cannot be sure that the
insurance we maintain against general business interruptions
will be adequate to cover all our losses.
We may
be affected by environmental laws and regulations.
We are subject to a variety of laws, rules and regulations in
the United States, England and Germany related to the use,
storage, handling, discharge and disposal of certain chemicals
and gases used in our manufacturing process. Any of those
regulations could require us to acquire expensive equipment or
to incur substantial other expenses to comply with them. If we
incur substantial additional expenses, product costs could
significantly increase. Failure to comply with present or future
environmental laws, rules and regulations could result in fines,
suspension of production or cessation of operations.
Nathan
Zommer, Ph.D. owns a significant interest in our common
stock.
Nathan Zommer, Ph.D., our Chief Executive Officer,
beneficially owned, as of June 2, 2010, approximately 22.3%
of the outstanding shares of our common stock. As a result,
Dr. Zommer can exercise significant control over all
matters requiring stockholder approval, including the election
of the board of directors. His holdings could result in a delay
of, or serve as a deterrent to, any change in control of IXYS,
which may reduce the market price of our common stock.
Our
stock price is volatile.
The market price of our common stock has fluctuated
significantly to date. The future market price of our common
stock may also fluctuate significantly in the event of:
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variations in our actual or expected quarterly operating results;
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announcements or introductions of new products;
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technological innovations by our competitors or development
setbacks by us;
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conditions in the communications and semiconductor markets;
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the commencement or adverse outcome of litigation;
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changes in analysts estimates of our performance or
changes in analysts forecasts regarding our industry,
competitors or customers;
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announcements of merger or acquisition transactions or a failure
to achieve the expected benefits of an acquisition as rapidly or
to the extent anticipated by financial analysts;
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terrorist attack or war;
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sales of our common stock by one or more members of management,
including Nathan Zommer, Ph.D., our Chief Executive
Officer; or
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general economic and market conditions.
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In addition, the stock market in recent years has experienced
extreme price and volume fluctuations that have affected the
market prices of many high technology companies, including
semiconductor companies. These fluctuations have often been
unrelated or disproportionate to the operating performance of
companies in our industry, and could harm the market price of
our common stock.
The
anti-takeover provisions of our certificate of incorporation and
of the Delaware General Corporation Law may delay, defer or
prevent a change of control.
Our board of directors have the authority to issue up to
5,000,000 shares of preferred stock and to determine the
price, rights, preferences, privileges and restrictions,
including voting rights, of those shares without any further
vote or action by our stockholders. The rights of the holders of
common stock will be subject to, and may be harmed by, the
rights of the holders of any shares of preferred stock that may
be issued in the future. The issuance of preferred stock may
delay, defer or prevent a change in control because the terms of
any issued preferred stock could potentially prohibit our
consummation of any merger, reorganization, sale of
substantially all of our assets, liquidation or other
extraordinary corporate transaction, without the approval of the
holders of the outstanding shares of preferred stock. In
addition, the issuance of preferred stock could have a dilutive
effect on our stockholders.
Our stockholders must give substantial advance notice prior to
the relevant meeting to nominate a candidate for director or
present a proposal to our stockholders at a meeting. These
notice requirements could inhibit a takeover by delaying
stockholder action. The Delaware anti-takeover law restricts
business combinations with some stockholders once the
stockholder acquires 15% or more of our common stock. The
Delaware statute makes it more difficult for us to be acquired
without the consent of our board of directors and management.
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Item 1B.
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Unresolved
Staff Comments
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None.
26
Our principal facilities are described below:
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Approximate
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Square
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Principal Facilities
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Footage
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Lease Expiration
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Use
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Aliso Viejo, California
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27,000
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(1)
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Research and development, sales and distribution
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Beverly, Massachusetts
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83,000
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(1)
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Research and development, manufacturing, sales and distribution
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Chippenham, England
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100,000
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December 2022
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Research and development, manufacturing, sales and distribution
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Fremont, California
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30,000
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November 2011
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Research and development, manufacturing, sales and distribution
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Lampertheim, Germany
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170,000
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(1)
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European headquarters, research and development, manufacturing,
sales and distribution
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Manila, Philippines
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140,000
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March 2012
|
|
Product testing and global support
|
Milpitas, California
|
|
|
51,000
|
|
|
(1)
|
|
Corporate headquarters, research and development, sales and
distribution
|
Santa Clara, California
|
|
|
21,000
|
|
|
(1)
|
|
Manufacturing
|
We believe that our current facilities are suitable to our needs
and will be adequate through at least fiscal year 2011 and that
suitable additional or replacement space will be available in
the future as needed on commercially reasonably terms. The
Lampertheim and Milpitas properties serve as collateral for
loans, and are subject to security interests.
|
|
Item 3.
|
Legal
Proceedings
|
We currently are involved in a variety of legal matters that
arise in the normal course of business. Based on information
currently available, management does not believe that the
ultimate resolution of these matters will have a material
adverse effect on our financial condition, results of operations
and cash flows. Were an unfavorable ruling to occur, there
exists the possibility of a material adverse impact on the
results of operations of the period in which the ruling occurs.
Executive
Officers of the Registrant
The executive officers, their ages and positions at our company,
as well as certain biographical information of these
individuals, are set forth below. The ages of the individuals
are provided as of March 31, 2010.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position(s)
|
|
Nathan Zommer
|
|
|
62
|
|
|
Chairman of the Board and Chief Executive Officer
|
Uzi Sasson
|
|
|
48
|
|
|
President, Chief Operating Officer, Chief Financial Officer and
Secretary
|
There are no family relationships among our directors and
executive officers.
27
Nathan Zommer. Dr. Zommer, our founder,
has served as a Director since our inception in 1983, and has
served as Chairman of the Board and Chief Executive Officer
since 1993. From 1993 to 2009, Dr. Zommer served as our
President and, from 1984 to 1993, Dr. Zommer served as our
Executive Vice President. Prior to founding our company,
Dr. Zommer served in a variety of positions with Intersil,
Hewlett-Packard and General Electric, including as a scientist
in the Hewlett-Packard Laboratories and Director of the Power
MOS Division for Intersil/General Electric. Dr. Zommer
received his B.S. and M.S. degrees in Physical Chemistry from
Tel Aviv University and a Ph.D. in Electrical Engineering from
Carnegie Mellon University.
Uzi Sasson. Mr. Sasson has served as our
President since December 2009, our Chief Operating Officer since
June 2007 and our Chief Financial Officer and Secretary since
November 2004. From November 2004 to December 2009,
Mr. Sasson was our Vice President. From February to
November 2004, Mr. Sasson was the Chief Executive Officer
of Sagent Management, a tax and accounting consulting firm.
Mr. Sasson also served as the interim Chief Financial
Officer for Digital Power Corp., a manufacturer of switching
power supplies, from June 2004 to November 2004. Mr. Sasson
served as Vice President of Tax for Mercury Interactive
Corporation, a provider of software and services for the
business technology optimization marketplace, from 2001 to
January 2004. Prior to that, Mr. Sasson was a Senior
Manager at PricewaterhouseCoopers LLP, an accounting firm, from
1992 to 2001. From August to November 2004, Mr. Sasson
served as a director of our company. Mr. Sasson has a
Masters of Science in Taxation and Bachelor of Science in
Accounting from Golden Gate University and is a Certified Public
Accountant in California.
PART II
|
|
Item 5.
|
Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
|
Our common stock is traded on the NASDAQ Global Select Market
under the symbol IXYS. The following table presents,
for the periods indicated, the intraday high and low sale prices
per share of our common stock as reported by the NASDAQ Global
Select Market:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
Second Quarter
|
|
|
Third Quarter
|
|
|
Fourth Quarter
|
|
|
Fiscal Year Ended March 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
11.00
|
|
|
$
|
10.61
|
|
|
$
|
8.71
|
|
|
$
|
9.36
|
|
Low
|
|
$
|
7.61
|
|
|
$
|
6.38
|
|
|
$
|
6.11
|
|
|
$
|
6.81
|
|
Fiscal Year Ended March 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
13.02
|
|
|
$
|
13.84
|
|
|
$
|
9.49
|
|
|
$
|
9.31
|
|
Low
|
|
$
|
6.49
|
|
|
$
|
8.80
|
|
|
$
|
4.58
|
|
|
$
|
5.61
|
|
The number of record holders of our common stock as of
June 2, 2010 was 400. During September 2008, we declared
$3.2 million in dividends that were paid during October
2008, consisting of a special, one-time dividend of $0.07 per
share and a quarterly dividend of $0.03 per share. In January
2009, we suspended the quarterly dividend indefinitely.
28
Stock
Performance Graph
The line graph below shows the total stockholder return of an
investment of $100 in cash for the period from March 31,
2005 through March 31, 2010 for (i) our common stock,
(ii) the NASDAQ Composite Index and (iii) the
Standard & Poors Semiconductors Index. All
values assume reinvestment of the full amount of all dividends
and are calculated as of March 31 of each year. Historical stock
price performance should not be relied upon as indicative of
future stock price performance.
29
|
|
Item 6.
|
Selected
Financial Data
|
The following selected consolidated financial information should
be read in conjunction with our consolidated financial
statements and related notes and Managements Discussion
and Analysis of Financial Condition and Results of Operations
included elsewhere in this Annual Report on
Form 10-K.
The consolidated statements of operations data for the years
ended March 31, 2010, 2009 and 2008, and the balance sheet
data as of March 31, 2010 and 2009 are derived from our
consolidated financial statements included elsewhere in this
Annual Report on
Form 10-K.
The statements of operations data for the years ended
March 31, 2007 and 2006 and the balance sheet data as of
March 31, 2008, 2007 and 2006 are derived from our
consolidated financial statements that are not included in this
Annual Report on
Form 10-K.
Historical results are not necessarily indicative of results to
be expected in any future period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended March 31,
|
|
|
|
2010(1)
|
|
|
2009
|
|
|
2008
|
|
|
2007(2)
|
|
|
2006
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
243,224
|
|
|
$
|
273,552
|
|
|
$
|
304,456
|
|
|
$
|
285,908
|
|
|
$
|
251,487
|
|
Cost of goods sold
|
|
|
179,791
|
|
|
|
207,594
|
|
|
|
217,332
|
|
|
|
201,577
|
|
|
|
169,792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
63,433
|
|
|
|
65,958
|
|
|
|
87,124
|
|
|
|
84,331
|
|
|
|
81,695
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research, development and engineering
|
|
|
20,112
|
|
|
|
19,931
|
|
|
|
21,124
|
|
|
|
20,105
|
|
|
|
17,523
|
|
Selling, general and administrative
|
|
|
36,163
|
|
|
|
37,962
|
|
|
|
42,093
|
|
|
|
44,134
|
|
|
|
38,371
|
|
Amortization of acquisition-related intangible assets
|
|
|
1,839
|
|
|
|
1,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges
|
|
|
1,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment charges
|
|
|
|
|
|
|
6,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Litigation provision
|
|
|
|
|
|
|
|
|
|
|
(12,957
|
)
|
|
|
(29,435
|
)
|
|
|
42,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
59,728
|
|
|
|
65,984
|
|
|
|
50,260
|
|
|
|
34,804
|
|
|
|
98,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
3,705
|
|
|
|
(26
|
)
|
|
|
36,864
|
|
|
|
49,527
|
|
|
|
(17,009
|
)
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest (expense) income, net
|
|
|
(1,230
|
)
|
|
|
(666
|
)
|
|
|
277
|
|
|
|
1,793
|
|
|
|
2,182
|
|
Other income (expense)
|
|
|
(141
|
)
|
|
|
4,256
|
|
|
|
(3,162
|
)
|
|
|
(3,081
|
)
|
|
|
1,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
2,334
|
|
|
|
3,564
|
|
|
|
33,979
|
|
|
|
48,239
|
|
|
|
(13,017
|
)
|
(Provision for) benefit from income tax
|
|
|
(3,011
|
)
|
|
|
(6,913
|
)
|
|
|
(10,690
|
)
|
|
|
(18,020
|
)
|
|
|
6,911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(677
|
)
|
|
$
|
(3,349
|
)
|
|
$
|
23,289
|
|
|
$
|
30,219
|
|
|
$
|
(6,106
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share basic
|
|
$
|
(0.02
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
0.73
|
|
|
$
|
0.90
|
|
|
$
|
(0.18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share diluted
|
|
$
|
(0.02
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
0.71
|
|
|
$
|
0.87
|
|
|
$
|
(0.18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends per share
|
|
|
|
|
|
$
|
0.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in per share calculations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
31,005
|
|
|
|
31,087
|
|
|
|
31,906
|
|
|
|
33,505
|
|
|
|
33,636
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
31,005
|
|
|
|
31,087
|
|
|
|
33,031
|
|
|
|
34,784
|
|
|
|
33,636
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
During fiscal 2010, we acquired Zilog, Inc. and a display driver
product line from Leadis Technology, Inc. |
|
(2) |
|
We began adopting the authoritative guidance issued by FASB in
connection with accounting for stock based compensation in
fiscal 2007. See Note 10, Employee Equity Incentive
Plans in the Notes to Consolidated Financial Statements in
Item 8 of this Annual Report on
Form 10-K. |
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31,
|
|
|
|
2010(1)
|
|
|
2009
|
|
|
2008
|
|
|
2007(2)
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Selected operating data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit margin
|
|
|
26.1
|
%
|
|
|
24.1
|
%
|
|
|
28.6
|
%
|
|
|
29.5
|
%
|
|
|
32.5
|
%
|
Depreciation and amortization
|
|
$
|
13,386
|
|
|
$
|
14,547
|
|
|
$
|
12,868
|
|
|
$
|
10,499
|
|
|
$
|
8,543
|
|
Balance sheet data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
60,524
|
|
|
$
|
55,441
|
|
|
$
|
56,614
|
|
|
$
|
54,027
|
|
|
$
|
78,192
|
|
Working capital
|
|
|
135,725
|
|
|
|
150,917
|
|
|
|
162,392
|
|
|
|
142,408
|
|
|
|
118,815
|
|
Total assets
|
|
|
285,296
|
|
|
|
252,832
|
|
|
|
293,830
|
|
|
|
273,641
|
|
|
|
279,987
|
|
Total long term obligations
|
|
|
48,122
|
|
|
|
40,037
|
|
|
|
47,980
|
|
|
|
34,647
|
|
|
|
28,023
|
|
Total stockholders equity
|
|
|
183,135
|
|
|
|
178,492
|
|
|
|
200,229
|
|
|
|
181,109
|
|
|
|
159,973
|
|
Cash flow data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by operating activities
|
|
$
|
29,166
|
|
|
$
|
21,580
|
|
|
$
|
27,955
|
|
|
$
|
1,883
|
|
|
$
|
31,143
|
|
Cash used in investing activities
|
|
|
(36,256
|
)
|
|
|
(5,874
|
)
|
|
|
(10,737
|
)
|
|
|
(8,865
|
)
|
|
|
(20,756
|
)
|
Cash (used in) provided by financing activities
|
|
|
11,775
|
|
|
|
(12,750
|
)
|
|
|
(18,579
|
)
|
|
|
(20,093
|
)
|
|
|
11,214
|
|
|
|
|
(1) |
|
During fiscal 2010, we acquired Zilog, Inc. and a display driver
product line from Leadis Technology, Inc. |
|
(2) |
|
We began adopting the authoritative guidance issued by FASB in
connection with accounting for stock based compensation in
fiscal 2007. See Note 10, Employee Equity Incentive
Plans in the Notes to Consolidated Financial Statements in
Item 8 of this Annual Report on
Form 10-K. |
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
This discussion contains forward-looking statements, which
are subject to certain risks and uncertainties, including,
without limitation, those described elsewhere in this
Form 10-K
and, in particular, in Item 1A hereof. Actual results may
differ materially from the results discussed in the
forward-looking statements. For a discussion of risks that could
affect future results, see Item 1A. Risk
Factors. All forward-looking statements included in this
document are made as of the date hereof, based on the
information available to us as of the date hereof, and we assume
no obligation to update any forward-looking statement, except as
may be required by law.
Overview
We are a multi-market integrated semiconductor company. Our
three principal product groups are: power semiconductors;
integrated circuits; and systems and RF power semiconductors.
Our power semiconductors improve system efficiency and
reliability by converting electricity at relatively high voltage
and current levels into the finely regulated power required by
electronic products. We focus on the market for power
semiconductors that are capable of processing greater than 200
watts of power.
We also design, manufacture and sell integrated circuits for a
variety of applications. Our analog and mixed signal ICs are
principally used in telecommunications applications. Our mixed
signal application specific ICs, or ASICs, address the
requirements of the medical imaging equipment and display
markets. Our power management and control ICs are used in
conjunction with our power semiconductors. Our microcontrollers
provide application specific, embedded
system-on-chip,
or SoC, solutions for the industrial and consumer markets.
Our systems include laser diode drivers, high voltage pulse
generators and modulators, and high power subsystems, sometimes
known as stacks, that are principally based on our high power
semiconductor devices. Our RF power semiconductors enable
circuitry that amplifies or receives radio frequencies in
wireless and other microwave communication applications, medical
imaging applications and defense and space applications.
Due to the global economic downturn, we experienced declining
quarterly revenues during fiscal 2009, which bottomed in the
first quarter of fiscal 2010. Thereafter, our revenues increased
quarter over quarter during fiscal
31
2010. Compared to fiscal 2009, our fiscal 2010 revenues from the
sale of ICs increased significantly, primarily through shipments
to the consumer products market in large part resulting from the
display driver IC product line acquired from Leadis Technology,
Inc. in September 2009, while our revenues from the sale of
power semiconductors and RF power semiconductors decreased. In
addition, we entered the microcontroller devices market by
acquiring Zilog during the fourth quarter. Compared to fiscal
2009, the proportion of our revenues obtained through
distribution increased during fiscal 2010 with the growth of
sales to the consumer products market, as consumer products
manufacturers typically buy our products through distribution.
Comparing the years, in fiscal 2010, our revenues fell across
all major geographic regions except the Asia Pacific area and
our sales to all major market segments declined, except to the
consumer products market. Gross profit decreased during fiscal
2010 because of the reduced revenues. Our selling, general and
administrative expenses, or SG&A expenses, increased,
mainly because of the legal and consulting expenses incurred in
our acquisitions. Excluding the impact of the acquired
businesses, our research, development and engineering expenses,
or R&D expenses, decreased due to reduced personnel
expenses. In future periods, both our SG&A and R&D
expenses are expected to increase commensurate with our
acquisitions. With the improvement in general economic
conditions during fiscal 2010, our backlog at the end of recent
quarterly periods has strengthened.
Critical
Accounting Policies and Significant Management
Estimates
The discussion and analysis of our financial condition and
results of operations are based upon our consolidated financial
statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of
America. The preparation of these financial statements requires
management to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses,
and related disclosures of contingent assets and liabilities. On
an ongoing basis, management evaluates the reasonableness of its
estimates. Management bases its estimates on historical
experience and on various assumptions that are believed to be
reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying values of
assets and liabilities that are not readily available from other
sources. Actual results may differ materially from these
estimates under different assumptions or conditions.
We believe the following critical accounting policies require
that we make significant judgments and estimates in preparing
our consolidated financial statements.
Revenue recognition. We sell to distributors
and original equipment manufacturers. Approximately 51.4% of our
revenues in fiscal 2010, 46.8% of our revenues in fiscal 2009
and 48.3% of our revenues in fiscal 2008 were from distributors.
We provide some of our distributors with the following programs:
stock rotation and ship and debit. Ship and debit is a sales
incentive program for products previously shipped to
distributors. We recognize revenue from product sales upon
shipment provided that we have received an executed purchase
order, the price is fixed and determinable, the risk of loss has
transferred, collection of resulting receivables is reasonably
assured, there are no customer acceptance requirements and there
are no remaining significant obligations. Our shipping terms are
generally FOB shipping point. Reserves for allowances are also
recorded at the time of shipment. Our management must make
estimates of potential future product returns and so called
ship and debit transactions related to current
period product revenue. Our management analyzes historical
returns and ship and debit transactions, current economic trends
and changes in customer demand and acceptance of our products
when evaluating the adequacy of the sales returns and
allowances. Significant management judgments and estimates must
be made and used in connection with establishing the allowances
in any accounting period. We have visibility into inventory held
by our distributors to aid in our reserve analysis. Different
judgments or estimates would result in material differences in
the amount and timing of our revenue for any period.
Accounts receivable from distributors are recognized and
inventory is relieved when title to inventories transfer,
typically upon shipment from our company, at which point we have
a legally enforceable right to collection under normal payment
terms. Under certain circumstances, where our management is not
able to reasonably and reliably estimate the actual returns,
revenues and costs relating to distributor sales are deferred
until products are sold by the distributors to their end
customers. Deferred amounts are presented net and included under
accrued expenses and other liabilities.
32
We state our revenues, net of any taxes collected from customers
that are required to be remitted to the various government
agencies. The amount of taxes collected from customers and
payable to government is included under accrued expenses and
other liabilities. Shipping and handling costs are included in
cost of sales.
Allowance for sales returns. We maintain an
allowance for sales returns for estimated product returns by our
customers. We estimate our allowance for sales returns based on
our historical return experience, current economic trends,
changes in customer demand, known returns we have not received
and other assumptions. If we were to make different judgments or
utilize different estimates, the amount and timing of our
revenue could be materially different. Given that our revenues
consist of a high volume of relatively similar products, to date
our actual returns and allowances have not fluctuated
significantly from period to period, and our returns provisions
have historically been reasonably accurate. This allowance is
included as part of the accounts receivable allowance on the
balance sheet and as a reduction of revenues in the statement of
operations.
Allowance for stock rotation. We also provide
stock rotation to select distributors. The rotation
allows distributors to return a percentage of the previous six
months sales in exchange for orders of an equal or greater
amount. In the fiscal years ended March 31, 2010, 2009 and
2008, approximately $1.2 million, $1.8 million and
$1.0 million, respectively, of products were returned to us
under the program. We establish the allowance for all sales to
distributors except in cases where the revenue recognition is
deferred and recognized upon sale by the distributor of products
to the end-customer. The allowance, which is managements
best estimate of future returns, is based upon the historical
experience of returns and inventory levels at the distributors.
This allowance is included as part of the accounts receivable
allowance on the balance sheet and as a reduction of revenues in
the statement of operations. Should distributors increase stock
rotations beyond our estimates, our statements would be
adversely affected.
Allowance for ship and debit. Ship and debit
is a program designed to assist distributors in meeting
competitive prices in the marketplace on sales to their end
customers. Ship and debit requires a request from the
distributor for a pricing adjustment for a specific part for a
customer sale to be shipped from the distributors stock.
We have no obligation to accept this request. However, it is our
historical practice to allow some companies to obtain pricing
adjustments for inventory held. We receive periodic statements
regarding our products held by our distributors. Our
distributors had approximately $12.2 million in inventory
of our products on hand at March 31, 2010. Ship and debit
authorizations may cover current and future distributor activity
for a specific part for sale to the distributors customer.
At the time we record sales to the distributors, we provide an
allowance for the estimated future distributor activity related
to such sales since it is probable that such sales to
distributors will result in ship and debit activity. The sales
allowance requirement is based on sales during the period,
credits issued to distributors, distributor inventory levels,
historical trends, market conditions, pricing trends we see in
our direct sales activity with original equipment manufacturers
and other customers, and input from sales, marketing and other
key management. We believe that the analysis of these inputs
enable us to make reliable estimates of future credits under the
ship and debit program. This analysis requires the exercise of
significant judgments. Our actual results to date have
approximated our estimates. At the time the distributor ships
the part from stock, the distributor debits us for the
authorized pricing adjustment. This allowance is included as
part of the accounts receivable allowance on the balance sheet
and as a reduction of revenues in the statement of operations.
If competitive pricing were to decrease sharply and
unexpectedly, our estimates might be insufficient, which could
significantly adversely affect our operating results.
33
Additions to the ship and debit allowance are estimates of the
amount of expected future ship and debit activity related to
sales during the period and reduce revenues and gross profit in
the period. The following table sets forth the beginning and
ending balances of, additions to and deductions from our
allowance for ship and debit during the three years ended
March 31, 2010 (in thousands):
|
|
|
|
|
Balance March 31, 2007
|
|
$
|
237
|
|
Additions
|
|
|
2,417
|
|
Deductions
|
|
|
(2,309
|
)
|
|
|
|
|
|
Balance March 31, 2008
|
|
|
345
|
|
Additions
|
|
|
2,407
|
|
Deductions
|
|
|
(2,338
|
)
|
|
|
|
|
|
Balance March 31, 2009
|
|
|
414
|
|
Additions
|
|
|
3,419
|
|
Deductions
|
|
|
(2,414
|
)
|
|
|
|
|
|
Balance March 31, 2010
|
|
$
|
1,419
|
|
|
|
|
|
|
Allowance for doubtful accounts. We maintain
an allowance for doubtful accounts for estimated losses from the
inability of our customers to make required payments. We
evaluate our allowance for doubtful accounts based on the aging
of our accounts receivable, the financial condition of our
customers and their payment history, our historical write-off
experience and other assumptions. If we were to make different
judgments of the financial condition of our customers or the
financial condition of our customers were to deteriorate,
resulting in an impairment of their ability to make payments,
additional allowances may be required. This allowance is
reported on the balance sheet as part of the accounts receivable
allowance and is included on the statement of operations as part
of selling, general and administrative expenses. This allowance
is based on historical losses and managements estimates of
future losses.
Inventories. Inventories are recorded at the
lower of standard cost, which approximates actual cost on a
first-in-first-out
basis, or market value. Our accounting for inventory costing is
based on the applicable expenditure incurred, directly or
indirectly, in bringing the inventory to its existing condition.
Such expenditures include acquisition costs, production costs
and other costs incurred to bring the inventory to its use. As
it is impractical to track inventory from the time of purchase
to the time of sale for the purpose of specifically identifying
inventory cost, our inventory is, therefore, valued based on a
standard cost, given that the materials purchased are identical
and interchangeable at various production processes. We review
our standard costs on an as-needed basis but in any event at
least once a year, and update them as appropriate to approximate
actual costs. The authoritative guidance provided by FASB
requires certain abnormal expenditures to be recognized as
expenses in the current period instead of capitalized in
inventory. It also requires that the amount of fixed production
overhead allocated to inventory be based on the normal capacity
of the production facilities.
We typically plan our production and inventory levels based on
internal forecasts of customer demand, which are highly
unpredictable and can fluctuate substantially. The value of our
inventories is dependent on our estimate of future demand as it
relates to historical sales. If our projected demand is
overestimated, we may be required to reduce the valuation of our
inventories below cost. We regularly review inventory quantities
on hand and record an estimated provision for excess inventory
based primarily on our historical sales and expectations for
future use. We also recognize a reserve based on known
technological obsolescence, when appropriate. However, for new
products, we do not consider whether there is excess inventory
until we develop sufficient sales history or experience a
significant change in expected product demand, based on backlog.
Actual demand and market conditions may be different from those
projected by our management. This could have a material effect
on our operating results and financial position. If we were to
make different judgments or utilize different estimates, the
amount and timing of our write-down of inventories could be
materially different. For example, during fiscal 2009, we
examined our inventory and as a consequence of the dramatic
retrenchment in some of our markets, certain of our inventory,
that normally would not be considered excess, was considered as
such. Therefore, we booked additional charges of about
$14.9 million to recognize this exposure.
34
Excess inventory frequently remains saleable. When excess
inventory is sold, it yields a gross profit margin of up to
100%. Sales of excess inventory have the effect of increasing
the gross profit margin beyond that which would otherwise occur,
because of previous write-downs. Once we have written down
inventory below cost, we do not subsequently write it up when it
is subsequently sold or scrapped. We do not physically segregate
excess inventory nor do we assign unique tracking numbers to it
in our accounting systems. Consequently, we cannot isolate the
sales prices of excess inventory from the sales prices of
non-excess inventory. Therefore, we are unable to report the
amount of gross profit resulting from the sale of excess
inventory or quantify the favorable impact of such gross profit
on our gross profit margin.
The following table provides information on our excess and
obsolete inventory reserve charged against inventory at cost (in
thousands):
|
|
|
|
|
Balance at March 31, 2007
|
|
$
|
18,829
|
|
Sale of excess inventory
|
|
|
(1,831
|
)
|
Scrap of excess inventory
|
|
|
(2,868
|
)
|
|
|
|
|
|
Balance of excess inventory
|
|
|
14,130
|
|
Additional provision for excess inventory
|
|
|
5,120
|
|
|
|
|
|
|
Balance at March 31, 2008
|
|
|
19,250
|
|
Sale of excess inventory
|
|
|
(515
|
)
|
Scrap of excess inventory
|
|
|
(2,021
|
)
|
|
|
|
|
|
Balance of excess inventory
|
|
|
16,714
|
|
Additional provision for excess inventory
|
|
|
17,983
|
|
|
|
|
|
|
Balance at March 31, 2009
|
|
|
34,697
|
|
Sale of excess inventory
|
|
|
(5,846
|
)
|
Scrap of excess inventory
|
|
|
(1,867
|
)
|
|
|
|
|
|
Balance of excess inventory
|
|
|
26,984
|
|
Additional provision for excess inventory
|
|
|
8,590
|
|
|
|
|
|
|
Balance at March 31, 2010
|
|
$
|
35,574
|
|
|
|
|
|
|
The practical efficiencies of wafer fabrication require the
manufacture of semiconductor wafers in minimum lot sizes. Often,
when manufactured, we do not know whether or when all the
semiconductors resulting from a lot of wafers will sell. With
more than 10,000 different part numbers for semiconductors,
excess inventory resulting from the manufacture of some of those
semiconductors will be continual and ordinary. Because the cost
of storage is minimal when compared to potential value and
because our products do not quickly become obsolete, we expect
to hold excess inventory for potential future sale for years.
Consequently, we have no set time line for the sale or scrapping
of excess inventory.
In addition, our inventory is also being written down to the
lower of cost or market or net realizable value. We review our
inventory listing on a quarterly basis for an indication of
losses being sustained for costs that exceed selling prices less
direct costs to sell. When it is evident that our selling price
is lower than current cost, inventory is marked down
accordingly. At March 31, 2010 and 2009, our lower of cost
or market reserve was $797,000 and $583,000, respectively.
Furthermore, we perform an annual inventory count and periodic
cycle counts for specific parts that have a high turnover. We
also periodically identify any inventory that is no longer
usable and write it off.
Valuation of Goodwill and Intangible
Assets. We value goodwill and intangible assets
in accordance with the authoritative guidance provided by FASB.
Goodwill. We review goodwill for impairment
annually as of December 31 and whenever events or changes in
circumstances indicate the carrying value of goodwill may not be
recoverable in accordance with the authoritative guidance
provided by FASB. The authoritative guidance requires that we
perform a two-step impairment test.
35
In the first step, we compare the fair value of each reporting
unit to its carrying value. We determine the fair value of our
reporting units based on the income approach. Under the income
approach, we calculate the fair value of a reporting unit based
on the present value of estimated future cash flows. If the fair
value of the reporting unit exceeds the carrying value of the
net assets assigned to that unit, goodwill is not impaired. If
the carrying value of the net assets assigned to the reporting
unit exceeds the fair value of the reporting unit, then the
second step of the impairment test is performed in order to
determine the implied fair value of the reporting units
goodwill. If the carrying value of a reporting units
goodwill exceeds its implied fair value, then we record an
impairment loss equal to the difference.
Our goodwill as of March 31, 2010 was the result of
acquisitions that occurred in fiscal 2010. The acquisition of
Zilog was completed in February 2010 and resulted in preliminary
goodwill of $8.8 million. The acquisition of Leadis
businesses was completed in September 2009 and resulted in
goodwill of $304,000. The goodwill was evaluated based on the
factors affecting the business and management concluded that
there was no impairment of goodwill.
An impairment assessment was performed in fiscal 2009 and an
impairment was recorded. As a result of the fiscal 2009
analysis, we concluded that the carrying amounts of goodwill for
the three reporting units to which goodwill were allocated
exceeded their implied fair values. Consequently, we recorded an
impairment charge of approximately $6.4 million for the
year that is included under Impairment Charges in
our fiscal 2009 consolidated statements of operations. The
$6.4 million included an impairment charge of approximately
$795,000 recorded for the RTI acquisition that was completed in
September 2008. In performing the analysis on the three
reporting units, we considered the income approach in
determining the implied fair value of the goodwill. The income
approach requires estimates of future operating results and cash
flows of each of the reporting units, which are discounted using
estimated discount rates of approximately 18%.
Determining the fair value of a reporting unit is judgmental in
nature and involves the use of significant estimates and
assumptions. These estimates and assumptions include revenue
growth rates and operating margins used to calculate projected
future cash flows, discount rates and future economic and market
conditions. Our estimates are based upon assumptions believed to
be reasonable, but which are inherently uncertain and
unpredictable. These valuations require the use of
managements assumptions, which would not reflect
unanticipated events and circumstances that may occur.
Income tax. As part of the process of
preparing our consolidated financial statements, we are required
to estimate our income taxes in each of the jurisdictions in
which we operate. This process involves estimating our actual
current tax exposure together with assessing temporary
differences resulting from differing treatment of items for tax
and accounting purposes. These differences result in deferred
tax assets and liabilities, which are included within our
consolidated balance sheet. We then assess the likelihood that
our deferred tax assets will be recovered from future taxable
income and, to the extent we believe that recovery is not
likely, we establish a valuation allowance. A valuation
allowance reduces our deferred tax assets to the amount that is
more likely than not to be realized. In determining the amount
of the valuation allowance, we consider estimated future taxable
income as well as feasible tax planning strategies in each
taxing jurisdiction in which we operate. If we determine that it
is more likely than not that we will not realize all or a
portion of our remaining deferred tax assets, then we will
increase our valuation allowance with a charge to income tax
expense. Conversely, if we determine that it is likely that we
will ultimately be able to utilize all or a portion of the
deferred tax assets for which a valuation allowance has been
provided, then the related portion of the valuation allowance
will reduce goodwill, intangible assets or income tax expense.
Significant management judgment is required in determining our
provision for income taxes and potential tax exposures, our
deferred tax assets and liabilities and any valuation allowance
recorded against our net deferred tax assets. In the event that
actual results differ from these estimates or we adjust these
estimates in future periods, we may need to establish a
valuation allowance, which could materially impact our financial
position and results of operations. Our ability to utilize our
deferred tax assets and the need for a related valuation
allowance are monitored on an ongoing basis.
Furthermore, computation of our tax liabilities involves
examining uncertainties in the application of complex tax
regulations. We recognize liabilities for uncertain tax
positions based on the two-step process as prescribed by the
authoritative guidance provided by FASB. The first step is to
evaluate the tax position for recognition by
36
determining if there is sufficient available evidence to
indicate if it is more likely than not that the position will be
sustained on audit, including resolution of any related appeals
or litigation processes. The second step requires us to measure
and determine the approximate amount of the tax benefit at the
largest amount that is more than 50% likely of being realized
upon ultimate settlement with the tax authorities. It is
inherently difficult and requires significant judgment to
estimate such amounts, as this requires us to determine the
probability of various possible outcomes. We reexamine these
uncertain tax positions on a quarterly basis. This reassessment
is based on various factors during the period including, but not
limited to, changes in worldwide tax laws and treaties, changes
in facts or circumstances, effectively settled issues under
audit and any new audit activity. A change in recognition or
measurement would result in the recognition of a tax benefit or
an additional charge to the tax provision in the period.
Defined benefit plans. We maintain pension
plans covering certain of our employees in foreign locations. We
recognize the funded status of our defined benefit pension and
post-retirement benefit plans with a corresponding adjustment to
accumulated other comprehensive income, net of tax. Funded
status is measured as the difference between the fair value of
plan assets and the projected benefit obligation for pension
plans. These amounts are adjusted to recognize the amortized
gain or losses as a part of net periodic pension cost. Net
periodic pension costs are calculated based upon a number of
actuarial assumptions, including a discount rate for plan
obligations, assumed rate of return on pension plan assets and
assumed rate of compensation increase for plan employees. Our
assumptions are derived from actuarial projections and actual
market data. These assumptions are based upon managements
judgment, considering known trends and uncertainties. Actual
results that differ from these assumptions would impact the
future expense recognition and cash funding requirements of our
pension plans.
Recent
Accounting Pronouncements and Accounting Changes
For a description of accounting changes and recent accounting
pronouncements, including the expected dates of adoption and
estimated effects, if any, on our consolidated financial
statements, see Note 2, Summary of Significant
Accounting Policies in the Notes to Consolidated Financial
Statements in Item 8 of this Annual Report on
Form 10-K.
Results
of Operations
The following table sets forth selected consolidated statements
of operations data for the fiscal years indicated and the
percentage change in such data from year to year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended March 31,
|
|
|
|
2010
|
|
|
% Change
|
|
|
2009
|
|
|
% Change
|
|
|
2008
|
|
|
|
(000)
|
|
|
|
|
|
(000)
|
|
|
|
|
|
(000)
|
|
|
Net revenues
|
|
$
|
243,224
|
|
|
|
(11.1
|
)
|
|
$
|
273,552
|
|
|
|
(10.2
|
)
|
|
$
|
304,456
|
|
Cost of goods sold
|
|
|
179,791
|
|
|
|
(13.4
|
)
|
|
|
207,594
|
|
|
|
(4.5
|
)
|
|
|
217,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
63,433
|
|
|
|
(3.8
|
)
|
|
$
|
65,958
|
|
|
|
(24.3
|
)
|
|
$
|
87,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research, development and engineering
|
|
$
|
20,112
|
|
|
|
0.9
|
|
|
$
|
19,931
|
|
|
|
(5.6
|
)
|
|
$
|
21,124
|
|
Selling, general and administrative
|
|
|
36,163
|
|
|
|
(4.7
|
)
|
|
|
37,962
|
|
|
|
(9.8
|
)
|
|
|
42,093
|
|
Amortization of acquisition-related intangible assets
|
|
|
1,839
|
|
|
|
11.4
|
|
|
|
1,651
|
|
|
|
nm
|
|
|
|
|
|
Restructuring charges
|
|
|
1,614
|
|
|
|
nm
|
|
|
|
|
|
|
|
nm
|
|
|
|
|
|
Impairment charges
|
|
|
|
|
|
|
nm
|
|
|
|
6,440
|
|
|
|
nm
|
|
|
|
|
|
Litigation provision
|
|
|
|
|
|
|
nm
|
|
|
|
|
|
|
|
nm
|
|
|
|
(12,957
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
$
|
59,728
|
|
|
|
(9.5
|
)
|
|
$
|
65,984
|
|
|
|
31.3
|
|
|
$
|
50,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
nm not meaningful
37
The following table sets forth selected statement of operations
data as a percentage of net revenues for the fiscal years
indicated. These historical operating results may not be
indicative of the results for any future period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ending March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
% of Net
|
|
|
% of Net
|
|
|
% of Net
|
|
|
|
Revenues
|
|
|
Revenues
|
|
|
Revenues
|
|
|
Net revenues
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
Cost of goods sold
|
|
|
73.9
|
|
|
|
75.9
|
|
|
|
71.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
26.1
|
|
|
|
24.1
|
|
|
|
28.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research, development and engineering
|
|
|
8.3
|
|
|
|
7.3
|
|
|
|
6.9
|
|
Selling, general and administrative
|
|
|
14.9
|
|
|
|
13.9
|
|
|
|
13.8
|
|
Amortization of acquisition-related intangible assets
|
|
|
0.7
|
|
|
|
0.6
|
|
|
|
|
|
Restructuring charges
|
|
|
0.7
|
|
|
|
|
|
|
|
|
|
Impairment charges
|
|
|
|
|
|
|
2.3
|
|
|
|
|
|
Litigation provision
|
|
|
|
|
|
|
|
|
|
|
(4.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
24.6
|
|
|
|
24.1
|
|
|
|
16.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
1.5
|
|
|
|
0.0
|
|
|
|
12.2
|
|
Other income (expense), net
|
|
|
(0.5
|
)
|
|
|
1.3
|
|
|
|
(0.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax
|
|
|
1.0
|
|
|
|
1.3
|
|
|
|
11.3
|
|
Provision for income tax
|
|
|
(1.2
|
)
|
|
|
(2.5
|
)
|
|
|
(3.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(0.2
|
)
|
|
|
(1.2
|
)
|
|
|
7.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth the revenues for each of our
product groups for fiscal 2010, 2009 and 2008:
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31,
|
|
|
|
2010
|
|
|
% Change
|
|
|
2009
|
|
|
% Change
|
|
|
2008
|
|
|
|
(000)
|
|
|
|
|
|
(000)
|
|
|
|
|
|
(000)
|
|
|
Power semiconductors
|
|
$
|
175,845
|
|
|
|
(18.9
|
)
|
|
$
|
216,836
|
|
|
|
(8.4
|
)
|
|
$
|
236,599
|
|
ICs
|
|
|
48,226
|
|
|
|
49.6
|
|
|
|
32,236
|
|
|
|
(21.6
|
)
|
|
|
41,097
|
|
Systems and RF power semiconductors
|
|
|
19,153
|
|
|
|
(21.8
|
)
|
|
|
24,480
|
|
|
|
(8.5
|
)
|
|
|
26,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
243,224
|
|
|
|
(11.1
|
)
|
|
$
|
273,552
|
|
|
|
(10.2
|
)
|
|
$
|
304,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following tables set forth the average selling prices, or
ASPs, and units for fiscal 2010, 2009 and 2008:
Average
Selling Prices
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31,
|
|
|
|
2010
|
|
|
% Change
|
|
|
2009
|
|
|
% Change
|
|
|
2008
|
|
|
Power semiconductors
|
|
$
|
2.29
|
|
|
|
(13.9
|
)
|
|
$
|
2.66
|
|
|
|
35.0
|
|
|
$
|
1.97
|
|
ICs(1)
|
|
$
|
0.78
|
|
|
|
0.0
|
|
|
$
|
0.78
|
|
|
|
1.3
|
|
|
$
|
0.77
|
|
Systems and RF power semiconductors
|
|
$
|
21.81
|
|
|
|
(4.5
|
)
|
|
$
|
22.84
|
|
|
|
32.9
|
|
|
$
|
17.19
|
|
|
|
|
(1) |
|
$1.1 million in royalty revenues were excluded from the
calculation of the ASP of ICs. |
38
Units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31,
|
|
|
|
2010
|
|
|
% Change
|
|
|
2009
|
|
|
% Change
|
|
|
2008
|
|
|
|
(000)
|
|
|
|
|
|
(000)
|
|
|
|
|
|
(000)
|
|
|
Power semiconductors
|
|
|
76,776
|
|
|
|
(5.8
|
)
|
|
|
81,498
|
|
|
|
(32.2
|
)
|
|
|
120,290
|
|
ICs
|
|
|
61,730
|
|
|
|
48.9
|
|
|
|
41,468
|
|
|
|
(22.5
|
)
|
|
|
53,482
|
|
Systems and RF power semiconductors
|
|
|
878
|
|
|
|
(18.1
|
)
|
|
|
1,072
|
|
|
|
(31.1
|
)
|
|
|
1,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
139,384
|
|
|
|
12.4
|
|
|
|
124,038
|
|
|
|
(29.3
|
)
|
|
|
175,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The 11.1% decline in net revenues from fiscal 2009 to fiscal
2010 reflected a $41.0 million, or 18.9%, decrease in the
sale of power semiconductor and a $5.3 million, or 21.8%
decrease in the sale of systems and RF power semiconductors,
offset by an increase of $16.0 million, or 49.6%, in the
sales of ICs.
The decrease in power semiconductors was broad based across all
major product lines, and included a $28.7 million decline
in the sale of bipolar products and a $12.3 million decline
in sales of MOSFET products, principally to the consumer
products market and the industrial and commercial market. The
revenues from the sale of systems and RF power semiconductors
decreased primarily due to a decrease of $4.3 million in
the sale of subassemblies to the industrial and commercial
market. The increase in revenues from ICs was principally due to
the acquisition of the display driver IC product line from
Leadis Technology, Inc. and the acquisition of Zilog.
The decrease in the ASPs of power semiconductors in fiscal 2010
as compared to fiscal 2009 was primarily due to a change in the
mix of products sold and declining prices in Europe that
resulted from market conditions in the first two quarters of the
fiscal year. The decline in the ASPs of systems and RF power
semiconductors was principally due to a decline in the revenues
from the sale of the higher priced subassemblies that was larger
than the decline in the revenues from the sale of lower priced
RF power semiconductors. The ASPs of ICs were unchanged from
year to year.
In fiscal 2010 as compared to fiscal 2009, the decline in
shipments of power semiconductors was primarily due to reduced
shipments of bipolar products, principally to the industrial and
commercial market. In systems and RF power semiconductors, the
unit decline was principally caused by reduced shipments of RF
power semiconductors. In ICs, the unit growth was primarily
because of increased shipments of display driver ICs to the
consumer products market, increased shipments of SSRs primarily
to the industrial and commercial market and the shipment of
microcontrollers after the acquisition of Zilog.
From fiscal 2008 to fiscal 2009, net revenues decreased 10.2%,
caused in large part by the adverse economic conditions in the
last two quarters of fiscal 2009. The $19.8 million, or
8.4%, decrease in net revenues from power semiconductors was
primarily due to a decrease of $22.3 million in the sale of
power MOSFET products, principally to the consumer products
market and to the industrial and commercial market, offset by an
increase of $1.8 million in the sale of bipolar products,
principally to the industrial and commercial market. The
$8.9 million, or 21.6%, decline in revenues from the sales
of ICs was primarily due to a decrease in sales of SSRs of
$4.8 million, primarily to the consumer products market,
and of customer premise equipment for the telecommunications
market of $3.9 million. The decrease of $2.3 million,
or 8.5%, in revenues from the sale of systems and RF power
semiconductors was mainly due to a decrease of $1.9 million
in the sale of subassemblies to the industrial and commercial
market.
The increase in the ASPs of power semiconductors in fiscal 2009
as compared to fiscal 2008 was primarily caused by a reduction
in the sale of lower priced semiconductors to the consumer
products market. The increase in the ASPs of systems and RF
power semiconductors was principally due to a shift in the
product mix towards the sale of higher priced subassemblies from
lower priced RF power semiconductors. The ASPs of ICs were
largely unchanged from year to year.
Units declined in all product groups in fiscal 2009 as compared
to fiscal 2008. The decline in shipments of power semiconductors
was principally due to reduced shipments to the consumer
products market and the industrial and commercial market. In
systems and RF power semiconductors, the unit decline was
principally caused by
39
reduced shipments of RF power semiconductors to the industrial
and commercial market. In ICs, the unit decline was principally
caused by the reduction of shipments to the telecommunication
markets.
For fiscal 2010, sales to customers in the United States
represented approximately 29.8% and sales to international
customers represented approximately 70.2%, of our net revenues.
Of our international sales in fiscal 2010, approximately 47.4%
were derived from sales in Europe and the Middle East,
approximately 46.5% were derived from sales in Asia and
approximately 6.1% were derived from sales in Canada and the
rest of the world.
By comparison, for fiscal 2009, sales to customers in the United
States represented approximately 28.6%, and sales to
international customers represented approximately 71.4%, of our
net revenues. Of our international sales in fiscal 2009,
approximately 57.2% were derived from sales in Europe and the
Middle East, approximately 33.8% were derived from sales in Asia
and approximately 9.0% were derived from sales in Canada and the
rest of the world.
For fiscal 2008, sales to customers in the United States
represented approximately 26.3%, and sales to international
customers represented approximately 73.7%, of our net revenues.
Of our international sales in fiscal 2008, approximately 54.5%
were derived from sales in Europe and the Middle East,
approximately 37.3% were derived from sales in Asia and
approximately 8.2% were derived from sales in Canada and the
rest of the world.
From fiscal 2009 to fiscal 2010, we experienced substantial
growth in sales in China, primarily through the sale of display
driver ICs to the consumer products market, offset by declines
in revenues across all the major European countries and in the
United States, India and Malaysia. The decline in Europe was
primarily due to reduced revenues from the industrial and
commercial market; the decline in the United States was
primarily due to curtailed revenues from the medical market and
the industrial and commercial market; the decline in revenues in
India was principally due to lower shipments of thyristor
products to the industrial and commercial market; and the
decline in Malaysia was primarily due to a decrease in revenues
from the medical market.
From fiscal 2008 to fiscal 2009, most of our revenue decline
occurred in Korea, China, the United Kingdom, or the UK, and
Germany. In Korea, the decline principally related to the
decline in the consumer products market. In China, the decline
was primarily in the industrial and commercial market. In
contrast, in the UK, the decline principally related to reduced
sales of SSRs to the consumer products market and the
telecommunications market. The decline of revenues in Germany
was primarily due to the reduced revenues in the industrial and
commercial market.
In fiscal 2010, one customer accounted for 10.9% of our net
revenues. In fiscal 2009 and 2008, none of our customers
accounted for more than 10% of our net revenues.
In each of the last three fiscal years, our revenues were
reduced by allowances for sales returns, stock rotations and
ship and debit. See Critical Accounting Policies and
Significant Management Estimates elsewhere in this
Managements Discussion and Analysis of Financial Condition
and Results of Operations.
Gross
Profit.
From fiscal 2009 to fiscal 2010, gross profit decreased by
$2.5 million, whereas the gross profit margin increased
from 24.1% to 26.1%. The decline in the gross profit dollars was
principally because of reduced revenues as a result of the
global economic downturn and because of changes in product mix,
as sales to the higher margin medical market decreased and sales
to the lower margin consumer products market increased, offset
by lower write-off inventories. The gross profit margin increase
was mainly due to a reduction in the write-offs of excess
inventory. In fiscal 2010, we added $2.5 million to our
reserve for excess inventory, while in fiscal 2009, we added
$17.5 million to our reserve for excess inventory.
From fiscal 2008 to fiscal 2009, gross profit decreased by
$21.2 million and the gross profit margin declined from
28.6% to 24.1%. The decline in gross profit margin was primarily
due to an increase in the reserve for excess inventory, which
increased from $5.1 million in fiscal 2008 to
$18.0 million in fiscal 2009. In addition, the
$30.9 million, or 10.2%, reduction in net revenues in
fiscal 2009 led to fewer gross profit dollars as compared to
fiscal 2008.
40
In each of the last three years, our gross profit and gross
profit margin were positively affected by the sale of excess
inventory, which had previously been written down. See
Critical Accounting Policies and Significant Management
Estimates Inventories elsewhere in the
Managements Discussion and Analysis of Financial Condition
and Results of Operations.
Research,
Development and Engineering.
Research, development and engineering, or R&D, expenses
typically consist of internal engineering efforts for product
design and development. From fiscal 2009 to fiscal 2010,
R&D expenses increased slightly by $181,000 and increased
from 7.3% to 8.3% as a percentage of net revenues. The increase
in the percentage of R&D expenses was primarily due to a
decrease in net revenues. From fiscal 2008 to fiscal 2009,
R&D expenses decreased by $1.2 million and increased
from 6.9% to 7.3% as a percentage of net revenues. The decrease
in R&D expenses was primarily because of reduced personnel
expenses. When expressed as a percentage of revenues, the
increase in R&D expenses was due to reduced net revenues.
Selling,
General and Administrative.
In fiscal 2010, as compared to fiscal 2009, selling, general and
administrative expenses decreased by $1.8 million and
increased from 13.9% to 14.9% as a percentage of net revenues.
The decrease was principally due to a decline in sales and
marketing expenses of $4.4 million, consistent with the
decreased revenues, offset by an increase in finance and
administration expenses, or F&A expenses, of
$2.6 million. The increase in F&A expenses resulted
from an increase of $1.5 million in professional and
consulting expense, incurred mainly because of acquisitions, and
$1.7 million of additional F&A expenses arising from
the acquired businesses, offset by a $709,000 reversal of an
employee payment accrual at our Germany division in compliance
with local laws. In fiscal 2009 as compared to fiscal 2008,
SG&A expenses decreased by $4.1 million and increased
from 13.8% to 13.9% as a percentage of net revenues. The
decrease was principally due to the receipt of $2.2 million
for reimbursement of litigation expenses from International
Rectifier and a decline in professional and consulting expenses
of $2.1 million.
Restructuring
Charges.
In the quarter ended September 30, 2009, we initiated plans
to restructure our European manufacturing and assembly
operations to align them to prevailing market conditions. The
plans primarily involved the termination of employees and
consolidation of certain positions. Costs related to termination
of employees represented severance payments and benefits. The
restructuring charges recorded in conjunction with the plan
represented severance costs and have been included under
Restructuring charges in our consolidated statements
of operations. The restructuring accrual as of March 31,
2010 was included under Accrued expenses and other
liabilities on our consolidated balance sheets. Aggregate
restructuring charges during the year were $1.6 million.
See Note 16, Restructuring Charges in the Notes
to Consolidated Financial Statements of this
Form 10-K.
Impairment
Charge.
For fiscal 2009, we performed an assessment of the impairment of
goodwill that considered current economic conditions and trends,
estimated future operating results and anticipated future
economic conditions. Several factors led to a reduction in
forecasted cash flows, including, among others, lower than
expected performance of reporting units carrying goodwill and
current economic conditions. After completing the first and the
second step in the goodwill impairment analysis, we concluded
that the entire goodwill balance of the three reporting units
that had goodwill recorded should be impaired. Consequently, we
recorded a charge of $6.4 million for fiscal 2009. See
Note 7, Goodwill and Intangible Assets in the
Notes to Consolidated Financial Statements in Item 8 of
this Annual Report on
Form 10-K
for further discussion regarding impairment testing.
41
Litigation
Provision.
For the year ended March 31, 2008, we recorded a reversal
of litigation provision of $13.0 million, upon the
favorable decisions of the appellate courts in the matters
involving International Rectifier Corporation and LoJack
Corporation.
Other
Income (Expense), Net.
In fiscal 2010, interest expense, net was $1.2 million as
compared to interest expense, net of $666,000 in fiscal 2009 and
interest income, net of $277,000 in fiscal 2008. The increase in
interest expense, net from fiscal 2009 to fiscal 2010 was
primarily caused by lower interest rates on our cash balances
and by interest expense on our $15.0 million borrowing from
Bank of the West, or BOW. See Note 8, Borrowing
Arrangements in the Notes to Consolidated Financial
Statements in Item 8 of this Annual Report on
Form 10-K
for further information regarding the credit agreement with BOW.
The change from interest income, net in fiscal 2008 to interest
expense, net in fiscal 2009 was primarily due to reduced
interest income caused by lower interest rates.
In fiscal 2010, other expense, net was $141,000 as compared to
other income, net of $4.3 million in fiscal 2009 and other
expense, net of $3.2 million in fiscal 2008, respectively.
The change from other income, net in fiscal 2009 to other
expense, net in fiscal 2010 was primarily due to losses from
changes in exchange rates applied to foreign currency
transactions. The change from other expense, net in fiscal 2008
to other income, net in fiscal 2009 was primarily due to gains
associated with changes in exchange rates applied to foreign
currency transactions.
Provision
for Income Taxes.
In fiscal 2010, the provision for income taxes reflected an
effective tax rate of 129% as compared to 194% in fiscal 2009
and 31% in fiscal 2008. The fiscal 2010 tax rate resulted from
taxable income recognized in higher tax rate jurisdictions and a
loss recognized in a lower tax rate jurisdiction. The income tax
provision in fiscal 2009 principally results from increases in
valuation allowances on certain deferred tax assets and the
impact of the impairment of our goodwill, which is not
deductible for tax purposes. The fiscal 2008 tax rate was
reduced from the statutory tax provision rate of 37% primarily
due to adjustments recorded to our deferred tax assets and
liabilities for a benefit of 6%.
Liquidity
and Capital Resources
At March 31, 2010, cash and cash equivalents were
$60.5 million as compared to $55.4 million at
March 31, 2009 and $56.6 million at March 31,
2008. In fiscal 2008 and fiscal 2009, the cash generated by our
operations provided sufficient liquidity for our needs. In
fiscal 2010, our liquidity needs expanded and we borrowed
$15.0 million to supplement the cash generated by
operations.
Our cash provided by operating activities in fiscal 2010 was
$29.2 million as compared to $21.6 million in fiscal
2009 and $28.0 million in fiscal 2008. For fiscal 2010 as
compared to fiscal 2009, the increase in cash provided by
operating activities of $7.6 million was primarily due to
an increase of $28.9 million in net changes in operating
assets and liabilities, offset by a decrease of
$21.3 million in net loss and total adjustments to
reconcile net loss.
Changes in assets and liabilities for fiscal 2010 compared to
fiscal 2009 included the following: Inventories decreased due to
reduced inventory purchases and accounts receivable increased
due to higher revenues in the fourth quarter of fiscal 2010 as
compared to the fourth quarter of fiscal 2009.
From fiscal 2008 to fiscal 2009, the $6.4 million decrease
in cash provided by operating activities was primarily due to a
decrease of $8.7 million in net changes in operating assets
and liabilities, offset by an increase of $2.3 million in
net income and total adjustments to reconcile net income (loss).
The decrease in net change in operating assets and liabilities
was primarily due to higher purchases of inventories in fiscal
2009 as compared to fiscal 2008, offset by lower accounts
receivable in fiscal 2009 as compared to fiscal 2008.
We used $36.3 million in net cash for investing activities
during fiscal 2010, as compared to $5.9 million in fiscal
2009 and $10.7 million in fiscal 2008. In fiscal 2010, we
spent $30.6 million on business combinations and
42
$5.1 million on capital expenditure. In fiscal year 2009
and 2008, our uses of cash for investing activities principally
reflected the purchase of plant and equipment. In fiscal 2009
and 2008, we spent $8.8 million and $7.2 million,
respectively, on capital expenditures. Over the past three
fiscal years, the capital expenditures were principally for
equipment required to increase our production capacity.
For fiscal 2010, net cash provided by financing activities was
$11.8 million, as compared to net cash used in financing
activities of $12.8 million in fiscal 2009 and of
$18.6 million in fiscal 2008. In fiscal 2010, we borrowed
$15.0 million and received $1.3 million through
employee equity plans, offset by $4.0 million for principal
repayments on capital lease obligations and $1.3 million
for repayments of loans. In fiscal 2009, we used
$7.5 million for the purchase of treasury stock,
$4.7 million for principal repayments on capital lease
obligations, $3.2 million for the payment of dividends to
stockholders and $1.9 million for repayments of loans,
offset by proceeds from employee equity plans of
$3.6 million. In fiscal 2008, we spent $15.1 million
to purchase our stock for treasury.
At March 31, 2010, capital lease obligations and loans
payable totaled $37.3 million. This represented 61.7% of
our cash and cash equivalents and 20.4% of our
stockholders equity. Over the past three fiscal years,
satisfying our payment obligations for capital leases and loans
payable did not materially affect our ability to fund our
operating needs.
We are obligated on a 6.8 million, or
$9.2 million, loan. The loan has a remaining term of
10 years, ending in June 2020, and bears a variable
interest rate, which is dependent upon the current Euribor rate
and the ratio of indebtedness to cash flow for the German
subsidiary. Each fiscal quarter a principal payment of
167,000, or about $225,000, and a payment of accrued
interest is required. Financial covenants for a ratio of
indebtedness to cash flow, a ratio of equity to total assets and
a minimum stockholders equity for the German subsidiary
must be satisfied for the loan to remain in good standing. The
loan may be prepaid in whole or in part at the end of a fiscal
quarter without penalty. At March 31, 2010, we had complied
with the financial covenants. The loan is collateralized by a
security interest in the facility in Lampertheim, Germany, which
is owned by our U.S. parent.
On August 2, 2007, we completed the purchase of a building
in Milpitas, California. We moved our corporate office and a
facility for operations to this location in January 2008. In
connection with the purchase, we assumed a loan, secured by the
building, of $7.5 million. The loan bears interest at the
rate of 7.455% per annum and is due and payable in February
2011. Monthly payments of principal and interest of $56,000 are
due under the loan. In addition, monthly impound payments
aggregating $14,000 are to be made for items such as real
property taxes, insurance and capital expenditures. The balance
of the loan liability at March 31, 2010 was, and the
remaining balance on the loan at maturity will be, approximately
$7.1 million.
On November 13, 2009, we entered into a credit agreement
for a revolving line of credit with BOW, under which we may
borrow up to $15.0 million. Borrowings may be repaid and
re-borrowed during the term of the credit agreement. The
obligations are guaranteed by two of our subsidiaries. All
amounts owed under the credit agreement are due and payable on
October 31, 2011. On November 16, 2009, we borrowed
$15.0 million pursuant to the credit agreement. See
Note 8, Borrowing Arrangements in the Notes to
Consolidated Financial Statements in Item 8 of this Annual
Report on
Form 10-K
for further information regarding the credit agreement. The
Agreement also includes a $3.0 million letter of credit
subfacility, which commenced in April 2010. See Note 18,
Commitment and Contingencies in the Notes to
Consolidated Financial Statements in Item 8 of this Annual
Report on
Form 10-K
for further information regarding the terms of the subfacility.
Additionally, we maintain two defined benefit pension plans: one
for the United Kingdom employees and one for German employees.
These plans cover most of the employees in the United Kingdom
and Germany. Benefits are based on years of service and the
employees compensation. We deposit funds for these plans,
consistent with the requirements of local law, with investment
management companies, insurance companies, trustees
and/or
accrue for the unfunded portion of the obligations. Both plans
have been curtailed. As such, the plans are closed to new
entrants and no credit is provided for additional periods of
service. The total pension liability accrued at March 31,
2010 was $15.8 million. See Note 9, Pension
Plans in the Notes to Consolidated Financial Statements in
Item 8 of this Annual Report on
Form 10-K
for a discussion of the investment return assumptions, the
underlying estimates and the expected future cash flows
associated with the pension plans.
43
On February 18, 2010, we completed the acquisition of
Zilog. The total consideration for the transaction was
$62.5 million, which was fully paid in cash. See
Note 3, Business Combinations in the Notes to
Consolidated Financial Statements in Item 8 of this Annual
Report on
Form 10-K
for further information regarding the transaction.
As of March 31, 2010, we had $60.5 million in cash and
cash equivalents. We believe that our cash and cash equivalents,
together with cash generated from operations, will be sufficient
to meet our anticipated cash requirements for the next
12 months. Our liquidity could be negatively affected by a
decline in demand for our products, increases in the cost of
materials or labor, investments in new product development or
one or more acquisitions. We occasionally use forward and option
contracts in the normal course of business to manage our foreign
currency exchange risks. We did not have any open foreign
exchange forward and option contracts at March 31, 2010.
There can be no assurance that additional debt or equity
financing will be available when required or, if available, can
be secured on terms satisfactory to us.
Disclosures
about Contractual Obligations and Commercial
Commitments
Details of our contractual obligations and commitments as of
March 31, 2010 to make future payments under contracts are
set forth below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
Less Than
|
|
|
|
|
|
|
|
|
After 5
|
|
Contractual Obligations(1)(2)
|
|
Total
|
|
|
1 Year
|
|
|
1-3 Years
|
|
|
4-5 Years
|
|
|
Years
|
|
|
Long term debt
|
|
$
|
32,805
|
|
|
$
|
8,434
|
|
|
$
|
17,640
|
|
|
$
|
2,022
|
|
|
$
|
4,709
|
|
Capital lease obligations(3)
|
|
|
4,777
|
|
|
|
3,021
|
|
|
|
1,756
|
|
|
|
|
|
|
|
|
|
Operating lease obligations
|
|
|
10,192
|
|
|
|
2,105
|
|
|
|
2,978
|
|
|
|
1,326
|
|
|
|
3,783
|
|
Other purchase obligations(4)
|
|
|
41,775
|
|
|
|
12,063
|
|
|
|
20,712
|
|
|
|
6,000
|
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
89,549
|
|
|
$
|
25,623
|
|
|
$
|
43,086
|
|
|
$
|
9,348
|
|
|
$
|
11,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Contractual obligations shown in the table above exclude benefit
payments to participants of our defined benefit pension plans.
We summarize the estimated benefit payments to be made by the
plans over the next ten years in Note 9, Pension
Plans in the Notes to Consolidated Financial Statements in
Item 8 of this Annual Report on
Form 10-K.
The table also excludes contributions we made to defined benefit
pension plans and our defined contribution plan. Our future
contributions to these plans depend on many uncertain factors
including future returns on the defined benefit plan assets and
the amount and timing of employee and discretionary employer
contributions to the defined contribution plan. We provide
additional information about our defined benefit pension plans
and our defined contribution plan, in Note 14,
Employee Savings and Retirement Plan and
Note 9, Pension Plans in the Notes to
Consolidated Financial Statements in Item 8 of this Annual
Report on
Form 10-K. |
|
(2) |
|
We are unable to reliably determine the timing of future
payments related to some of our uncertain tax positions.
Therefore, $6.2 million of income taxes payable has been
excluded from the table above. However, long term income taxes
payable, included on our consolidated balance sheet, includes
these uncertain tax payments. |
|
(3) |
|
Includes anticipated interest payments. The capital lease
obligations of $4.8 million include interest payments
totaling $236,000. |
|
(4) |
|
Represents commitments for purchase of inventory and property
and equipment. These were not recorded as liabilities on our
consolidated balance sheet as of March 31, 2010, as we had
not yet received the related goods or taken title to the
property. |
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
We are exposed to various risks, including fluctuations in
interest and foreign currency rates. In the normal course of
business, we also face risks that are either non-financial or
non-quantifiable. Such risks principally include country risks,
credit risks and legal risks that are not discussed or
quantified in the following analyses.
44
Other than some immaterial investments, we currently keep our
funds in accounts and instruments that, for accounting purposes,
are cash and cash equivalents and do not carry interest rate
risk to the fair market value of principal. We may, in the
future, choose to place our funds in investments in high quality
debt securities, potentially consisting of debt instruments of
the United States or state or local governments or investment
grade corporate issuers. Investments in both fixed and floating
rate securities have some degree of interest rate risk. Fixed
rate securities may have their fair market value adversely
impacted by increases in interest rates. Floating rate
securities may produce less income than anticipated if interest
rates fall. As a result, changes in interest rates could cause
us to incur losses in principal if we are forced to sell
securities that have declined in market value or may result in
lower than anticipated investment income.
We intend to manage our exposure to interest rate, market and
credit risk in any investment portfolio with investment policies
and procedures that limit such things as term, credit rating and
the amount of credit exposure to any one issue, issuer and type
of instrument. We have not used derivative financial instruments
in any investment portfolio.
The impact on the fair market value of our cash equivalents and
our earnings from a hypothetical 100 basis point adverse
change in interest rates as of the end of fiscal 2010 would have
had the effect of increasing our net loss by an amount less than
$1.0 million. As our cash and cash equivalents have
historically been held in accounts and instruments where the
principal was not subject to interest rate risk and our cash and
cash equivalents exceeded our variable rate borrowings, this
sensitivity analysis was accomplished by offsetting our variable
rate borrowings against our cash and cash equivalents and then
estimating the impact of a 100 basis point reduction in
interest rates on such adjusted cash balances.
We have interest rate risk from a 6.8 million, or
approximately $9.2 million, loan taken by IXYS
Semiconductor GmbH, a German subsidiary of IXYS, from IKB
Deutsche Industriebank, which has a remaining term of about
10 years.
The interest rate on the loan is determined by adding the then
effective
3-month
Euribor rate and a margin. The margin can range from
70 basis points to 125 basis points, depending on the
calculation of a ratio of indebtedness to cash flow for the
German subsidiary. Additionally, we have entered into an
interest rate swap to economically hedge the interest rate risk.
The swap agreement expires on June 30, 2010. Under the swap
arrangement, if the Euribor rate exceeds 3.75%, the Euribor rate
for the purposes of the loan shall be 4.1%, and, if the Euribor
rate falls below 2%, the Euribor rate for the purposes of the
loan shall be 3%. The effective interest rate at March 31,
2010 was 3.7%.
In addition, we have interest rate risk from a
$15.0 million revolving line of credit with BOW. Borrowings
may be repaid and re-borrowed during the term of the credit
agreement. The obligations are guaranteed by two of our
subsidiaries. All amounts owed under the credit agreement are
due and payable on October 31, 2011. On November 16,
2009, we borrowed $15.0 million pursuant to the credit
agreement.
The credit agreement provides different interest rate
alternatives under which we may borrow funds. We may elect to
borrow based on LIBOR plus a margin, an alternative base rate
plus a margin or a floating rate plus a margin. The margin can
range from 1.5% to 3.25%, depending on interest rate
alternatives and on our leverage of liabilities to effective
tangible net worth. Currently, a two-month LIBOR commitment is
in effect, resulting in an interest rate, inclusive of
BOWs margin, of 2.88338%.
Revenues from our foreign subsidiaries were approximately 48.9%
of total revenues in fiscal 2010. These revenues come from our
German and UK subsidiaries and are primarily denominated in
Euros and British pounds, respectively. Our risk to European
currencies is partially offset by the natural hedge of
manufacturing and selling goods in the local currency. Our
foreign subsidiaries also incur most of their expenses in the
local currency. Our principal foreign subsidiaries use their
respective local currencies as their functional currency.
Although from time to time we enter into a limited number of
foreign exchange forward or option contracts to help manage
foreign currency exchange risk associated with certain of our
operations, we do not generally hedge foreign currency exchange
rates. The foreign exchange forward or option contracts we have
entered into generally have original maturities ranging from one
to six months. We do not enter into these contracts for trading
purposes and do not expect gains or losses on these contracts to
have a material impact on our financial results.
45
A hypothetical 10% adverse fluctuation in the exchange rate
between the Euro and the U.S. dollar and the exchange rate
between the British pound and the U.S. dollar would have
had the effect of increasing our net loss as of the end of
fiscal 2010 by an amount less than $4.0 million. Because of
the operation of our principal foreign units in their own
functional currencies, this sensitivity analysis was undertaken
by examining the net income or loss of the foreign units
incorporated into our statement of operations and testing the
impact of the hypothetical change in exchange rates on such
income or loss. The hypothetically derived net income or loss of
the foreign units was then calculated with our statement of
operations data to derive the hypothetical impact on our net
loss. Additionally, the impact of the hypothetical change in
exchange rates on the balance sheets of our principal foreign
units was examined and the hypothetical transaction effects,
using normal accounting practices, were incorporated into the
analysis.
It is likely that our future financial results could be directly
affected by changes in foreign currency exchange rates. We will
continue to face foreign currency exchange risks in the future.
Therefore, our financial results could be directly affected by
weak economic conditions in foreign markets. In addition, a
strengthening of the U.S. dollar, the Euro or the British
pound could make our products less competitive in foreign
markets.
46
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
IXYS Corporation
Milpitas, California
We have audited the accompanying consolidated balance sheets of
IXYS Corporation as of March 31, 2010 and 2009 and the
related consolidated statements of operations,
stockholders equity and comprehensive income (loss), and
cash flows for each of the three years in the period ended
March 31, 2010. These financial statements are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). 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, assessing the accounting principles
used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of IXYS Corporation at March 31, 2010 and
2009, and the results of its operations and its cash flows for
each of the three years in the period ended March 31,
2010, in conformity with accounting principles generally
accepted in the United States of America.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
IXYS Corporations internal control over financial
reporting as of March 31, 2010, based on criteria
established in Internal Control Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) and our report
dated June 11, 2010 expressed an unqualified opinion
thereon.
/s/ BDO
Seidman, LLP
San Francisco, California
June 11, 2010
47
IXYS
CORPORATION
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands, except share data)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
60,524
|
|
|
$
|
55,441
|
|
Restricted cash
|
|
|
813
|
|
|
|
136
|
|
Accounts receivable, net of allowances of $3,466 in 2010 and
$1,899 in 2009
|
|
|
47,158
|
|
|
|
37,251
|
|
Inventories
|
|
|
65,583
|
|
|
|
75,601
|
|
Prepaid expenses and other current assets
|
|
|
5,219
|
|
|
|
3,994
|
|
Deferred income taxes
|
|
|
10,467
|
|
|
|
12,797
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
189,764
|
|
|
|
185,220
|
|
Property, plant and equipment, net
|
|
|
47,588
|
|
|
|
52,912
|
|
Intangible assets, net
|
|
|
15,303
|
|
|
|
256
|
|
Goodwill
|
|
|
9,125
|
|
|
|
|
|
Deferred income taxes
|
|
|
17,081
|
|
|
|
7,972
|
|
Other assets
|
|
|
6,435
|
|
|
|
6,472
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
285,296
|
|
|
$
|
252,832
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Current portion of capitalized lease obligations
|
|
$
|
2,845
|
|
|
$
|
3,739
|
|
Current portion of loans payable
|
|
|
8,434
|
|
|
|
1,455
|
|
Accounts payable
|
|
|
17,762
|
|
|
|
13,767
|
|
Accrued expenses and other liabilities
|
|
|
24,998
|
|
|
|
15,342
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
54,039
|
|
|
|
34,303
|
|
Long term income tax payable
|
|
|
6,233
|
|
|
|
4,845
|
|
Capitalized lease obligations, net of current portion
|
|
|
1,696
|
|
|
|
4,418
|
|
Long term loans, net of current portion
|
|
|
24,371
|
|
|
|
17,599
|
|
Pension liabilities
|
|
|
15,822
|
|
|
|
13,175
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
102,161
|
|
|
|
74,340
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 18)
|
|
|
|
|
|
|
|
|
Stockholders equity
|
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par value:
|
|
|
|
|
|
|
|
|
Authorized: 5,000,000 shares; none issued and outstanding
|
|
|
|
|
|
|
|
|
Common stock, $0.01 par value:
|
|
|
|
|
|
|
|
|
Authorized: 80,000,000 shares; 36,796,751 issued and
31,335,764 outstanding and 36,054,936 issued and 30,633,949
outstanding at March 31, 2010 and 2009, respectively
|
|
|
368
|
|
|
|
361
|
|
Additional paid-in capital
|
|
|
183,242
|
|
|
|
177,551
|
|
Treasury stock, at cost: 5,460,987 and 5,420,987 common shares
at March 31, 2010 and 2009, respectively
|
|
|
(45,662
|
)
|
|
|
(45,374
|
)
|
Retained earnings
|
|
|
43,307
|
|
|
|
43,984
|
|
Accumulated other comprehensive income
|
|
|
1,880
|
|
|
|
1,970
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
183,135
|
|
|
|
178,492
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
285,296
|
|
|
$
|
252,832
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
48
IXYS
CORPORATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands, except per share data)
|
|
|
Net revenues
|
|
$
|
243,224
|
|
|
$
|
273,552
|
|
|
$
|
304,456
|
|
Cost of goods sold
|
|
|
179,791
|
|
|
|
207,594
|
|
|
|
217,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
63,433
|
|
|
|
65,958
|
|
|
|
87,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research, development and engineering
|
|
|
20,112
|
|
|
|
19,931
|
|
|
|
21,124
|
|
Selling, general and administrative
|
|
|
36,163
|
|
|
|
37,962
|
|
|
|
42,093
|
|
Amortization of acquisition-related intangible assets
|
|
|
1,839
|
|
|
|
1,651
|
|
|
|
|
|
Restructuring charges
|
|
|
1,614
|
|
|
|
|
|
|
|
|
|
Impairment charges
|
|
|
|
|
|
|
6,440
|
|
|
|
|
|
Litigation provision
|
|
|
|
|
|
|
|
|
|
|
(12,957
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
59,728
|
|
|
|
65,984
|
|
|
|
50,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
3,705
|
|
|
|
(26
|
)
|
|
|
36,864
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
426
|
|
|
|
1,098
|
|
|
|
2,121
|
|
Interest expense
|
|
|
(1,656
|
)
|
|
|
(1,764
|
)
|
|
|
(1,844
|
)
|
Other income (expense), net
|
|
|
(141
|
)
|
|
|
4,256
|
|
|
|
(3,162
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax
|
|
|
2,334
|
|
|
|
3,564
|
|
|
|
33,979
|
|
Provision for income tax
|
|
|
(3,011
|
)
|
|
|
(6,913
|
)
|
|
|
(10,690
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(677
|
)
|
|
$
|
(3,349
|
)
|
|
$
|
23,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.02
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
0.73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
(0.02
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
0.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends per share
|
|
$
|
|
|
|
$
|
0.10
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in per share calculation
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
31,005
|
|
|
|
31,087
|
|
|
|
31,906
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
31,005
|
|
|
|
31,087
|
|
|
|
33,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
49
IXYS
CORPORATION
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock and
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Additional Paid-In
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
Capital
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Treasury Shares
|
|
|
Treasury Amount
|
|
|
Retained Earnings
|
|
|
Income
|
|
|
Equity
|
|
|
Balances, March 31, 2007
|
|
|
35,032
|
|
|
$
|
166,239
|
|
|
|
2,520
|
|
|
$
|
(22,851
|
)
|
|
$
|
29,605
|
|
|
$
|
8,116
|
|
|
$
|
181,109
|
|
Components of comprehensive income, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,289
|
|
|
|
|
|
|
|
23,289
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,140
|
|
|
|
9,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
|
|
|
|
2,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,164
|
|
Proceeds from sale of shares through employee equity incentive
plans, net of excess tax benefit and others
|
|
|
372
|
|
|
|
1,994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,994
|
|
Purchase of treasury stock
|
|
|
|
|
|
|
|
|
|
|
1,798
|
|
|
|
(15,067
|
)
|
|
|
|
|
|
|
|
|
|
|
(15,067
|
)
|
FIN 48 related earnings adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,400
|
)
|
|
|
|
|
|
|
(2,400
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2008
|
|
|
35,404
|
|
|
|
170,397
|
|
|
|
4,318
|
|
|
|
(37,918
|
)
|
|
|
50,494
|
|
|
|
17,256
|
|
|
|
200,229
|
|
Components of comprehensive income, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,349
|
)
|
|
|
|
|
|
|
(3,349
|
)
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,286
|
)
|
|
|
(15,286
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18,635
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
|
|
|
|
2,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,816
|
|
Proceeds from sale of shares through employee equity incentive
plans, net of excess tax benefit and others
|
|
|
651
|
|
|
|
4,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,699
|
|
Purchase of treasury stock
|
|
|
|
|
|
|
|
|
|
|
1,103
|
|
|
|
(7,456
|
)
|
|
|
|
|
|
|
|
|
|
|
(7,456
|
)
|
Payment of dividend to stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,161
|
)
|
|
|
|
|
|
|
(3,161
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2009
|
|
|
36,055
|
|
|
|
177,912
|
|
|
|
5,421
|
|
|
|
(45,374
|
)
|
|
|
43,984
|
|
|
|
1,970
|
|
|
|
178,492
|
|
Components of comprehensive income, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(677
|
)
|
|
|
|
|
|
|
(677
|
)
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(90
|
)
|
|
|
(90
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(767
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
|
|
|
|
3,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,160
|
|
Proceeds from sale of shares through employee equity incentive
plans, net of excess tax benefit and others
|
|
|
742
|
|
|
|
2,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,538
|
|
Purchase of treasury stock
|
|
|
|
|
|
|
|
|
|
|
40
|
|
|
|
(288
|
)
|
|
|
|
|
|
|
|
|
|
|
(288
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2010
|
|
|
36,797
|
|
|
$
|
183,610
|
|
|
|
5,461
|
|
|
$
|
(45,662
|
)
|
|
$
|
43,307
|
|
|
$
|
1,880
|
|
|
$
|
183,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
50
IXYS
CORPORATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(677
|
)
|
|
$
|
(3,349
|
)
|
|
$
|
23,289
|
|
Adjustments to reconcile net income (loss) to net cash provided
by operating activities net of assets acquired and liabilities
assumed:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
13,386
|
|
|
|
14,547
|
|
|
|
12,868
|
|
Provision for receivables allowances
|
|
|
4,864
|
|
|
|
5,951
|
|
|
|
3,201
|
|
Write down of goodwill
|
|
|
|
|
|
|
6,440
|
|
|
|
|
|
Net change in inventory provision
|
|
|
2,059
|
|
|
|
17,110
|
|
|
|
3,284
|
|
Change in litigation provision
|
|
|
|
|
|
|
|
|
|
|
(12,957
|
)
|
Foreign currency adjustments on intercompany amounts
|
|
|
(101
|
)
|
|
|
1,040
|
|
|
|
1,006
|
|
Deferred income taxes
|
|
|
(1,358
|
)
|
|
|
(2,259
|
)
|
|
|
7,313
|
|
Tax benefit from employee equity incentive plans
|
|
|
(1,219
|
)
|
|
|
(1,132
|
)
|
|
|
(241
|
)
|
Stock based compensation
|
|
|
3,160
|
|
|
|
2,816
|
|
|
|
2,164
|
|
Loss (gain) on investments
|
|
|
249
|
|
|
|
227
|
|
|
|
(882
|
)
|
Gain on disposal of plant and equipment
|
|
|
(364
|
)
|
|
|
(54
|
)
|
|
|
(5
|
)
|
Changes in operating assets and liabilities, net of business
acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(12,182
|
)
|
|
|
2,346
|
|
|
|
(8,099
|
)
|
Inventories
|
|
|
12,305
|
|
|
|
(16,996
|
)
|
|
|
940
|
|
Prepaid expenses and other current assets
|
|
|
2,849
|
|
|
|
(1,769
|
)
|
|
|
196
|
|
Other assets
|
|
|
236
|
|
|
|
45
|
|
|
|
(259
|
)
|
Accounts payable
|
|
|
2,814
|
|
|
|
(4,969
|
)
|
|
|
234
|
|
Accrued expenses and other liabilities
|
|
|
3,201
|
|
|
|
2,059
|
|
|
|
(3,185
|
)
|
Pension liabilities
|
|
|
(56
|
)
|
|
|
(473
|
)
|
|
|
(912
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
29,166
|
|
|
|
21,580
|
|
|
|
27,955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in restricted cash
|
|
|
(413
|
)
|
|
|
484
|
|
|
|
(451
|
)
|
Purchase of businesses, net of cash and cash equivalents acquired
|
|
|
(30,631
|
)
|
|
|
(420
|
)
|
|
|
|
|
Purchases of investments
|
|
|
(618
|
)
|
|
|
(1,067
|
)
|
|
|
(4,012
|
)
|
Purchases of plant and equipment
|
|
|
(5,142
|
)
|
|
|
(8,775
|
)
|
|
|
(7,236
|
)
|
Proceeds from sale of investments
|
|
|
506
|
|
|
|
3,570
|
|
|
|
962
|
|
Proceeds from sale of fixed assets
|
|
|
42
|
|
|
|
334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(36,256
|
)
|
|
|
(5,874
|
)
|
|
|
(10,737
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments on capital lease obligations
|
|
|
(3,961
|
)
|
|
|
(4,657
|
)
|
|
|
(4,365
|
)
|
Repayments of notes payable from bank
|
|
|
(242
|
)
|
|
|
(278
|
)
|
|
|
|
|
Proceeds from loans
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
Repayment of loans
|
|
|
(1,272
|
)
|
|
|
(1,897
|
)
|
|
|
(1,141
|
)
|
Tax benefit from employee equity incentive plans
|
|
|
1,219
|
|
|
|
1,132
|
|
|
|
241
|
|
Payment of dividend to stockholders
|
|
|
|
|
|
|
(3,161
|
)
|
|
|
|
|
Purchases of treasury stock
|
|
|
(288
|
)
|
|
|
(7,456
|
)
|
|
|
(15,067
|
)
|
Proceeds from employee equity plans
|
|
|
1,319
|
|
|
|
3,567
|
|
|
|
1,753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
11,775
|
|
|
|
(12,750
|
)
|
|
|
(18,579
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate fluctuations on cash and cash equivalents
|
|
|
398
|
|
|
|
(4,129
|
)
|
|
|
3,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
5,083
|
|
|
|
(1,173
|
)
|
|
|
2,587
|
|
Cash and cash equivalents at beginning of the year
|
|
|
55,441
|
|
|
|
56,614
|
|
|
|
54,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of the year
|
|
$
|
60,524
|
|
|
$
|
55,441
|
|
|
$
|
56,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for interest
|
|
$
|
1,629
|
|
|
$
|
1,714
|
|
|
$
|
1,454
|
|
Cash paid during the period for income taxes
|
|
$
|
1,760
|
|
|
$
|
4,120
|
|
|
$
|
7,000
|
|
Supplemental disclosure of noncash investing and financing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed assets acquired under capital leases and loans
|
|
|
|
|
|
$
|
2,543
|
|
|
$
|
12,011
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
51
IXYS
CORPORATION
|
|
1.
|
Description
of Business
|
We design, develop, manufacture and market power semiconductors,
digital and analog integrated circuits, or ICs, and systems and
radio frequency, or RF, power semiconductors.
Power semiconductors are used primarily in controlling energy in
motor drives, power conversion including uninterruptible power
supplies (UPS) and switch mode power supplies
(SMPS), and medical electronics. Our power
semiconductors convert electricity at relatively high voltage
and current levels to create efficient power as required by a
specific application. Our target market includes segments of the
power semiconductor market that require medium to high power
semiconductors, with a particular emphasis on high power
semiconductors. Our power semiconductors include power metal
oxide silicon field effect transistors (Power
MOSFETs), insulated gate bipolar transistors
(IGBTs), thyristors and rectifiers, including fast
recovery epitaxial diodes (FREDs). Our ICs include
solid state relays (SSRs) for telecommunications
applications and power management and control ICs, such as
current regulators, motion controllers, digital power modulators
and drivers, and microcontrollers such as embedded flash
microcontrollers and core 8-bit microcontrollers and
microprocessors. Our systems include laser diode drivers, high
voltage pulse generators and modulators, and high power
subsystems, sometimes know as stacks, that are principally based
on our high power semiconductor devices.
We sell products in North America, Europe and Asia through an
organization that includes direct sales personnel, independent
representatives and distributors. We are headquartered in
Northern California with principal operations in California,
Massachusetts, Germany, the Philippines and the United Kingdom.
Each site has manufacturing, research and development and sales
and distribution activities. We also make use of subcontract
manufacturers for fabrication of wafers and for assembly and
test operations.
|
|
2.
|
Summary
of Significant Accounting Policies
|
Principles
of Consolidation
The consolidated financial statements include the accounts of
IXYS and our wholly-owned subsidiaries after elimination of all
intercompany balances and transactions.
Foreign
Currency Translation
The local currency is considered to be the functional currency
of our wholly owned international subsidiaries: the Euro for
IXYS Semiconductor GmbH, or IXYS GmbH, and the pound sterling
for Westcode Semiconductors Limited, or Westcode. Accordingly,
assets and liabilities are translated at the exchange rate in
effect at year-end and revenues and expenses are translated at
average rates during the year. Adjustments resulting from the
translation of the accounts of IXYS GmbH and Westcode into
U.S. dollars are included in accumulated other
comprehensive income, a separate component of stockholders
equity. Our Swiss subsidiary utilizes the US dollar as its
functional currency. Foreign currency transaction gains and
losses are included as a component of other income or expense.
Use of
Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could materially differ from our
estimates. Areas where management uses subjective judgments
include, but are not limited to, revenue reserves, inventory
valuation, deferred income taxes, allocation of purchase price
in business combinations and restructuring costs.
52
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Revenue
Recognition
Revenues are recognized upon shipment, provided that a signed
purchase order has been received, the price is fixed, title has
transferred, collection of resulting receivables is reasonably
assured, and there are no remaining significant obligations.
Reserves for sales returns and allowances, including allowances
for so called ship and debit transactions, are
recorded at the time of shipment, based on historical levels of
returns and discounts, current economic trends and changes in
customer demand. Transactions with sale terms of FOB shipping
point are recognized when the products are shipped and
transactions with sale terms of FOB destination are recognized
upon arrival.
We sell to distributors and original equipment manufacturers.
Approximately 51.4% of our revenues in fiscal year ended
March 31, 2010, or fiscal 2010, were from distributors. We
provide certain of our distributors with the following programs:
stock rotation and ship and debit. Ship and debit is a form of
price protection. We recognize revenue from product sales upon
shipment provided that it has received an executed purchase
order, the price is fixed and determinable, the risk of loss has
transferred, collection of resulting receivables is reasonably
assured, there are no customer acceptance requirements and there
are no remaining significant obligations. Reserves for
allowances are also recorded at the time of shipment. The
management of our company must make estimates of potential
future product returns and so called ship and debit
transactions related to current period product revenue.
Management analyzes historical returns and ship and debit
transactions, current economic trends and changes in customer
demand and acceptance of our products when evaluating the
adequacy of the sales returns and allowances. We have visibility
into inventory held by our distributors to aid in our reserve
analysis. Significant management judgments and estimates must be
made and used in connection with establishing the allowances in
any accounting period. Material differences may result in the
amount and timing of our revenue for any period if management
made different judgments or utilized different estimates.
Accounts receivable from distributors are recognized and
inventory is relieved when title to inventories transfer,
typically upon shipment from us, at which point we have a
legally enforceable right to collection under normal payment
terms. Under certain circumstances where we are not able to
reasonably and reliably estimate the actual returns, revenues
and costs relating to distributor sales are deferred until
products are sold by the distributors to the distributors
end customers. Deferred amounts are presented net and included
under Accrued expenses and other liabilities.
Allowance for sales returns. We maintain an
allowance for sales returns for estimated product returns by our
customers. We estimate our allowance for sales returns based on
our historical return experience, current economic trends,
changes in customer demand, known returns we have not received
and other assumptions. If we were to make different judgments or
utilize different estimates, the amount and timing of our
revenue could be materially different. Given that our revenues
consist of a high volume of relatively similar products, to date
our actual returns and allowances have not fluctuated
significantly from period to period, and our returns provisions
have historically been reasonably accurate. This allowance is
included as part of the accounts receivable allowance on the
balance sheet and as a reduction of revenues in the statement of
operations.
Allowance for stock rotation. We also provide
stock rotation to select distributors. The rotation
allows distributors to return a percentage of the previous six
months sales. In the fiscal years ended March 31,
2010, 2009 and 2008, approximately $1.2 million,
$1.8 million and $1.0 million, respectively, of
products were returned to us under the program. We establish the
stock rotation allowance for all sales to distributors except
where the revenue recognition is deferred and recognized on the
sale by the distributor of products to the end-customers. The
allowance, which is managements best estimate of future
returns, is based upon the historical experience of returns and
inventory levels at the distributors. This allowance is included
as part of the accounts receivable allowance on the balance
sheet and as a reduction of revenues in the statement of
operations.
Allowance for ship and debit. Ship and debit
is a program designed to assist distributors in meeting
competitive prices in the marketplace on sales to their end
customers. Ship and debit requires a request from the
53
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
distributor for a pricing adjustment for a specific part for a
customer sale to be shipped from the distributors stock.
We have no obligation to accept this request. However, it is our
historical practice to allow some companies to obtain pricing
adjustments for inventory held. Our distributors had
approximately $12.2 million in inventory of our products on
hand at March 31, 2010. Ship and debit authorizations may
cover current and future distributor activity for a specific
part for sale to the distributors customer. At the time we
record sales to the distributors, we provide an allowance for
the estimated future distributor activity related to such sales
since it is probable that such sales to distributors will result
in ship and debit activity. The sales allowance requirement is
based on sales during the period, credits issued to
distributors, distributor inventory levels, historical trends,
market conditions, pricing trends we see in our direct sales
activity with original equipment manufacturers and other
customers, and input from sales, marketing and other key
management. We receive periodic statements regarding our
products held by distributors. These procedures require the
exercise of significant judgments. We believe that they enable
us to make reliable estimates of future credits under the ship
and debit program. Actual results to date have approximated the
estimates. At the time the distributor ships the part from
stock, the distributor debits us for the authorized pricing
adjustment. This allowance is included as part of the accounts
receivable allowance on the balance sheet and as a reduction of
revenues in the statement of operations. If competitive pricing
were to decrease sharply and unexpectedly, estimates would be
insufficient, which could significantly adversely affect results.
Additions to the ship and debit allowance are estimates of the
amount of expected future ship and debit activity related to
sales during the period and reduce revenues and gross profit in
the period. The following table sets forth the beginning and
ending balances of, additions to, and deductions from, the
allowance for ship and debit during the three years ended
March 31, 2010 (in thousands):
|
|
|
|
|
Balance March 31, 2007
|
|
$
|
237
|
|
Additions
|
|
|
2,417
|
|
Deductions
|
|
|
(2,309
|
)
|
|
|
|
|
|
Balance March 31, 2008
|
|
|
345
|
|
Additions
|
|
|
2,407
|
|
Deductions
|
|
|
(2,338
|
)
|
|
|
|
|
|
Balance March 31, 2009
|
|
|
414
|
|
Additions
|
|
|
3,419
|
|
Deductions
|
|
|
(2,414
|
)
|
|
|
|
|
|
Balance March 31, 2010
|
|
$
|
1,419
|
|
|
|
|
|
|
We state our revenues net of any taxes collected from customers
that are required to be remitted to the various government
agencies. The amount of taxes collected from customers and
payable to government is included under accrued expenses and
other liabilities. Shipping and handling costs are included in
cost of sales.
Trade accounts receivable and allowance for doubtful
accounts. Trade accounts receivable are recorded
at the invoiced amount and do not bear interest. The allowance
for doubtful accounts is our best estimate of the amount of
probable credit losses in the existing accounts receivable. We
determine the allowance based on the aging of our accounts
receivable, the financial condition of our customers and their
payment history, our historical write-off experience and other
assumptions. The allowance for doubtful accounts is reviewed
quarterly. Past due balances and other specified accounts as
necessary are reviewed individually. Account balances are
charged off against the allowance after all means of collection
have been exhausted and the potential for recovery is considered
remote. Actual write-offs may be in excess of the recorded
allowance. This allowance is included as part of the accounts
receivable allowance on the balance sheet and as a selling,
general and administrative expense in the statement of
operations.
54
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Cash
and Cash Equivalents
We consider all highly liquid investments with original
maturities of three months or less at the time of purchase to be
cash equivalents. Cash equivalents include investments in
commercial paper and money market accounts at banks.
Restricted
Cash
Cash and cash equivalents at March 31, 2010 and
March 31, 2009 include restricted cash balances of $813,000
and $136,000, respectively. The restricted cash balances include
amounts pledged as collateral on outstanding letters of credit
and funds held in escrow.
Inventories
Inventories, consisting primarily of wafers, bipolar devices,
transistors, diodes and integrated circuits, are recorded at the
lower of a currently adjusted standard cost, which approximates
actual cost on a
first-in-first-out
basis, or market value. Our accounting for inventory costing is
based on the applicable expenditure incurred, directly or
indirectly, in bringing the inventory to its existing condition.
Such expenditures include acquisition costs, production costs
and other costs incurred to bring the inventory to its use. As
it is impractical to track inventory from the time of purchase
to the time of sale for the purpose of specifically identifying
inventory cost, inventory is, therefore, valued based on a
standard cost, given that the materials purchased are identical
and interchangeable at various production processes. The
authoritative guidance provided by Financial Accounting
Standards Board, or FASB, requires certain abnormal expenditures
to be recognized as expenses in the current period versus being
capitalized in inventory. It also requires that the amount of
fixed production overhead allocated to inventory be based on the
normal capacity of the production facilities. We review our
standard costs on an as-needed basis, but in any event at least
once a year, and update them as appropriate to approximate
actual costs.
We typically plan our production and inventory levels based on
internal forecasts of customer demand, which are highly
unpredictable and can fluctuate substantially. The value of our
inventories is dependent on our estimate of future demand as it
relates to historical sales. If our projected demand is over
estimated, we may be required to reduce the valuation of our
inventories below cost. We regularly review inventory quantities
on hand and record an estimated provision for excess inventory
based primarily on our historical sales and expectations for
future use. However, for new products, we do not consider
whether there is excess inventory until it develops sufficient
sales history or experiences a significant change in expected
product demand, based on backlog. Actual demand and market
conditions may be different from those projected by our
management. This could have a material effect on our operating
results and financial position. If we were to make different
judgments or utilize different estimates, the amount and timing
of the write-down of inventories could be materially different.
Excess inventory frequently remains saleable. When excess
inventory is sold, it yields a gross profit margin of up to
100%. Sales of excess inventory have the effect of increasing
the gross profit margin beyond that which would otherwise occur,
because of previous write-downs. Once inventory is written down
below cost, it is not written back up when it is subsequently
sold or scrapped. We do not physically segregate excess
inventory and assign unique tracking numbers to it in our
accounting systems. Consequently, we cannot isolate the sales
prices of excess inventory from the sales prices of non-excess
inventory. Therefore, we are unable to report the amount of
gross profit resulting from the sale of excess inventory or
quantify the favorable impact of such gross profit on our gross
profit margin.
55
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table provides information on our excess and
obsolete inventory reserve charged against inventory at cost (in
thousands):
|
|
|
|
|
Balance at March 31, 2007
|
|
$
|
18,829
|
|
Sale of excess inventory
|
|
|
(1,831
|
)
|
Scrap of excess inventory
|
|
|
(2,868
|
)
|
|
|
|
|
|
Balance of excess inventory
|
|
|
14,130
|
|
Additional provision for excess inventory
|
|
|
5,120
|
|
|
|
|
|
|
Balance at March 31, 2008
|
|
|
19,250
|
|
Sale of excess inventory
|
|
|
(515
|
)
|
Scrap of excess inventory
|
|
|
(2,021
|
)
|
|
|
|
|
|
Balance of excess inventory
|
|
|
16,714
|
|
Additional provision for excess inventory
|
|
|
17,983
|
|
|
|
|
|
|
Balance at March 31, 2009
|
|
|
34,697
|
|
Sale of excess inventory
|
|
|
(5,846
|
)
|
Scrap of excess inventory
|
|
|
(1,867
|
)
|
|
|
|
|
|
Balance of excess inventory
|
|
|
26,984
|
|
Additional provision for excess inventory
|
|
|
8,590
|
|
|
|
|
|
|
Balance at March 31, 2010
|
|
$
|
35,574
|
|
|
|
|
|
|
The practical efficiencies of wafer fabrication require the
manufacture of semiconductor wafers in minimum lot sizes. Often,
when manufactured, we do not know whether or when all the
semiconductors resulting from a lot of wafers will sell. With
more than 10,000 different part numbers for semiconductors,
excess inventory resulting from the manufacture of some of those
semiconductors will be continual and ordinary. Because the cost
of storage is minimal when compared to potential value and
because the products of our company do not quickly become
obsolete, we expect to hold excess inventory for potential
future sale for years. Consequently, we have no set time line
for the sale or scrapping of excess inventory.
In addition, our inventory is also being written down to lower
of cost or market or net realizable value. We review our
inventory listing on a quarterly basis for an indication of
losses being sustained for costs that exceed selling prices less
direct costs to sell. When it is evident that the selling price
is lower than current cost, the inventory is marked down
accordingly. At March 31, 2010 and 2009, our lower of cost
or market reserve was $797,000 and $583,000, respectively.
We periodically identify any inventory that is no longer usable
and write it off against recorded reserves.
We have entered into a purchase agreement for purchase of wafers
and substrates for a period of 6 years. Under the
agreement, the supplier agrees to supply and we are obliged to
purchase products corresponding to an agreed yearly purchase
amount. We have recognized the liability for all products
delivered as of March 31, 2010. The total amount committed
under the agreements has been disclosed in Note 18,
Commitments and Contingencies.
Property,
Plant and Equipment
Property, plant and equipment, including equipment under capital
leases, are stated at cost less accumulated depreciation.
Equipment under capital lease is stated at the lower of the
present value of the minimum lease payments at the beginning of
the lease term or the fair value of the leased assets at the
inception of the lease. Depreciation is computed using the
straight-line method over estimated useful lives of 1 to
14 years for equipment and 24 years to 50 years
for property and plant. Upon disposal, the assets and related
accumulated depreciation are removed from our accounts and the
resulting gains or losses are reflected in the statements of
operations. Repairs
56
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
and maintenance costs are charged to expense. Depreciation of
leasehold improvements is provided on the straight-line method
over the shorter of the estimated useful life or the term of the
lease.
The authoritative guidance provided by FASB requires evaluating
the recoverability of the carrying amount of our property, plant
and equipment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be fully
recoverable. Impairment is assessed when the forecasted
undiscounted cash flows derived for the operation, to which the
assets relate, are less than the carrying amount including
associated intangible assets of the operation. If the operation
is determined to be unable to recover the carrying amount of its
assets, then intangible assets are written down first, followed
by the other long-lived assets of the operation, to fair value.
Fair value is determined based on discounted cash flows or
appraised values, depending on the nature of the assets.
Judgment is used when applying these impairment rules to
determine the timing of the impairment test, the undiscounted
expected cash flows used to assess impairments and the fair
value of an impaired asset. The dynamic economic environment in
which we operate and the resulting assumptions used to estimate
future cash flows impact the outcome of these impairment tests.
On June 10, 2005, IXYS Semiconductor GmbH, or IXYS GmbH,
our German subsidiary, borrowed 10.0 million, or
about $12.2 million at the time, from IKB Deutsche
Industriebank for a term of 15 years. This loan is
partially collateralized by a security interest in our facility
in Lampertheim, Germany. See Note 8, Borrowing
Arrangements for more details.
On August 2, 2007, IXYS Buckeye, LLC, one of our
U.S. subsidiaries, acquired real property in Milpitas,
California for $7.5 million. We moved our corporate office
and a facility for operations to this location in January 2008.
Additional costs of $101,000 incurred in connection with
preparing the building for occupancy were capitalized. The
building is being depreciated over its estimated useful life of
40 years. The property was acquired by assumption of a loan
in the principal amount of $7.5 million. For further
details regarding the loan, see Note 8, Borrowing
Arrangements for more details.
Treasury
Stock
We account for treasury stock using the cost method.
Other
Assets
Other assets include marketable equity securities classified as
available-for-sale
and long term equity investments accounted under the equity
method. Investments designated as
available-for-sale
are reported at fair value with the unrealized gains and losses,
net of tax, recorded in other comprehensive income (loss).
Realized gains and losses (calculated as proceeds less
specifically identified costs) and declines in value of these
investments judged by management to be other than temporary, if
any, are included in other (expense) income. We have a 45%
equity interest in Powersem GmbH, or Powersem, a semiconductor
manufacturer based in Germany, and 20% equity interest in EB
Tech Ltd, or EB Tech, a radiation services provider based in
South Korea. These investments are accounted for using the
equity method. In fiscal 2010, we recognized losses of $154,000
on our investment in Powersem and $82,000 on our investment in
EB Tech Ltd. We recognized income of $212,000 and $75,000 during
fiscal 2009 on each of these investments, respectively. We
recognized income of $507,000 and loss of $176,000 during fiscal
2008 on each of these investments, respectively.
On November 5, 2009, IXYS CH GmbH, our Swiss subsidiary,
entered into a Share Purchase Agreement with Zencell Co. Ltd, or
Zencell, to acquire 53,847 shares of convertible preferred
stock of Zencell for $500,000. Zencell is a manufacturer of
rechargeable and primary alkaline batteries in South Korea. The
investment resulted in IXYS CH GmbH owning 35% of the equity in
Zencell and is accounted for using the equity method in the
financial statements. In fiscal 2010, we recognized a loss of
$46,000 on our investment in Zencell.
Refer to Note 5, Other Assets and Note 13,
Related Party Transactions for further information
regarding the investment balances and the related transactions
of those long term equity investments.
57
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
An impairment loss is recorded when there has been a loss in
value of the investment that is other than temporary. No
impairment loss on investment was recognized in any of the
periods presented.
Goodwill
and Intangible Assets
Goodwill represents the excess of the purchase price over the
estimated fair value of the net assets acquired. The costs of
acquired intangible assets are recorded at fair value at
acquisition. Intangible assets with finite lives are amortized
using the straight-line method over their estimated useful
lives, normally three to six years, and evaluated for impairment
in accordance with the authoritative guidance provided by FASB.
Goodwill and intangible assets with indefinite lives are carried
at fair value and reviewed at least annually for impairment
charge during the quarter ending March 31, as of
December 31, or more frequently if events and circumstances
indicate that the asset might be impaired, in accordance with
the authoritative guidance provided by FASB. An impairment loss
would be recognized to the extent that the carrying amount
exceeds the fair value of the reporting unit. There are two
steps in the determination. The first step compares the carrying
amount of the net assets to the fair value of the reporting
unit. The second step, if necessary, recognizes an impairment
loss to the extent the carrying value of the reporting
units net assets exceed the implied fair value of
goodwill. See Note 7, Goodwill and Intangible
Assets for further discussion of impairment analysis of
goodwill and related charges recorded.
Derivative
financial instruments
Although the majority of our transactions are in
U.S. dollars, we enter into foreign exchange forward and
option contracts to manage foreign currency exchange risk
associated with our operations. From time to time, we purchase
short-term, foreign exchange forward and option contracts to
hedge the impact of foreign currency fluctuations on certain
underlying assets, liabilities and commitments for operating
expenses denominated in foreign currencies. The purpose of
entering into these hedge transactions is to minimize the impact
of foreign currency fluctuations on the results of operations.
The contracts generally have maturity dates that do not exceed
six months. We have entered into an interest rate swap to manage
our variable interest rate exposure on the borrowing from IKB
Deutsche Industriebank.
We do not purchase derivative contracts for trading purposes. We
elected not to designate these contracts as accounting hedges
and any changes in fair value are marked to market and recorded
in the results of operations in other income. We did not have
any open foreign exchange forward and option contracts at
March 31, 2010. See Note 4, Fair Value and
Note 8, Borrowing Arrangements for further
information on the borrowing from IKB Deutsche Industriebank.
Defined
Benefit Plans
We maintain pension plans covering certain of our employees. For
financial reporting purposes, net periodic pension costs are
calculated based upon a number of actuarial assumptions,
including a discount rate for plan obligations, assumed rate of
return on pension plan assets and assumed rate of compensation
increases for plan employees. All of these assumptions are based
upon managements judgment, considering all known trends
and uncertainties. Actual results that differ from these
assumptions would impact the future expense recognition and cash
funding requirements of our pension plans. The authoritative
guidance provided by FASB required us to recognize the funded
status of our defined benefit pension and post-retirement
benefit plans in our consolidated balance sheets, with a
corresponding adjustment to accumulated other comprehensive
income, net of tax. The adoption of the authoritative guidance
provided by FASB on employers accounting for defined
benefit pension and other retirement plans since the end of
fiscal 2007 did not have any impact on the consolidated
financial statements.
58
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fair
Value of Financial Instruments
Beginning in the first quarter of fiscal 2009, the assessment of
fair value for our financial instruments was based on the
authoritative guidance provided by FASB in connection with fair
value measurements. It defines fair value, establishes a
framework for measuring fair value and expands disclosure of
fair value measurements.
Carrying amounts of some of our financial instruments, including
cash and cash equivalents, accounts receivable and accounts
payable, approximate fair value due to their short maturities.
Based on borrowing rates currently available to us for loans
with similar terms, the carrying value of notes payable to banks
and loans payable approximate fair value.
Advertising
We expense advertising as the costs are incurred. Advertising
expense for the years ended March 31, 2010, 2009 and 2008
was $453,000, $488,000 and $518,000, respectively. Advertising
expense is included in Selling, general and administrative
expenses on our consolidated statements of operations.
Research
and Development
Research and development costs are charged to operations as
incurred.
Income
Taxes
Our provision for income taxes is comprised of our current tax
liability and the change in deferred tax assets and liabilities.
Deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets
and liabilities and are measured using the enacted tax rates and
laws that will be in effect when the differences are expected to
reverse. A valuation allowance is required to reduce the
deferred tax assets to the amount that management estimates is
more likely than not to be realized. In determining the amount
of the valuation allowance, we consider estimated future taxable
income as well as feasible tax planning strategies in each
taxing jurisdiction in which it operates. If we determine that
it is more probable that it will not realize all or a portion of
our remaining deferred tax assets, we will increase our
valuation allowance with a charge to income tax expense.
Conversely, if we determine that it is likely that it will
ultimately be able to utilize all or a portion of the deferred
tax assets for which a valuation allowance has been provided,
the related portion of the valuation allowance will be released
as income tax expense. Significant management judgment is
required in determining the provision for income taxes, the
deferred tax assets and liabilities and any valuation allowance
recorded against net deferred tax assets. In the event that
actual results differ from these estimates or we adjust these
estimates in future periods, we may need to establish or
increase an additional valuation allowance that could materially
impact our financial position and results of operations. Our
ability to utilize our deferred tax assets and the continuing
need for a related valuation allowance are monitored on an
ongoing basis.
Other
Income and Expense
Other income and expense primarily consists of gains and losses
on foreign currency transactions and interest income and
expense, together with our share of income from investments
accounted for on the equity method.
Indemnification
Product guarantees and warranties have not historically proved
to be material. On occasion, we provide limited indemnification
to customers against intellectual property infringement claims
related to our products. To date, we have not experienced
significant activity or claims related to such indemnifications.
We also provide in the normal course of business indemnification
to our officers, directors and selected parties. We are unable
to estimate any potential future liability, if any. Therefore,
no liability for these indemnification agreements has been
recorded as of March 31, 2010 and 2009.
59
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Legal
Contingencies
We are subject to various legal proceedings and claims, the
outcomes of which are subject to significant uncertainty. The
authoritative guidance provided by FASB requires that an
estimated loss from a loss contingency should be accrued by a
charge to income if it is probable that an asset has been
impaired or a liability has been incurred and the amount of the
loss can be reasonably estimated. Disclosure of a contingency is
required if there is at least a reasonable possibility that a
material loss has been incurred. We evaluate, among other
factors, the degree of probability of an unfavorable outcome and
the ability to make a reasonable estimate of the amount of loss.
Changes in these factors could materially impact our financial
position, results of operations or cash flows.
Net
Income (Loss) per Share
Basic net income (loss) available per common share is computed
using net income (loss) and the weighted average number of
common shares outstanding during the period. Diluted net income
(loss) per common share is computed using net income (loss) and
the weighted average number of common shares outstanding,
assuming dilution, which includes potentially dilutive common
shares outstanding during the period. Potentially dilutive
common shares include the assumed exercise of stock options and
assumed vesting of restricted stock units using the treasury
stock method. See Note 12, Computation of Net Income
(Loss) per Share.
Accumulated
Other Comprehensive Income
Accumulated other comprehensive income or loss represents
foreign currency translation adjustments, unrealized gain or
loss on equity investments classified as
available-for-sale
and minimum pension liability, net of tax. See Note 11,
Other Comprehensive Income (Loss) and Accumulated Other
Comprehensive Income.
Concentration
and Business Risks
Dependence
on Third Parties for Wafer Fabrication and Assembly
Measured in dollars, we manufacture approximately 61.2% of our
wafers, an integral component of our products, in our facilities
in Germany, the UK, Massachusetts and California. We rely on
third party suppliers to provide the remaining 38.8%. The
principal external foundry for power semiconductors is Samsung
Electronics facility in Kiheung, South Korea. There can be
no assurance that material disruptions in supply will not occur
in the future. In such event, we may have to identify and secure
additional foundry capacity and may be unable to identify or
secure sufficient foundry capacity to meet demand. Even if such
capacity is available from another manufacturer, the
qualification process could take six months or longer. If we
were unable to qualify alternative manufacturing sources for
existing or new products in a timely manner or if such sources
were unable to produce semiconductor devices with acceptable
manufacturing yields and at acceptable prices, our business,
financial condition and results of operations would be
materially and adversely affected.
Dependence
on Suppliers
We purchase silicon substrates from a limited number of vendors,
most of whom we do not have long term supply agreements with.
Any of these suppliers could terminate their relationship with
us at any time. Our reliance on a limited number of suppliers
involves several risks, including potential inability to obtain
an adequate supply of silicon substrates and reduced control
over the price, timely delivery, reliability and quality of the
silicon substrates. There can be no assurance that problems will
not occur in the future with suppliers.
Employees
Covered by Collective Bargaining Arrangements
Approximately 128, or 66.7%, and 295, or 60.8%, of our employees
in the United Kingdom and Germany, respectively, have their
annual pay increases negotiated by a labor union.
60
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Concentration
of Credit Risk
Financial instruments that potentially subject us to credit risk
comprise principally cash and cash equivalents and trade
accounts receivable. We invest our excess cash in accordance
with our investment policy that has been approved by the Board
of Directors and is reviewed periodically by management to
minimize credit risk. Regarding cash and cash equivalents, the
policy authorizes the investment of excess cash in deposit
accounts, time deposits, certificates of deposit, bankers
acceptances, commercial paper rated AA or better and other money
market accounts and instruments of similar liquidity and credit
quality.
We invest our excess cash primarily in foreign and domestic
banks in short term time deposit and money market accounts.
Maturities are generally three months or less. Additionally, we
invest in commercial paper with financial institutions that
management believes to be creditworthy. These securities mature
within ninety days or less and bear minimal credit risk. We have
not experienced any losses on such investments.
We sell our products primarily to distributors and original
equipment manufacturers. We perform ongoing credit evaluations
of our customers and generally do not require collateral. An
allowance for potential credit losses is maintained by us. See
Note 15, Segment and Geographic Information for
a discussion of revenues by geography.
In the year ended March 31, 2010, one customer accounted
for 10.9% of our net revenues. In fiscal year 2009 and 2008, no
customer accounted for more than 10% of net revenues. At
March 31, 2010, 2009 and 2008, one customer accounted for
15.3%, 16.8% and 11.8% of accounts receivable, respectively. We
believe that the receivable balance from the largest customer
does not represent a significant credit risk based on financial
analysis and past collection experience.
We continually monitor the credit risk in our portfolio and
mitigate our credit risk exposures in accordance with the
policies approved by our Board of Directors.
Stock-Based
Compensation Plans
We have employee equity incentive plans, which are described
more fully in Note 10, Employee Equity Incentive
Plans. The authoritative guidance provided by FASB
requires employee stock options and rights to purchase shares
under stock participation plans to be accounted for under the
fair value method and requires the use of an option pricing
model for estimating fair value. Accordingly, share-based
compensation is measured at grant date, based on the fair value
of the award and shares expected to vest.
Under the authoritative guidance provided by FASB, the
compensation cost recognized beginning in fiscal 2007 includes
compensation cost for all equity incentive awards granted prior
to, but not yet vested as of April 1, 2006, based on the
grant-date fair value estimated in accordance with the
authoritative guidance provided by FASB, and compensation cost
for all equity incentive awards granted subsequent to
April 1, 2006 based on the grant-date fair value estimated
in accordance with the authoritative guidance provided by FASB.
We use the straight-line attribution method to recognize
share-based compensation costs over the service period of the
award.
The fair value of issuances under our Employee Stock Purchase
Plan is estimated on the issuance date and using the
Black-Scholes options pricing model.
Accounting
Changes and Recent Accounting Pronouncements
On July 1, 2009, FASB officially launched the FASB
Accounting Standards
Codificationtm,
or Codification, which has become the single official source of
authoritative, nongovernmental U.S. Generally Accepted
Accounting Principles, or GAAP. The Codification, which is
effective for interim and annual periods ending on or after
September 15, 2009, is organized into approximately 90
accounting topics. Going forward, U.S. GAAP will no longer
be issued in the form of an accounting standard, but
as an update to the applicable topic or
subtopic within the Codification. As such,
accounting guidance will be classified as either
authoritative or non-
61
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
authoritative based on its inclusion in or exclusion from
the Codification. We adopted the Codification starting with the
quarter ended September 30, 2009.
In the quarter ended June 30, 2009, we adopted the
authoritative guidance issued by FASB on business combinations.
The guidance requires an entity to recognize the assets
acquired, liabilities assumed, contingencies, and contingent
consideration at their fair value on the acquisition date. In
circumstances where the acquisition-date fair value for a
contingency cannot be determined during the measurement period
and it is concluded that it is probable that an asset or
liability exists as of the acquisition date and the amount can
be reasonably estimated, a contingency is recognized as of the
acquisition date based on the estimated amount. It further
requires that acquisition-related costs be recognized separately
from the acquisition and expensed as incurred, restructuring
costs be expensed in periods subsequent to the acquisition date,
and changes in accounting for deferred tax asset valuation
allowances and acquired income tax uncertainties after the
measurement period impact income tax expense. In addition,
acquired in-process research and development is capitalized as
an intangible asset, and once the project is completed,
amortized over its estimated useful life. The guidance is
applicable to business combinations on a prospective basis, and
applied to the acquisition of assets from Leadis Technology,
Inc., or Leadis, and the acquisition of the outstanding common
stock of Zilog, Inc, or Zilog. See Note 3, Business
Combinations for further information regarding the
acquisition.
In the quarter ended June 30, 2009, we adopted the
authoritative guidance issued by FASB on fair value measurement
for nonfinancial assets and liabilities, except for items that
are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually). The
adoption did not have a significant impact on our consolidated
financial statements.
In the quarter ended June 30, 2009, we adopted the
authoritative guidance issued by FASB that changes the
accounting and reporting for noncontrolling interests. The
guidance establishes accounting and reporting standards to
improve the relevance, comparability and transparency of
financial information that a reporting entity provides in its
consolidated financial statements. The guidance is not presently
applicable to us.
In the quarter ended June 30, 2009, we adopted the
authoritative guidance issued by FASB on determining fair value
when the volume and level of activity for an asset or liability
has significantly decreased, and on identifying transactions
that are not orderly. Based on the guidance, if an entity
determines that the level of activity for an asset or liability
has significantly decreased and that a transaction is not
orderly, further analysis of transactions or quoted prices is
needed, and a significant adjustment to the transaction or
quoted prices may be necessary to estimate fair value. The
adoption did not have any impact on our consolidated financial
statements.
In the fiscal year ended March 31, 2010, we adopted the
authoritative guidance issued by FASB on employers
disclosures about postretirement benefit plan assets. The
guidance requires more detailed annual disclosures about
employers plan assets, including employers
investment strategies, major categories of plan assets,
concentrations of risk within plan assets and valuation
techniques used to measure the fair value of plan assets. The
guidance does not change the accounting treatment for
postretirement benefits plans and the adoption did not have any
impact on our consolidated financial statements.
In the quarter ended June 30, 2009, we adopted the
authoritative guidance issued by FASB on recognition and
presentation of
other-than-temporary
impairment. The guidance amends the
other-than-temporary
impairment guidance for debt securities to make the guidance
more operational and to improve the presentation and disclosure
of
other-than-temporary
impairments in the financial statements. The guidance also
clarifies the interaction of the factors that should be
considered when determining whether a debt security is
other-than-temporarily
impaired. The adoption of this guidance did not have any impact
on our consolidated financial statements.
In the quarter ended June 30, 2009, we adopted the
authoritative guidance issued by FASB on interim disclosure
about fair value of financial instruments. The guidance requires
disclosures about fair value of financial instruments for
interim reporting periods of publicly traded companies as well
as in annual financial statements. Additionally, the guidance
requires disclosure of the methods and significant assumptions
used to estimate the fair
62
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
value of financial instruments on an interim basis as well as
changes of methods and significant assumptions from prior
periods. The guidance does not change the accounting treatment
for these financial instruments and the adoption did not have a
significant impact on our consolidated financial statements.
In the quarter ended September 30, 2009, we adopted the
authoritative guidance issued by FASB on fair value measurements
and disclosures. The guidance provides clarification that in
circumstances in which a quoted price in an active market for
the identical liability is not available, a reporting entity is
required to measure fair value using certain defined valuation
techniques. The adoption of the guidance did not have a
significant impact on our consolidated financial statements.
In June 2009, FASB issued authoritative guidance on the
consolidation of variable interest entities. The guidance
eliminates a required quantitative approach to determine whether
a variable interest gives the entity a controlling financial
interest in a variable interest entity in favor of a
qualitatively focused analysis. It requires an ongoing
reassessment of whether an entity is the primary beneficiary.
The guidance is effective for us beginning in the quarter ending
June 30, 2010. We are currently evaluating the impact that
the adoption of the guidance will have on our consolidated
financial statements.
In January 2010, the FASB issued an accounting standards update
that amends the disclosure guidance with respect to fair value
measurements. Specifically, the new guidance requires disclosure
of amounts transferred in and out of Levels 1 and 2 fair
value measurements and a reconciliation presented on a gross
basis rather than a net basis of activity in Level 3 fair
value measurements. The requirement for new disclosures is
effective for interim and annual reporting periods beginning
after December 15, 2009, with the exception of the new
guidance around the Level 3 activity reconciliations, which
is effective for fiscal years beginning after December 15,
2010. The adoption of the effective portion of this
pronouncement during the quarter ended March 31, 2010 did
not have a material impact on our consolidated financial
statements.
Zilog,
Inc.
On February 18, 2010, we completed the acquisition of
Zilog, a supplier of application specific, embedded
microcontroller units that are
system-on-chip
solutions for industrial and consumer markets. We acquired all
outstanding shares as of the acquisition date for a cash
consideration of $62.5 million and Zilog became our
wholly-owned subsidiary. The acquisition is intended to add
digital control to our power management and to create more
cost-effective system integration solutions for our diversified
customer base.
As of March 31, 2010, we have incurred $1.2 million in
legal and consulting costs related to the acquisition. The costs
incurred have been fully expensed and are included in
Selling, general and administrative expenses on our
consolidated statements of operations.
63
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table summarizes the consideration paid for Zilog
and the preliminary values of the assets acquired and
liabilities assumed at the acquisition date.
Recognized
amounts of identifiable assets acquired and liabilities assumed
(in thousands):
|
|
|
|
|
|
|
Preliminary Purchase
|
|
|
|
Price Allocation
|
|
|
Cash, restricted cash and cash equivalents
|
|
$
|
35,237
|
|
Trade receivables
|
|
|
2,088
|
|
Inventories
|
|
|
3,406
|
|
Property, plant and equipment
|
|
|
1,373
|
|
Deferred tax assets
|
|
|
4,397
|
|
Other assets
|
|
|
3,813
|
|
Identifiable intangible assets
|
|
|
14,000
|
|
Trade payable
|
|
|
(1,869
|
)
|
Accruals and other liabilities
|
|
|
(8,776
|
)
|
Total identifiable net assets
|
|
|
53,669
|
|
Goodwill
|
|
|
8,821
|
|
|
|
|
|
|
Total purchase price
|
|
$
|
62,490
|
|
|
|
|
|
|
The fair value of assets acquired included gross contractual
trade receivables of $3.3 million, of which an estimated
$1.2 million is not expected to be collected, resulting in a
fair value of $2.1 million. Other receivables, included above in
other assets, were stated at their fair value, which also
approximates the gross contractual amount of the receivable.
Identifiable intangible assets consisted of developed
intellectual property, customer relationships, contract backlog,
trade name and information technology related assets. The
valuation of the acquired intangibles was classified as a
level 3 measurement under the fair value measurement
guidance, because the valuation was based on significant
unobservable inputs and involved management judgment and
assumptions about market participants and pricing. In
determining fair value of the acquired intangible assets, we
determined the appropriate unit of measure, the exit market and
the highest and best use for the assets. The income approach and
royalty savings approach were used to estimate the fair value.
The income approach indicates the fair value of an asset based
on the value of the cash flows that the asset can be expected to
generate in the future through a discounted cash flow method.
The income approach was used to determine the fair values of
developed intellectual property, contract backlog and customer
relationships. We utilized a discount rate of 22% to value these
intangibles using the income approach. The royalty savings
approach was used to determine the fair value of the trade name
and indicates the fair value of an asset based upon a 22%
discount rate and a 1% royalty rate. The purchase price
allocation table presented above reflects our preliminary
determination of the fair values of the assets acquired and
liabilities assumed. We are in the process of completing our
review of income tax related effects in order to finalize the
valuation reports.
The goodwill arising from the acquisition was largely
attributable to the synergies expected to be realized after our
acquisition and integration of Zilog. We have one reportable
operating segment, so all of the goodwill was assigned to that
segment. The goodwill is not deductible for tax purposes.
Zilog contributed revenues and profit before tax of
$4.9 million and $447,000, respectively, in our
consolidated statements of operations for the year ended
March 31, 2010.
64
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Supplemental
Pro Forma Financial Information (unaudited):
The consolidated financial statements include the operational
results of the acquired business from the date of acquisition on
February 18, 2010. The following pro forma summary gives
effect to the acquisition of Zilog as if it had occurred at the
beginning of fiscal 2010 and fiscal 2009. The summary is
provided for illustrative purposes only and is not necessarily
indicative of the consolidated results of operations for future
periods.
|
|
|
|
|
|
|
|
|
|
|
Years Ended March 31
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands, except
|
|
|
|
per share data)
|
|
|
|
(unaudited)
|
|
|
Pro forma net revenues
|
|
$
|
271,828
|
|
|
$
|
309,709
|
|
|
|
|
|
|
|
|
|
|
Pro forma net loss
|
|
$
|
(7,049
|
)
|
|
$
|
(22,123
|
)
|
|
|
|
|
|
|
|
|
|
Pro forma net loss per share (basic)
|
|
$
|
(0.23
|
)
|
|
$
|
(0.71
|
)
|
|
|
|
|
|
|
|
|
|
Pro forma net loss per share (diluted)
|
|
$
|
(0.23
|
)
|
|
$
|
(0.71
|
)
|
|
|
|
|
|
|
|
|
|
Leadis
Technology, Inc.
On September 14, 2009, we completed the acquisition of the
assets and certain associated intellectual property of the LED
driver and display driver businesses of Leadis. The acquisition
was undertaken to expand our market opportunity in the LED
market.
The total consideration for the inventory and the identifiable
intangible assets acquired was $4.1 million, which was paid
in cash.
The following table represents the purchase price allocation of
assets acquired on the closing date of the acquisition (in
thousands):
|
|
|
|
|
|
|
Purchase Price
|
|
|
|
Allocation
|
|
|
Inventory
|
|
$
|
937
|
|
Intangible assets
|
|
|
2,810
|
|
Goodwill
|
|
|
304
|
|
|
|
|
|
|
Total purchase price
|
|
$
|
4,051
|
|
|
|
|
|
|
Goodwill represents the excess of purchase price of an acquired
business over the fair value of the underlying intangible
assets. Since these assets were acquired by an entity with a
favorable tax ruling, goodwill will not result in any effective
tax benefit. The primary item that generated the goodwill is the
value of the synergies between the acquired businesses and our
previously existing business, which does not qualify as an
amortizable intangible asset. The fair value of the amortizable
intangible assets was determined using the income approach,
royalty savings approach and cost approach. As of March 31,
2010, we have incurred $134,000 in legal and consulting costs
related to the acquisition. The costs incurred have been fully
expensed and are included in Selling, general and
administrative expenses on our consolidated statements of
operations.
The pro forma financial information has not been included in the
unaudited summary above because the effect of this acquisition
was not material to our financial results.
Reaction
Technology Incorporated
On September 10, 2008, we acquired all the outstanding
shares of Reaction Technology Incorporated, or RTI, a privately
held company based in Santa Clara, California. RTI is a
supplier of silicon epitaxy and silicon coatings to
65
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
the semiconductor and industrial sectors. The acquisition of RTI
is intended to improve our ability to meet our production
requirements and provide us more control over an element of our
manufacturing process. For accounting purposes, the purchase
price for the acquisition was $3.2 million, consisting of
the following (in thousands):
|
|
|
|
|
Cash consideration
|
|
$
|
1,031
|
|
Note issued
|
|
|
2,000
|
|
|
|
|
|
|
Total acquisition consideration
|
|
|
3,031
|
|
Transaction costs
|
|
|
192
|
|
|
|
|
|
|
Total purchase price
|
|
$
|
3,223
|
|
|
|
|
|
|
We also purchased the land and building formerly leased by RTI
from its majority shareholder for cash consideration of
$1.5 million.
The following table represents the purchase price allocation and
summarizes the aggregate estimated fair values of the net assets
acquired on the closing date of the acquisition (in thousands):
|
|
|
|
|
|
|
Purchase Price
|
|
|
|
Allocation
|
|
|
Cash
|
|
$
|
804
|
|
Other current assets
|
|
|
734
|
|
Plant and equipment
|
|
|
1,379
|
|
Current liabilities
|
|
|
(443
|
)
|
Note payable to bank
|
|
|
(853
|
)
|
Deferred tax liability
|
|
|
(813
|
)
|
Intangibles
|
|
|
1,620
|
|
Goodwill
|
|
|
795
|
|
|
|
|
|
|
Total purchase price
|
|
$
|
3,223
|
|
|
|
|
|
|
The fair values set forth above are based on a valuation of
RTIs assets and liabilities performed in accordance with
the authoritative guidance issued by the FASB on business
combinations and reflect push-down accounting in
accordance with SEC regulations. Goodwill represents the excess
of the purchase price over the fair value of the net tangible
and identifiable intangible assets acquired. Goodwill is not
deductible for tax purpose. The intangible assets primarily
consist of related customer relationships. In light of the
recession then underway and the resulting impact on our
revenues, we estimated the useful life of these intangible
assets to be 6 months. Consequently, the assets were fully
amortized as of March 31, 2009. The income approach and the
royalty savings approach were used to determine the fair value
of the identified intangibles. In presenting the purchase price
allocation above, we also valued a deferred tax liability. In
its fiscal year ended December 31, 2007, RTIs
unaudited net revenues were about $3.8 million. Pro forma
financial information has not been included in the unaudited
summary above because the effects of this acquisition were not
material to our consolidated results of operations.
The consolidated financial statements include the results of
operations of these acquired businesses commencing as of their
respective acquisition dates.
The authoritative guidance provided by FASB defines fair value
as the price that would be received from selling an asset or
paid to transfer a liability in an orderly transaction between
market participants at the measurement date. In determining fair
value, we consider our principal or most advantageous market and
the assumptions that market participants would use when pricing,
such as inherent risk, restrictions on sale and risk of
nonperformance. The guidance also specifies a fair value
hierarchy based upon the observability of inputs used in
66
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
valuation techniques. Observable inputs (highest level) reflect
market data obtained from independent sources, while
unobservable inputs (lowest level) reflect internally developed
market assumptions. In accordance with the guidance, fair value
measurements are classified under the following hierarchy:
|
|
|
|
Level 1
|
Quoted prices for identical instruments in active markets.
|
|
|
Level 2
|
Quoted prices for similar instruments in active markets; quoted
prices for identical or similar instruments in markets that are
not active; and model-derived valuations in which all
significant inputs or significant value-drivers are observable
in active markets.
|
|
|
Level 3
|
Model-derived valuations in which one or more significant inputs
or significant value-drivers are unobservable.
|
Assets and liabilities measured at fair value on a recurring
basis, excluding accrued interest components, consisted of the
following types of instruments as of March 31, 2010 and
March 31, 2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2010(1)
|
|
|
March 31, 2009(1)
|
|
|
|
|
|
|
Fair Value
|
|
|
|
|
|
Fair Value
|
|
|
|
|
|
|
Measured at
|
|
|
|
|
|
Measured at
|
|
|
|
|
|
|
Reporting Date
|
|
|
|
|
|
Reporting Date
|
|
|
|
|
|
|
Using
|
|
|
|
|
|
Using
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable equity securities(2)
|
|
$
|
198
|
|
|
$
|
198
|
|
|
$
|
|
|
|
$
|
525
|
|
|
$
|
525
|
|
|
$
|
|
|
Auction rate preferred securities(2)
|
|
|
375
|
|
|
|
|
|
|
|
375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative contract(3)
|
|
|
(109
|
)
|
|
|
|
|
|
|
(109
|
)
|
|
|
(124
|
)
|
|
|
|
|
|
|
(124
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value
|
|
$
|
464
|
|
|
$
|
198
|
|
|
$
|
266
|
|
|
$
|
401
|
|
|
$
|
525
|
|
|
$
|
(124
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
We did not have any assets whose fair value was measured using
significant unobservable inputs. |
|
(2) |
|
Included in Other assets on our consolidated balance
sheets. |
|
(3) |
|
Included in Accrued expenses and other liabilities
on our consolidated balance sheets. |
We measure our marketable securities and derivative contracts at
fair value. Marketable securities are valued using the quoted
market prices in an active markets and are, therefore,
classified as Level 1 estimates.
We use derivative instruments to manage exposures to changes in
foreign currency exchange rates and interest rates. In
accordance with the authoritative guidance provided by FASB, the
fair values of these instruments are recorded on the balance
sheet. We have elected not to designate these instruments as
accounting hedges. The changes in the fair value of these
instruments are recorded in current periods income
statement and are included in other income (expense), net. All
of our derivative instruments are traded on
over-the-counter
markets where quoted market prices are not readily available.
For those derivatives, we measure fair value using prices
obtained from the counterparties with whom we have traded. The
counterparties price the derivatives based on models that use
primarily market observable inputs, such as yield curves and
option volatilities. Accordingly, we classify these derivatives
as Level 2. See Note 8, Borrowing
Arrangements for further information regarding the terms
of the derivative contract. Auction Rate Preferred Securities,
or ARPS, are stated at par value based upon observable inputs
including historical redemptions received from the ARPS issuers.
All of our ARPS have AAA credit ratings, are 100% collateralized
and continue to pay interest in accordance with their
contractual terms. Additionally, the collateralized asset value
ranges exceed the value of our ARPS by approximately
300 percent. Accordingly, the remaining ARPS balance of
$375,000 is categorized as Level 2 for fair value
measurement in accordance with the authoritative guidance
provided by FASB and was recorded at full par value on the
consolidated balance sheet as of March 31, 2010. We
currently believe that the ARPS values are not impaired and as
such, no impairment has been recognized against the investment.
If future auctions fail to
67
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
materialize and the credit rating of the issuers deteriorates,
we may be required to record an impairment charge against the
value of our ARPS.
Cash and cash equivalents are recognized and measured at fair
value in our consolidated financial statements. Accounts
receivable and prepaid expenses and other current assets are
financial assets with carrying values that approximate fair
value. Accounts payable and accrued expenses and other
liabilities are financial liabilities with carrying values that
approximate fair value.
Long term loans, which primarily consist of notes from banks,
approximate fair value as the interest rates either adjust
according to the market rates or the interest rates approximate
the market rates at March 31, 2010. See Note 9,
Pension Plans for a discussion of pension
liabilities and fair value of the plan assets.
Other assets consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Available-for-sale
investment securities
|
|
$
|
573
|
|
|
$
|
525
|
|
Long term equity investment
|
|
|
4,446
|
|
|
|
4,183
|
|
Other
|
|
|
1,416
|
|
|
|
1,764
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
$
|
6,435
|
|
|
$
|
6,472
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
investment securities have been stated at their fair value as of
March 31, 2010 and include an unrealized gain, net of
taxes, of $27,000 at March 31, 2010, and unrealized loss,
net of taxes, of $4,000 at March 31, 2009.
Available-for-sale
investments as of March 31, 2010 and March 31, 2009
were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2010
|
|
Fiscal Year 2009
|
|
|
|
|
Gross
|
|
Gross
|
|
|
|
|
|
Gross
|
|
Gross
|
|
|
|
|
|
|
Unrealized
|
|
Unrealized
|
|
Fair
|
|
|
|
Unrealized
|
|
Unrealized
|
|
Fair
|
|
|
Cost
|
|
Gains
|
|
(Losses)
|
|
Value
|
|
Cost
|
|
Gains
|
|
(Losses)
|
|
Value
|
|
Marketable Equity
Securities
|
|
$
|
530
|
|
|
$
|
46
|
|
|
$
|
(3
|
)
|
|
$
|
573
|
|
|
$
|
531
|
|
|
$
|
78
|
|
|
$
|
(84
|
)
|
|
$
|
525
|
|
The
available-for-sale
investments that were in a continuous unrealized loss position
as of March 31, 2010 and March 31, 2009, aggregated by
length of time that individual securities have been in a
continuous loss position, were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than 12 Months
|
|
12 Months or Greater
|
|
Total
|
|
|
Gross
|
|
|
|
Gross
|
|
|
|
Gross
|
|
|
|
|
Unrealized
|
|
Fair
|
|
Unrealized
|
|
Fair
|
|
Unrealized
|
|
Fair
|
Period
|
|
Losses
|
|
Value
|
|
Losses
|
|
Value
|
|
Losses
|
|
Value
|
|
March 31, 2010
|
|
$
|
1
|
|
|
$
|
63
|
|
|
$
|
2
|
|
|
$
|
4
|
|
|
$
|
3
|
|
|
$
|
67
|
|
March 31, 2009
|
|
$
|
18
|
|
|
$
|
86
|
|
|
$
|
66
|
|
|
$
|
12
|
|
|
$
|
84
|
|
|
$
|
98
|
|
Gross unrealized losses on our
available-for-sale
portfolio were immaterial to the consolidated balance sheets at
March 31, 2010 and March 31, 2009. Based on evaluation
of available evidence as of March 31, 2010, we believe that
unrealized losses on marketable equity securities are temporary
and do not represent a need for an
other-than-temporary
impairment.
During fiscal 2010, we recognized a gain of $70,000 on the sale
of
available-for-sale
investment securities. In respect to those securities, we had an
unrealized gain of $78,000, which was included in accumulated
other comprehensive income as of March 31, 2009.
68
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Our long term equity investments represent investment accounted
for under the equity method of accounting. See Note 2,
Summary of Significant Accounting Policies and
Note 13, Related Party Transactions for further
information on these investments.
Allowances
Movement (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
Beginning
|
|
|
|
|
|
|
|
|
Translation
|
|
|
End of
|
|
|
|
of Year
|
|
|
Additions
|
|
|
Deductions
|
|
|
Adjustments
|
|
|
Year
|
|
|
Allowances for accounts receivable and for doubtful accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, 2010
|
|
$
|
1,899
|
|
|
$
|
5,967
|
(1)
|
|
$
|
(4,430
|
)
|
|
$
|
30
|
|
|
$
|
3,466
|
|
Year ended March 31, 2009
|
|
$
|
1,712
|
|
|
$
|
5,951
|
|
|
$
|
(5,656
|
)
|
|
$
|
(108
|
)
|
|
$
|
1,899
|
|
Year ended March 31, 2008
|
|
$
|
2,847
|
|
|
$
|
3,201
|
|
|
$
|
(4,452
|
)
|
|
$
|
116
|
|
|
$
|
1,712
|
|
|
|
|
(1) |
|
Includes $1.2 million additions from the Zilog acquisition. |
Inventories
Inventories consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Raw materials
|
|
$
|
12,216
|
|
|
$
|
14,431
|
|
Work in process
|
|
|
35,339
|
|
|
|
39,916
|
|
Finished goods
|
|
|
18,028
|
|
|
|
21,254
|
|
|
|
|
|
|
|
|
|
|
Total inventories
|
|
$
|
65,583
|
|
|
$
|
75,601
|
|
|
|
|
|
|
|
|
|
|
Property,
Plant and Equipment
Property, plant and equipment consist of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Property and plant (useful life of 24 to 50 years)
|
|
$
|
32,328
|
|
|
$
|
32,192
|
|
Equipment owned (useful life of 1 to 14 years)
|
|
|
78,691
|
|
|
|
73,599
|
|
Equipment capital leases (useful life of 4 years)
|
|
|
32,296
|
|
|
|
32,103
|
|
Leasehold improvements (useful life of up to 8 years)
|
|
|
1,292
|
|
|
|
923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
144,607
|
|
|
|
138,817
|
|
Accumulated depreciation plant, equipment owned, and
leasehold improvements
|
|
|
(68,737
|
)
|
|
|
(62,590
|
)
|
Accumulated amortization equipment capital leases
|
|
|
(28,282
|
)
|
|
|
(23,315
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
47,588
|
|
|
$
|
52,912
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense for fiscal years ended March 31, 2010,
2009 and 2008 amounted to $13.4 million, $12.7 million
and $12.5 million, respectively.
69
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Accrued
Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Uninvoiced goods and services
|
|
$
|
11,029
|
|
|
$
|
5,755
|
|
Compensation and benefits
|
|
|
6,876
|
|
|
|
5,916
|
|
Income taxes
|
|
|
2,763
|
|
|
|
1,232
|
|
Restructuring accrual
|
|
|
1,205
|
|
|
|
|
|
Commission, royalties, deferred revenue and other
|
|
|
3,125
|
|
|
|
2,439
|
|
|
|
|
|
|
|
|
|
|
Total accrued expenses and other liabilities
|
|
$
|
24,998
|
|
|
$
|
15,342
|
|
|
|
|
|
|
|
|
|
|
|
|
7.
|
Goodwill
and Intangible Assets
|
Goodwill
During fiscal 2010, we completed two acquisitions and recorded
goodwill of $9.1 million in connection with those
acquisitions. Refer to Note 3, Business
Combinations for details of goodwill resulting from each
of the acquisitions of Zilog and Leadis businesses. The
acquisition of Zilog was completed in February 2010 and result
in preliminary goodwill of $8.8 million. The acquisition of
Leadis businesses was completed in September 2009 and resulted
in goodwill of $304,000. The goodwill was evaluated based on the
factors affecting the business and management concluded that
there was no impairment of goodwill.
During fiscal 2009, when we performed our goodwill impairment
analysis, we concluded that all of the goodwill was impaired.
The goodwill balance was allocated to three of our six reporting
units. As a result of our analysis, we concluded that the
carrying amount of goodwill for each of these three reporting
units exceeded their implied fair values. Consequently, a total
impairment charge of $6.4 million was recorded for fiscal
2009 to write off all of the then outstanding goodwill and was
included under Impairment charges in the 2009
consolidated statements of operations. In performing the
analysis, we considered the income approach in determining the
implied fair value of the goodwill. The income approach requires
estimates of future operating results and cash flows of each of
the reporting units, which are discounted using estimated
discount rates of approximately 18%.
Determining the fair value of a reporting unit is judgmental in
nature and involves the use of significant estimates and
assumptions. These estimates and assumptions include revenue
growth rates and operating margins used to calculate projected
future cash flows, discount rates and future economic and market
conditions. Our estimates are based upon assumptions believed to
be reasonable, but which are inherently uncertain and
unpredictable. These valuations require the use of
managements assumptions, which would not reflect
unanticipated events and circumstances that may occur.
The changes in the carrying amount of goodwill for the years
ended March 31, 2010 and 2009 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Goodwill
|
|
$
|
6,440
|
|
|
$
|
5,645
|
|
Accumulated impairment losses
|
|
|
(6,440
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net goodwill at beginning of period
|
|
|
|
|
|
|
5,645
|
|
Goodwill acquired in acquisition
|
|
|
9,125
|
|
|
|
795
|
|
Impairment charge
|
|
|
|
|
|
|
(6,440
|
)
|
|
|
|
|
|
|
|
|
|
Net goodwill at end of period
|
|
$
|
9,125
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
70
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Identifiable
Intangible Assets
Identified intangible assets consisted of the following as of
March 31, 2010 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
|
Intangible
|
|
|
Accumulated
|
|
|
Intangible
|
|
|
|
Assets
|
|
|
Amortization
|
|
|
Assets
|
|
|
Developed intellectual property
|
|
$
|
6,000
|
|
|
$
|
366
|
|
|
$
|
5,634
|
|
Customer relationships
|
|
|
6,310
|
|
|
|
644
|
|
|
|
5,666
|
|
Contract backlog
|
|
|
3,170
|
|
|
|
753
|
|
|
|
2,417
|
|
Other intangible assets
|
|
|
2,084
|
|
|
|
498
|
|
|
|
1,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total identifiable intangible assets
|
|
$
|
17,564
|
|
|
$
|
2,261
|
|
|
$
|
15,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the components of the acquired
identifiable intangible assets associated with the acquisitions
of Zilog and Leadis. The fair value of the amortizable
intangible assets was determined using the income approach,
royalty savings approach and cost approach.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
|
|
Estimated
|
|
|
|
Fair Value
|
|
|
Method
|
|
Useful Life
|
|
|
|
(In thousands)
|
|
|
|
|
(In months)
|
|
|
Zilog
|
|
|
|
|
|
|
|
|
|
|
Developed intellectual property
|
|
$
|
4,800
|
|
|
Straight-line
|
|
|
72
|
|
Customer relationships
|
|
|
6,100
|
|
|
Accelerated
|
|
|
37
|
|
Contract backlog
|
|
|
2,000
|
|
|
Straight-line
|
|
|
12
|
|
Trade name
|
|
|
1,100
|
|
|
Straight-line
|
|
|
72
|
|
|
|
|
|
|
|
|
|
|
|
|
Total for Zilog
|
|
$
|
14,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leadis
|
|
|
|
|
|
|
|
|
|
|
Developed intellectual property
|
|
$
|
1,200
|
|
|
Straight-line
|
|
|
24
|
|
Customer relationships
|
|
|
210
|
|
|
Straight-line
|
|
|
24
|
|
Contract backlog
|
|
|
1,170
|
|
|
Straight-line
|
|
|
12
|
|
Non-compete agreement
|
|
|
20
|
|
|
Straight-line
|
|
|
24
|
|
Trade name
|
|
|
210
|
|
|
Straight-line
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
Total for Leadis
|
|
$
|
2,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total acquired intangible assets
|
|
$
|
16,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identified intangible assets consisted of the following as of
March 31, 2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Gross Assets
|
|
|
Amortization
|
|
|
Net Assets
|
|
|
Customer relationships
|
|
$
|
1,620
|
|
|
$
|
1,620
|
|
|
|
|
|
Other intangible assets
|
|
|
509
|
|
|
|
253
|
|
|
|
256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total identifiable intangible assets
|
|
$
|
2,129
|
|
|
$
|
1,873
|
|
|
$
|
256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In fiscal 2009, we acquired certain intangible assets, primarily
comprising of customer relationships, aggregating to
$1.6 million in the business combination of RTI. These
intangible assets were amortized over 6 months and, as a
result, were fully amortized as of March 31, 2009. Refer to
Note 3, Business Combinations for more details
on the acquisitions.
71
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Amortization expense for intangible assets amounted to
$2.0 million in fiscal 2010, of which $169,000 was included
in cost of sales and operating expenses. For fiscal year ended
March 31, 2009, amortization expense for intangible assets
amounted to $1.8 million, of which $216,000 was included in
cost of sales and operating expenses. The amortization of
intangible assets is expected to be $7.2 million,
$3.0 million, $2.2 million, $973,000, $973,000 and
$896,000 in fiscal 2011, 2012, 2013, 2014, 2015 and thereafter,
respectively.
|
|
8.
|
Borrowing
Arrangements
|
Bank
of the West
On November 13, 2009, we entered into a credit agreement,
for a revolving line of credit with Bank of the West, or BOW,
under which we may borrow up to $15.0 million. Borrowings
may be repaid and re-borrowed during the term of the credit
agreement. The obligations are guaranteed by two of our
subsidiaries. All amounts owed under the credit agreement are
due and payable on October 31, 2011. On November 16,
2009, we borrowed $15.0 million pursuant to the credit
agreement.
The credit agreement provides different interest rate
alternatives under which we may borrow funds. We may elect to
borrow based on LIBOR plus a margin, an alternative base rate
plus a margin or a floating rate plus a margin. The margin can
range from 1.5% to 3.25%, depending on interest rate
alternatives and on our leverage of liabilities to effective
tangible net worth.
For the initial period, we chose a six-month LIBOR commitment,
resulting in an interest rate, inclusive of BOWs margin,
of 3.0625% per annum. During the year ended March 31, 2010,
monthly interest of approximately $38,000 was paid to BOW.
The credit agreement is subject to a set of financial covenants,
including minimum effective tangible net worth, the ratio of
cash, cash equivalents and accounts receivable to current
liabilities, profitability beginning with the quarter ended
June 30, 2010, maximum losses in the fiscal quarters before
such quarter, a ratio of EBITDA to interest expense and a
minimum amount of U.S. domestic cash on hand. At
March 31, 2010, we were in compliance with the financial
covenants.
The credit agreement also includes a $3.0 million letter of
credit subfacility commencing April 1, 2010. See
Note 18, Commitment and Contingencies for
further information regarding the terms of the subfacility.
IKB
Deutsche Industriebank
On June 10, 2005, IXYS Semiconductor GmbH, our German
subsidiary, borrowed 10.0 million, or about
$12.2 million at the time, from IKB Deutsche Industriebank
for a term of 15 years. The outstanding balance at
March 31, 2010 was 6.8 million, or
$9.2 million.
The interest rate on the loan is determined by adding the then
effective three month Euribor rate and a margin. The margin can
range from 70 basis points to 125 basis points,
depending on the calculation of a ratio of indebtedness to cash
flow for our German subsidiary.
We have entered into an interest rate swap to economically hedge
the interest rate risk. Under the swap arrangement, during the
first five years of the loan, if the Euribor rate exceeds 3.75%,
then the Euribor rate for the purposes of the loan shall be
4.1%, and, if the Euribor rate falls below 2.0%, then the
Euribor rate for the purposes of the loan shall be 3.0%. The
effective interest rate at March 31, 2010 was 3.7%. The
swap agreement expires on June 30, 2010 and is not
designated as a hedge in the financial statements. See
Note 4, Fair Value for further information
regarding the derivative contract.
During each fiscal quarter, a principal payment of
167,000, or about $225,000, and a payment of accrued
interest are required.
72
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The loan is subject to a set of financial covenants, including a
ratio of indebtedness to cash flow, a ratio of equity to total
assets and a minimum stockholders equity for the German
subsidiary. The loan may be prepaid in whole or in part at the
end of a fiscal quarter without penalty. At March 31, 2010,
we were in compliance with the financial covenants. The loan is
partially collateralized by a security interest in the facility
owned by us in Lampertheim, Germany.
LaSalle
Bank National Association
On August 2, 2007, IXYS Buckeye, LLC, a subsidiary of our
company, entered into an Assumption Agreement with LaSalle Bank
National Association, trustee for Morgan Stanley Dean Witter
Capital I Inc., for the assumption of a loan of
$7.5 million in connection with the purchase of property in
Milpitas, California. The loan carries a fixed annual interest
rate of 7.455%. Monthly payments of principal and interest of
$56,000 are due under the loan. In addition, monthly impound
payments aggregating $14,000 are to be made for items such as
real property taxes, insurance and capital expenditures. The
loan is due and payable on February 1, 2011. At maturity,
the remaining balance on the loan will be approximately
$7.1 million. The loan is secured by a guarantee from us
and collateralized by a security interest in the property
acquired. Aggregate loan costs of $93,000 incurred in connection
with the loan are amortized over the loan period, and the
unamortized balance is shown net of the loan liability.
Note
Issued on Acquisition
On September 10, 2008, we issued a note with a face value
of $2.0 million in connection with the purchase of real
property and the acquisition of the shares of RTI. The note is
repayable in 60 equal monthly installments of $38,666, which
includes interest at an annual rate of 6.0%. The note is
collateralized by a security interest in the property acquired
and the current assets of RTI. Refer to Note 3,
Business Combinations for more details regarding the
acquisition.
Aggregate
Debt Maturities
Aggregate debt maturities at March 31, 2010 were as follows
(in thousands):
|
|
|
|
|
Fiscal Year Payable
|
|
Amount
|
|
|
2011
|
|
$
|
8,434
|
|
2012
|
|
|
16,307
|
|
2013
|
|
|
1,333
|
|
2014
|
|
|
1,125
|
|
2015
|
|
|
897
|
|
Thereafter
|
|
|
4,709
|
|
|
|
|
|
|
Total
|
|
|
32,805
|
|
Less: Current portion
|
|
|
8,434
|
|
|
|
|
|
|
Long term portion
|
|
$
|
24,371
|
|
|
|
|
|
|
We maintain two defined benefit pension plans: one for United
Kingdom employees and one for German employees. These plans
cover most of the employees in the United Kingdom and Germany.
Benefits are based on years of service and the employees
compensation. We deposit funds for these plans, consistent with
the requirements of local law, with investment management
companies, insurance companies or trustees
and/or
accrue for the unfunded portion of the obligations. The
measurement date for the projected benefit obligations and the
plan assets is March 31. Both plans have been curtailed. As
such, the plans are closed to new entrants and no credit is
73
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
provided for additional periods of service. In connection with
the Zilog acquisition, we assumed the defined benefit plan for
the local employees of Zilogs Philippine subsidiary. The
plan is consistent with local statutes and practices. Net
periodic pension cost for the year ended March 31, 2010 for
the new plan was insignificant as the Zilog acquisition was
completed in February 2010. The components of the projected
benefit obligation assumed and the fair value of the assets
assumed are disclosed in the tables below under the title
Business combinations.
Net
Period Pension Cost
The net periodic pension expense includes the following
components (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Service cost
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest cost
|
|
|
1,924
|
|
|
|
2,174
|
|
|
|
2,168
|
|
Expected return on plan assets
|
|
|
(1,003
|
)
|
|
|
(1,616
|
)
|
|
|
(1,782
|
)
|
Recognized actuarial loss
|
|
|
120
|
|
|
|
84
|
|
|
|
123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension expense
|
|
$
|
1,041
|
|
|
$
|
642
|
|
|
$
|
509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Net
Amount Recognized (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Change in projected benefit obligation
|
|
|
|
|
|
|
|
|
Projected benefit obligation at the beginning of the year
|
|
$
|
26,593
|
|
|
$
|
41,293
|
|
Service cost
|
|
|
|
|
|
|
|
|
Interest cost
|
|
|
1,924
|
|
|
|
2,174
|
|
Plan participants contribution
|
|
|
|
|
|
|
|
|
Actuarial gain (loss)
|
|
|
7,013
|
|
|
|
(5,864
|
)
|
Benefits paid
|
|
|
(1,273
|
)
|
|
|
(1,353
|
)
|
Business combination
|
|
|
1,202
|
|
|
|
|
|
Foreign currency adjustment
|
|
|
795
|
|
|
|
(9,657
|
)
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation at year end
|
|
$
|
36,254
|
|
|
$
|
26,593
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets
|
|
|
|
|
|
|
|
|
Fair value of plan assets at the beginning of the year
|
|
$
|
13,418
|
|
|
$
|
24,065
|
|
Actual return (loss) on plan assets
|
|
|
5,306
|
|
|
|
(4,275
|
)
|
Employer contribution
|
|
|
702
|
|
|
|
730
|
|
Plan participants contribution
|
|
|
|
|
|
|
|
|
Benefits paid from assets
|
|
|
(825
|
)
|
|
|
(969
|
)
|
Business combination
|
|
|
1,330
|
|
|
|
|
|
Foreign currency adjustment
|
|
|
501
|
|
|
|
(6,133
|
)
|
|
|
|
|
|
|
|
|
|
Plan assets at fair value at year end
|
|
$
|
20,432
|
|
|
$
|
13,418
|
|
|
|
|
|
|
|
|
|
|
Unfunded status of the plan at year end
|
|
$
|
(15,822
|
)
|
|
$
|
(13,175
|
)
|
Pension liability recognized on the balance sheet due after one
year
|
|
$
|
(15,822
|
)
|
|
$
|
(13,175
|
)
|
|
|
|
|
|
|
|
|
|
Amounts recognized in Accumulated other comprehensive income
(loss)
|
|
|
|
|
|
|
|
|
Unrecognized actuarial loss (gross of taxes, $1,685 for 2010 and
$942 for 2009)
|
|
$
|
5,719
|
|
|
$
|
3,364
|
|
|
|
|
|
|
|
|
|
|
Amount recognized as component of stockholders
equity pretax
|
|
$
|
5,719
|
|
|
$
|
3,364
|
|
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation at year end
|
|
$
|
35,825
|
|
|
$
|
26,586
|
|
|
|
|
|
|
|
|
|
|
Weighted average actuarial assumptions used to determine benefit
obligations for the plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Discount rate
|
|
|
5.4-8.84
|
%
|
|
|
6.0-7.2
|
%
|
Expected long term rate of return on assets
|
|
|
6.0-7.4
|
%
|
|
|
4.4-6.8
|
%
|
Salary scale
|
|
|
1.5-6.0
|
%
|
|
|
1.5
|
%
|
The expected long term rate of return on assets is a weighted
average of the returns expected for the underlying broad asset
classes. The expected returns for each asset class are estimated
in light of the market conditions on the accounting date and the
past performance of the asset classes generally.
The amount of accumulated other comprehensive income expected to
be recognized in net periodic pension cost in fiscal 2011
includes amortization of actuarial loss of $173,000.
Approximately 58% of the accrued pension liability relates to
the German plan and 42% to the United Kingdom plan.
75
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The investment policies and strategies for the United Kingdom
plan assets are determined by the respective plans
trustees in consultation with independent investment consultants
and the employer. Our practice is to fund these plans in amounts
at least sufficient to meet the minimum requirements of local
laws and regulations. The trustees are aware that the nature of
the liabilities of the plans will evolve as the age profile and
life expectancy of the membership changes. These changing
liability profiles lead to consultations about the appropriate
balance of investment assets to be used by the plans (equity,
debt, other), as well as timescales, within which required
adjustments should be implemented. The plan assets in the United
Kingdom are held in pooled investment funds operated by Fidelity
Investments. The plan assets do not include our securities. The
investment managers have discretion to vary the balance of
investments of the scheme according to prevailing investment
conditions and the Trustees regularly monitor all investment
decisions affecting the scheme and the overall investment
performance. The target allocation of the United Kingdom plan
assets that we control is 75% equity securities and 25% fixed
income instruments. This objective has not been achieved due to
the relative investment return of the two asset classes.
The German plan was held by a separate legal entity. As of
March 31, 2010, the German defined benefit plan was
completely unfunded.
For our Philippine plan, the local law requires us to appoint a
trustee for the fund. We have appointed Bank of the Philippine
Islands, or BPI, as the trustee of the plan. The plan assets are
fully invested with BPI. The main role of the trustee is to
manage the fund according to the mandate given by the retirement
committee of our Philippine entity and to pay the
covered/eligible employees in accordance with the plan. BPI
Asset Management and Trust Group, an independent unit of
BPI, provides investment management services to the trustee. BPI
had a BB+/stable rating from Fitch, an international credit
rating agency, for the long term local currency issuer default
risk. The target allocation for the Philippine fund was 70% to
fixed income securities, 25% to equities and 5% to cash and cash
equivalents.
We expect to make contributions to the plans of approximately
$752,000 in the fiscal year ending March 31, 2011. This
contribution is primarily contractual. The fair values and the
allocation of the assets of the plans at the measurement dates
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
March 31, 2010
|
|
|
March 31, 2009
|
|
|
|
(000)
|
|
|
%
|
|
|
(000)
|
|
|
%
|
|
|
Equity securities
|
|
$
|
15,865
|
|
|
|
78
|
%
|
|
$
|
10,244
|
|
|
|
76
|
%
|
Debt securities
|
|
|
4,374
|
|
|
|
21
|
%
|
|
|
2,734
|
|
|
|
21
|
%
|
Other
|
|
|
193
|
|
|
|
1
|
%
|
|
|
440
|
|
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
20,432
|
|
|
|
100
|
%
|
|
$
|
13,418
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximately 81% of the assets of the United Kingdom fund were
invested in equity securities while 18% were in debt securities.
The investments in debt securities are made in government
instruments and investment grade corporate bonds. For our
Philippine fund, the investment advisors have a moderately
aggressive risk tolerance policy with an investment objective of
higher capital appreciation with steady income and an investment
horizon of 5 to 10 years. Approximately 69% of the assets
of the fund are invested in fixed income securities, primarily
comprising of government instruments.
All the plans securities are publicly traded and highly
liquid. Therefore, the securities are valued under Level 1.
The plans do not hold any level 2 or level 3
securities.
76
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
We expect to pay benefits in each of the next five fiscal years
and in the aggregate for the five fiscal years thereafter of
approximately the following (in thousands):
|
|
|
|
|
|
|
Benefit
|
|
Fiscal Year Ended:
|
|
Payment
|
|
|
March 31, 2011
|
|
$
|
1,107
|
|
March 31, 2012
|
|
|
1,169
|
|
March 31, 2013
|
|
|
1,238
|
|
March 31, 2014
|
|
|
1,318
|
|
March 31, 2015
|
|
|
1,744
|
|
Five fiscal years ended March 31, 2020
|
|
|
9,854
|
|
|
|
|
|
|
Total benefit payments for the ten fiscal years ended
March 31, 2020
|
|
$
|
16,430
|
|
|
|
|
|
|
|
|
10.
|
Employee
Equity Incentive Plans
|
Stock
Purchase and Stock Option Plans
The 2009
Equity Incentive Plan
Stock
Options
On September 10, 2009, our stockholders approved the 2009
Equity Incentive Plan, or the 2009 Plan, under which
900,000 shares of our common stock are reserved for the
grant of stock options.
Under the 2009 Plan, nonqualified and incentive stock options
may be granted to employees, consultants and non-employee
directors. Generally, the per share exercise price shall not be
less than 100% of the fair market value of a share on the grant
date. The Board of Directors has the full power to determine the
provisions of each option issued under the 2009 Plan. While we
may grant options that become exercisable at different times or
within different periods, we have granted options that primarily
vest over four years. The options, once granted, expire ten
years from the date of grant.
Restricted
Stock
Restricted stock awards may be granted to any employee, director
or consultant under the 2009 Plan. Pursuant to a restricted
stock award, we will issue shares of common stock that will be
released from restriction if certain requirements, including
continued performance of services, are met.
Stock
Appreciation Rights
Awards of stock appreciation rights, or SARs, may be granted to
employees, consultants and nonemployee directors pursuant to the
2009 Plan. In any event, the exercise price of a SAR shall be
not less than 100% of the fair market value of a share on the
grant date and shall expire no later than ten years from the
grant date. Upon exercise, the holder of SAR shall be entitled
to receive payment either in cash or a number of shares by
dividing such cash amount by the fair market value of a share on
the exercise date.
Performance
Units
Performance units may be granted to employees, consultants and
nonemployee directors under the 2009 Plan. Each performance unit
shall have a value equal to the fair market value of one share.
After the applicable performance period has ended, the holder
will be entitled to receive a payment, either in cash or in the
form of shares, based on the number of performance units earned
over the performance period, to be determined as a function of
the extent to which the corresponding performance goals or other
vesting provisions have been achieved.
77
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The 1999
Equity Incentive Plan and the 1999 Non-Employee Directors
Equity Incentive Plan
Stock
Options
Prior to May 2009, stock options were granted under the 1999
Equity Incentive Plan and the 1999 Non-Employee Directors
Equity Incentive Plan, or the 1999 Plans, for not less than 85%
of fair market value at the time of grant. Once granted, the
options expire ten years from the date of grant. Options granted
to employees under the 1999 Equity Incentive Plan typically vest
over four years. The initial option grants under the 1999
Non-Employee Directors Equity Incentive Plan typically
vest over four years and subsequent annual grants vest over one
year. The 1999 Plans expired in May 2009 and no additional
grants may be made thereunder.
Restricted
Stock Units
We granted restricted stock unit awards, or RSUs, under the 1999
Equity Incentive Plan. Pursuant to a RSU award, we will, in the
future, deliver shares of our common stock if certain
requirements, including continued performance of services, are
met. RSUs granted to employees typically vest over four years.
When vested, each RSU will entitle the holder of the RSU award
to one share of our common stock.
Zilog
2004 Omnibus Stock Incentive Plan
The Zilog 2004 Omnibus Stock Incentive Plan, or the Zilog 2004
Plan, was approved by the stockholders of Zilog in 2004, and was
amended and approved by the stockholders of Zilog in 2007. In
connection with the acquisition of Zilog, our Board of Directors
approved assumption of the Zilog 2004 Plan. Employees of Zilog
and persons first employed by our company after the closing of
the acquisition of Zilog may receive grants under the Zilog 2004
Plan. Under the 2004 Plan, incentive stock options, non
statutory stock options, or restricted shares may be granted. At
the time of the assumption of the Zilog 2004 Plan by our
company, up to 652,963 shares of our common stock were
available for grant under the plan.
In general, the options and shares granted pursuant to the Zilog
2004 Plan are exercisable at such time or times, and subject to
such terms and conditions (including the vesting schedule,
period of exercisability and expiration date) as the plan
administrator, generally expected to be the Compensation
Committee of our Board of Directors, determines in the
applicable option agreement. The exercise price per share,
payable upon the exercise of an option, is established by such
administrator at the time of the grant and is not less than the
par value per share of common stock on the date of the grant and
in the case of an incentive stock option generally is not less
than 100% of the fair market value per share on the date of
grant.
In general, restricted stock awards granted pursuant to the
Zilog 2004 Plan are subject to the restricted stock award
agreement that reflects the terms, conditions and restrictions
related to the restricted stock award. The agreement includes,
among other things, the period during which the restricted stock
is subject to forfeiture, the imposition of any
performance-based conditions or other restrictions on the award,
if any.
Zilog
2002 Omnibus Stock Incentive Plan
The Zilog 2002 Omnibus Stock Incentive Plan, or the Zilog 2002
Plan, was adopted in 2002. In connection with the acquisition of
Zilog, our Board of Directors approved the assumption of the
Zilog 2002 Plan with respect to the shares available for grant
as stock options. Employees of Zilog and persons first employed
by our company after the closing of the acquisition of Zilog may
receive grants under the Zilog 2002 Plan. At the time of the
assumption of the Zilog 2002 Plan by our company, up to
366,589 shares of our common stock were available for grant
under the plan.
Stock options granted under the Zilog 2002 Plan were permitted
to be: (i) incentive stock options or nonqualified stock
options or (ii) EBITDA-linked options
and/or
non-EBITDA linked options. We will not grant any EBITDA-linked
options and none are outstanding. In general, non-EBITDA-linked
options granted pursuant to
78
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
the Zilog 2002 Plan will be exercisable at such time or times
and subject to such terms and conditions (including the vesting
schedule, period of exercisability and expiration date) as is
determined by the plan administrator, generally expected to be
the Compensation Committee of our Board of Directors, in the
applicable award agreements or thereafter. The exercise price
per share payable upon the exercise of an option will be
established by such administrator, in its sole discretion, at
the time of grant. The term of a non-EBITDA-linked option is
determined at the time of grant, but will not exceed ten years.
Employee
Stock Purchase Plan (ESPP)
In May 1999, we approved the 1999 Employee Stock Purchase Plan,
or the Purchase Plan, and reserved 500,000 shares of common
stock for issuance under the Purchase Plan. Under the Purchase
Plan, all eligible employees may purchase our common stock at a
price equal to 85% of the lower of the fair market value at the
beginning of the offer period or the semi-annual purchase date.
Stock purchases are limited to 15% of an employees
eligible compensation. On July 31, 2007, the Board of
Directors amended the Purchase Plan and reserved an additional
350,000 shares of common stock for issuance under the
Purchase Plan. During the year ended March 31, 2010, there
were 86,668 shares purchased under the Purchase Plan,
leaving approximately 148,000 shares available for purchase
under the plan in the future.
Fair
Value of Stock Compensation
The authoritative guidance provided by FASB requires employee
stock options and rights to purchase shares under stock
participation plans to be accounted for under the fair value
method and requires the use of an option pricing model for
estimating fair value. Accordingly, share-based compensation is
measured at grant date, based on the fair value of the award.
Under the authoritative guidance provided by FASB, the
compensation cost recognized by us beginning in fiscal 2007
includes compensation cost for all equity incentive awards
granted prior to, but not yet vested as of, April 1, 2006,
based on the grant-date fair value estimated in accordance with
the authoritative guidance provided by FASB, and compensation
cost for all equity incentive awards granted on or after
April 1, 2006, based on the grant-date fair value estimated
in accordance with the authoritative guidance provided by FASB.
We use the straight-line attribution method to recognize
share-based compensation costs over the service period of the
award.
The fair value of issuances under our Employee Stock Purchase
Plan is estimated on the issuance date and using the
Black-Scholes options pricing model, consistent with the
requirements of the authoritative guidance provided by FASB.
The following table summarizes the effects of share-based
compensation recognized on our consolidated statement of
operations resulting from options granted under our equity
incentive plans and rights to acquire stock granted under our
Employee Stock Purchase Plan (in thousands except per share
amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31,
|
|
Income Statement Classifications
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Selling, general and administrative expenses
|
|
$
|
3,160
|
|
|
$
|
2,816
|
|
|
$
|
2,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation effect on income before taxes
|
|
|
3,160
|
|
|
|
2,816
|
|
|
|
2,164
|
|
Benefit from income taxes
|
|
|
1,151
|
|
|
|
971
|
|
|
|
639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net share-based compensation effects on net income (loss)
|
|
$
|
2,009
|
|
|
$
|
1,845
|
|
|
$
|
1,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
As of March 31, 2010, there were $4.9 million of total
unrecognized compensation costs related to stock options
granted. The unrecognized compensation cost is expected to be
recognized over a weighted average period of 2.2 years.
Total tax benefit realized during the year ended March 31,
2010 on stock options was $1.2 million.
The weighted average estimated values of employee stock option
grants and rights granted under the Employee Stock Purchase
Plan, as well as the weighted average assumptions that were used
in calculating such values during fiscal 2010, 2009 and 2008,
were based on estimates at the date of grant as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee Stock
|
|
|
|
Stock Options
|
|
|
Purchase Plan
|
|
|
|
Year Ended March 31,
|
|
|
Year Ended March 31,
|
|
|
|
2010(1)
|
|
|
2009
|
|
|
2008
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Weighted average estimated per share fair value of grant
|
|
$
|
3.49
|
|
|
$
|
3.39
|
|
|
$
|
4.11
|
|
|
$
|
4.19
|
|
|
$
|
4.21
|
|
|
$
|
2.89
|
|
Risk-free interest rate
|
|
|
2.3
|
%
|
|
|
2.4
|
%
|
|
|
4.6
|
%
|
|
|
0.4
|
%
|
|
|
2.6
|
%
|
|
|
4.8
|
%
|
Expected term (in years)
|
|
|
5.0
|
|
|
|
4.6
|
|
|
|
4.3
|
|
|
|
0.5
|
|
|
|
0.5
|
|
|
|
0.5
|
|
Volatility
|
|
|
57.0
|
%
|
|
|
50.5
|
%
|
|
|
48.7
|
%
|
|
|
80.1
|
%
|
|
|
77.8
|
%
|
|
|
44.3
|
%
|
Dividend yield
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
|
(1) |
|
All stock options were granted during the second quarter ended
September 30, 2010. |
We estimate the expected term of options granted based on the
historical average period over which the options are exercised
by employees. We estimate the volatility of our common stock on
historical volatility measures. We base the risk-free interest
rate that it uses in the option valuation model on
U.S. Treasury zero-coupon issues with remaining terms
similar to the expected term on the options. We do not
anticipate paying any additional cash dividends in the
foreseeable future and, therefore, uses an expected dividend
yield of zero in the option valuation model. We are required to
estimate forfeitures at the time of grants and revise those
estimates in subsequent periods if actual forfeitures differ
from those estimates. We use historical data to estimate
pre-vesting option forfeitures and record stock-based
compensation expense only for those awards that are expected to
vest. All stock-based payment awards are amortized on a
straight-line basis over the requisite service periods of the
awards, which are generally the vesting periods.
We recognize the estimated compensation cost of restricted stock
over the vesting term. The estimated compensation cost is based
on the fair value of our common stock on the date of grant.
We recognize the compensation cost relating to stock bonuses on
the date of grant based on the fair value of our common stock on
the date of grant, as such stock bonuses are vested immediately.
We did not grant any bonus shares during fiscal 2010.
80
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Stock compensation activity under our equity incentive plans for
fiscal 2008, 2009 and 2010 is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Weighted Average
|
|
|
|
Shares Available
|
|
|
Number of
|
|
|
Intrinsic
|
|
|
Exercise Price
|
|
|
|
for Grant
|
|
|
Shares(1)
|
|
|
Value(2)(3)
|
|
|
per Share(4)
|
|
|
|
|
|
|
|
|
|
(000)
|
|
|
|
|
|
Stock Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2007
|
|
|
5,166,623
|
|
|
|
4,456,025
|
|
|
$
|
14,528
|
|
|
$
|
8.27
|
|
New shares authorized
|
|
|
1,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
(815,200
|
)
|
|
|
815,200
|
|
|
|
|
|
|
$
|
9.32
|
|
Options exercised
|
|
|
|
|
|
|
(238,679
|
)
|
|
$
|
941
|
|
|
$
|
4.53
|
|
Stock grants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options cancelled
|
|
|
73,291
|
|
|
|
(73,291
|
)
|
|
|
|
|
|
$
|
9.69
|
|
Options expired
|
|
|
122,225
|
|
|
|
(130,438
|
)
|
|
|
|
|
|
$
|
14.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2008
|
|
|
5,546,939
|
|
|
|
4,828,817
|
|
|
$
|
4,779
|
|
|
$
|
8.46
|
|
New shares authorized
|
|
|
1,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
(1,920,500
|
)
|
|
|
1,920,500
|
|
|
|
|
|
|
$
|
7.84
|
|
Options exercised
|
|
|
|
|
|
|
(548,294
|
)
|
|
$
|
3,270
|
|
|
$
|
5.11
|
|
Stock grants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options cancelled
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options expired
|
|
|
137,454
|
|
|
|
(137,454
|
)
|
|
|
|
|
|
$
|
14.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2009(5)
|
|
|
4,763,893
|
|
|
|
6,063,569
|
|
|
$
|
7,834
|
|
|
$
|
8.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan authorization expired
|
|
|
(4,763,893
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
New shares authorized(5)
|
|
|
900,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumed plans(6)
|
|
|
1,019,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted
|
|
|
(100,000
|
)
|
|
|
100,000
|
|
|
|
|
|
|
$
|
6.88
|
|
Options exercised
|
|
|
|
|
|
|
(881,150
|
)
|
|
$
|
4,106
|
|
|
$
|
2.89
|
|
Stock grants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options cancelled
|
|
|
|
|
|
|
(56,750
|
)
|
|
|
|
|
|
$
|
7.00
|
|
Options expired
|
|
|
|
|
|
|
(37,396
|
)
|
|
|
|
|
|
$
|
12.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2010
|
|
|
1,819,552
|
|
|
|
5,188,273
|
|
|
$
|
4,570
|
|
|
$
|
9.32
|
|
Restricted Stock Units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2007
|
|
|
(153,500
|
)
|
|
|
139,352
|
|
|
|
|
|
|
$
|
9.54
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested
|
|
|
|
|
|
|
(40,268
|
)
|
|
$
|
401
|
|
|
$
|
9.46
|
|
Forfeited
|
|
|
1,734
|
|
|
|
(1,734
|
)
|
|
|
|
|
|
$
|
9.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2008
|
|
|
(151,766
|
)
|
|
|
97,350
|
|
|
|
|
|
|
$
|
9.58
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested
|
|
|
|
|
|
|
(32,450
|
)
|
|
$
|
285
|
|
|
$
|
9.58
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2009
|
|
|
(151,766
|
)
|
|
|
64,900
|
|
|
|
|
|
|
$
|
9.58
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested
|
|
|
|
|
|
|
(32,450
|
)
|
|
$
|
251
|
|
|
$
|
9.58
|
|
Forfeited
|
|
|
|
|
|
|
(250
|
)
|
|
|
|
|
|
$
|
9.73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2010
|
|
|
(151,766
|
)
|
|
|
32,200
|
|
|
|
|
|
|
$
|
9.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2010
|
|
|
1,667,786
|
|
|
|
5,220,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
(1) |
|
The number of stock option exercised and restricted stock units
vested includes shares that were withheld on behalf of employees
to satisfy the statutory tax withholding requirements. |
|
(2) |
|
For RSUs, represents value of our stock on the date the
restricted stock unit vests. |
|
(3) |
|
Except for options exercised, these amounts represent the
difference between the exercise price and $8.54 per share, the
closing price of our stock on March 31, 2010 as reported on
the NASDAQ Global Select Market, for all
in-the-money,
outstanding and exercisable options. |
|
(4) |
|
For restricted stock units, represents the weighted average fair
value per share on the date of grant. |
|
(5) |
|
The 1999 Plans expired in May 2009. On September 10, 2009,
our stockholders approved the 2009 Plan, under which
900,000 shares of our common stock are reserved for the
grant of stock options. |
|
(6) |
|
Represents IXYS shares available for grant under the Zilog 2002
Omnibus Stock Incentive Plan and the Zilog 2004 Omnibus Stock
Incentive Plan assumed on acquisition of Zilog. |
The following table summarizes information about stock options
outstanding at March 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
Number of
|
|
|
|
|
|
Weighted
|
|
|
Number of
|
|
|
Weighted
|
|
Exercise Price
|
|
Shares
|
|
|
Weighted Average
|
|
|
Average Exercise
|
|
|
Shares
|
|
|
Average Exercise
|
|
per Share
|
|
Outstanding
|
|
|
Contractual Life
|
|
|
Price per Share
|
|
|
Exercisable
|
|
|
Price per Share
|
|
|
$ 2.51 - 5.00
|
|
|
107,126
|
|
|
|
2.3
|
|
|
$
|
4.64
|
|
|
|
107,126
|
|
|
$
|
4.64
|
|
$ 5.01 - 7.75
|
|
|
2,111,367
|
|
|
|
6.8
|
|
|
$
|
6.70
|
|
|
|
1,015,492
|
|
|
$
|
6.80
|
|
$ 7.76 - 10.00
|
|
|
1,215,720
|
|
|
|
5.2
|
|
|
$
|
8.76
|
|
|
|
936,970
|
|
|
$
|
8.67
|
|
$10.01 - 12.50
|
|
|
954,960
|
|
|
|
6.2
|
|
|
$
|
10.84
|
|
|
|
737,210
|
|
|
$
|
10.81
|
|
$12.51 - 29.50
|
|
|
799,100
|
|
|
|
4.9
|
|
|
$
|
15.91
|
|
|
|
671,600
|
|
|
$
|
16.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,188,273
|
|
|
|
6.0
|
|
|
$
|
9.32
|
|
|
|
3,468,398
|
|
|
$
|
9.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of the 5,188,273 options outstanding, 3,468,398 were exercisable
on March 31, 2010 at a weighted average exercise price of
$9.98 per share, with an intrinsic value of $2.4 million.
The weighted average remaining contractual life of options
outstanding and options exercisable at March 31, 2010 is
6.0 years and 4.8 years, respectively. Fair value of
options that vested during the year ended March 31, 2010
was $2.8 million.
|
|
11.
|
Other
Comprehensive Income (Loss) and Accumulated Other Comprehensive
Income
|
The components of other comprehensive income (loss) and related
tax effects were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Unrealized gain (loss) on
available-for-sale
investments securities, net of taxes $17 in 2010, ($186) in
2009, and ($263) in 2008
|
|
$
|
31
|
|
|
$
|
(362
|
)
|
|
$
|
(286
|
)
|
Change in accumulated net actuarial income (loss), net of taxes,
($743) in 2010, $725 in 2009, and ($148) in 2008
|
|
|
(1,612
|
)
|
|
|
678
|
|
|
|
(353
|
)
|
Foreign currency translation adjustments
|
|
|
1,491
|
|
|
|
(15,602
|
)
|
|
|
9,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income (loss)
|
|
$
|
(90
|
)
|
|
$
|
(15,286
|
)
|
|
$
|
9,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The components of accumulated other comprehensive income, net of
tax, were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Accumulated net unrealized gain (loss) on
available-for-sale
investments securities, net of taxes $15 in 2010 and ($2) in 2009
|
|
$
|
27
|
|
|
$
|
(4
|
)
|
Accumulated net actuarial loss, net of taxes of ($1,685) in 2010
and ($942) in 2009
|
|
|
(4,034
|
)
|
|
|
(2,422
|
)
|
Accumulated foreign currency translation adjustments
|
|
|
5,887
|
|
|
|
4,396
|
|
|
|
|
|
|
|
|
|
|
Total accumulated other comprehensive income
|
|
$
|
1,880
|
|
|
$
|
1,970
|
|
|
|
|
|
|
|
|
|
|
|
|
12.
|
Computation
of Net Income (Loss) per Share
|
Basic and diluted earnings (loss) per share are calculated as
follows (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares
|
|
|
31,005
|
|
|
|
31,087
|
|
|
|
31,906
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(677
|
)
|
|
$
|
(3,349
|
)
|
|
$
|
23,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share
|
|
$
|
(0.02
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
0.73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares
|
|
|
31,005
|
|
|
|
31,087
|
|
|
|
31,906
|
|
Common equivalent shares from stock options
|
|
|
|
|
|
|
|
|
|
|
1,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares used in diluted per share calculation
|
|
|
31,005
|
|
|
|
31,087
|
|
|
|
33,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(677
|
)
|
|
$
|
(3,349
|
)
|
|
$
|
23,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share
|
|
$
|
(0.02
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
0.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We incurred net losses for fiscal 2010 and fiscal 2009. As a
result, for fiscal 2010 and fiscal 2009, outstanding options and
restricted stock units to purchase 5,220,473 and
6,128,469 shares, respectively, were not included in the
diluted net loss per share calculation as their inclusion would
have been anti-dilutive. In fiscal 2008, there were outstanding
options to purchase 2,455,316 shares at a weighted average
exercise price of $11.85 per share that were not included in the
computation of dilutive net income per share since the exercise
prices of the options exceeded the market price of the common
stock. These options could dilute earnings per share in future
periods.
|
|
13.
|
Related
Party Transactions
|
We own 45% of the outstanding equity of Powersem, a module
manufacturer based in Germany. The investment is accounted for
using the equity method. In fiscal 2010, 2009 and 2008, we
recorded revenues of $1.2 million, $2.0 million and
$2.7 million, respectively, from sales of products to
Powersem for use as components in our products. In fiscal 2010,
2009 and 2008, we purchased $2.4 million, $5.1 million
and $5.3 million, respectively, from Powersem. At
March 31, 2010, 2009 and 2008, the accounts receivable
balance from our sales to Powersem was $330,000, $66,000 and
$292,000, respectively. The accounts payable balance to
Powersem, as of March 31, 2010, 2009 and 2008, was
$208,000, $27,000 and $112,000, respectively.
We own 20% of the outstanding equity of EB Tech Ltd, a company
with expertise in radiation technology based in South Korea. The
investment is accounted for using the equity method. In fiscal
2010 and 2009, EB Tech
83
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
rendered processing services totaling approximately $53,000 and
$19,000, respectively, to our company. As of March 31,
2010, no accrued payable balance was due to EB Tech. During the
fourth quarter of fiscal 2010, we ordered a $1.0 million
accelerator from EB Tech with a deposit of $300,000.
We had no other material related party transactions with
companies in which we invested and which were accounted for by
the equity method during fiscal 2010.
Omni Microelectronics, a consulting and engineering company
majority owned by S. Joon Lee, was paid fees by Samsung
Electronics on $26.4 million billed to us by Samsung
Electronics during fiscal 2008 for wafer fabrication services.
Mr. Lee is a director of our company. Omni
Microelectronics arrangement with Samsung ended in
February 2008.
|
|
14.
|
Employee
Savings and Retirement Plan
|
We have a 401(k) plan, known as the IXYS Corporation
and Subsidiary Employee Savings and Retirement Plan.
Eligibility to participate in the plan is subject to certain
minimum service requirements. Employees may voluntarily
contribute up to the limit prescribed by law and we may make
matching contributions in our discretion. Employees are 100%
vested immediately in any contributions by us. For the years
ended March 31, 2010, 2009 and 2008, we contributed
$487,000, $479,000 and $486,000, respectively.
Westcode also started a defined contribution plan in fiscal 2007
known as Westcode Semiconductor Group Personal
Pension. The plan is subject to minimum service
requirements. Employees contribute from 2.5% to 4.5% of the
pensionable salary. Westcode contributes between 5% to 7%
depending upon the contribution by the employee. Additionally,
Westcode pays the annual management charges for the plan.
Employees are 100% vested immediately in any contributions by
Westcode. For the years ended March 31, 2010, 2009 and
2008, Westcode contributed $312,000, $300,000 and $410,000,
respectively.
|
|
15.
|
Segment
and Geographic Information
|
We have a single operating segment. This operating segment is
comprised of semiconductor products used primarily in
power-related applications. The principle reason in the Zilog
acquisition in fiscal 2010 was the synergies with our existing
product lines. While we have separate legal subsidiaries with
discrete financial information, we have one chief operating
decision maker with highly integrated businesses.
84
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Our sales by major geographic area (based on destination) were
as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
United States
|
|
$
|
72,362
|
|
|
$
|
78,305
|
|
|
$
|
79,944
|
|
Europe and the Middle East
|
|
|
|
|
|
|
|
|
|
|
|
|
France
|
|
|
4,570
|
|
|
|
7,552
|
|
|
|
7,776
|
|
Germany
|
|
|
27,419
|
|
|
|
40,703
|
|
|
|
44,222
|
|
Italy
|
|
|
4,397
|
|
|
|
8,071
|
|
|
|
8,116
|
|
Sweden
|
|
|
3,921
|
|
|
|
4,039
|
|
|
|
4,019
|
|
United Kingdom
|
|
|
14,954
|
|
|
|
17,379
|
|
|
|
21,664
|
|
Other
|
|
|
25,723
|
|
|
|
33,962
|
|
|
|
36,539
|
|
Asia Pacific
|
|
|
|
|
|
|
|
|
|
|
|
|
China
|
|
|
48,991
|
|
|
|
34,103
|
|
|
|
39,186
|
|
Japan
|
|
|
9,100
|
|
|
|
8,685
|
|
|
|
9,467
|
|
Korea
|
|
|
7,364
|
|
|
|
7,182
|
|
|
|
18,456
|
|
Other
|
|
|
13,937
|
|
|
|
16,051
|
|
|
|
16,596
|
|
Rest of the world
|
|
|
|
|
|
|
|
|
|
|
|
|
India
|
|
|
6,103
|
|
|
|
11,423
|
|
|
|
11,760
|
|
Other
|
|
|
4,383
|
|
|
|
6,097
|
|
|
|
6,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
243,224
|
|
|
$
|
273,552
|
|
|
$
|
304,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth the revenues for each of our
product groups for fiscal 2010, 2009 and 2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Power semiconductors
|
|
$
|
175,845
|
|
|
$
|
216,836
|
|
|
$
|
236,599
|
|
Integrated circuits
|
|
|
48,226
|
|
|
|
32,236
|
|
|
|
41,097
|
|
Systems and RF power semiconductors
|
|
|
19,153
|
|
|
|
24,480
|
|
|
|
26,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
243,224
|
|
|
$
|
273,552
|
|
|
$
|
304,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In fiscal 2010, one customer accounted for 10.9% of our net
revenues. In fiscal 2009 and 2008, none of our customers
accounted for more than 10% of our net revenues.
85
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Our principal foreign operations consist of our subsidiaries,
IXYS GmbH in Germany and Westcode in the United Kingdom. The
following table summarizes the net revenues, net income (loss)
and long-lived assets of our domestic and foreign operations (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
|
|
$
|
118,954
|
|
|
$
|
138,492
|
|
|
$
|
148,897
|
|
Domestic
|
|
|
124,270
|
|
|
|
135,060
|
|
|
|
155,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
243,224
|
|
|
$
|
273,552
|
|
|
$
|
304,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
|
|
$
|
(3,825
|
)
|
|
$
|
4,392
|
|
|
$
|
1,934
|
|
Domestic
|
|
|
3,148
|
|
|
|
(7,741
|
)
|
|
|
21,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(677
|
)
|
|
$
|
(3,349
|
)
|
|
$
|
23,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Property, plant and equipment, net:
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
29,764
|
|
|
$
|
31,465
|
|
Germany
|
|
|
15,667
|
|
|
|
19,104
|
|
United Kingdom
|
|
|
2,152
|
|
|
|
2,337
|
|
Switzerland
|
|
|
5
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment
|
|
$
|
47,588
|
|
|
$
|
52,912
|
|
|
|
|
|
|
|
|
|
|
|
|
16.
|
Restructuring
Charges
|
In the quarter ended September 30, 2009, we initiated plans
to restructure our European manufacturing and assembly
operations to align them to current market conditions. The plans
primarily involved the termination of employees and
centralization of certain positions. Costs related to
termination of employees represented severance payments and
benefits. The restructuring charges recorded in conjunction with
the plans represented severance costs and have been included
under Restructuring charges on our consolidated
statements of operations. The restructuring accrual as of
March 31, 2010 was included under Accrued expenses
and other liabilities on our consolidated balance sheet.
86
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Restructuring activity incurred in fiscal 2010 was as follows
(in thousands):
|
|
|
|
|
|
|
Severance and
|
|
|
|
Related Benefits
|
|
|
Charges
|
|
$
|
1,010
|
|
Cash payments
|
|
|
(176
|
)
|
Currency translation adjustment
|
|
|
2
|
|
|
|
|
|
|
Balance at September 30, 2009
|
|
|
836
|
|
Charges
|
|
|
32
|
|
Cash payments
|
|
|
(46
|
)
|
Currency translation adjustment
|
|
|
(11
|
)
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
811
|
|
Charges
|
|
|
572
|
|
Cash payments
|
|
|
(127
|
)
|
Currency translation adjustment
|
|
|
(51
|
)
|
|
|
|
|
|
Balance at March 31, 2010
|
|
$
|
1,205
|
|
|
|
|
|
|
We anticipate that the remaining restructuring obligations of
$1.2 million as of March 31, 2010 will be
substantially paid by March 31, 2011.
Income (loss) before income tax consists of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Domestic
|
|
$
|
4,418
|
|
|
$
|
(2,075
|
)
|
|
$
|
25,774
|
|
International
|
|
|
(2,084
|
)
|
|
|
5,639
|
|
|
|
8,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,334
|
|
|
$
|
3,564
|
|
|
$
|
33,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our provision for income taxes consists of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
2,415
|
|
|
$
|
4,983
|
|
|
$
|
1,098
|
|
State
|
|
|
124
|
|
|
|
441
|
|
|
|
627
|
|
Foreign
|
|
|
1,830
|
|
|
|
3,748
|
|
|
|
1,652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,369
|
|
|
|
9,172
|
|
|
|
3,377
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(1,290
|
)
|
|
|
1,168
|
|
|
|
6,717
|
|
State
|
|
|
946
|
|
|
|
(480
|
)
|
|
|
187
|
|
Foreign
|
|
|
(1,014
|
)
|
|
|
(2,947
|
)
|
|
|
409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,358
|
)
|
|
|
(2,259
|
)
|
|
|
7,313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax provision
|
|
$
|
3,011
|
|
|
$
|
6,913
|
|
|
$
|
10,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The reconciliation of our effective tax rate to the
U.S. statutory federal income tax rate is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Statutory federal income tax rate
|
|
|
35
|
%
|
|
|
35
|
%
|
|
|
35
|
%
|
State taxes, net of federal tax benefit
|
|
|
30
|
|
|
|
(3
|
)
|
|
|
2
|
|
Expense (benefit) of lower tax jurisdictions
|
|
|
94
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Swiss benefit
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
Goodwill
|
|
|
|
|
|
|
63
|
|
|
|
|
|
Credits and other taxes
|
|
|
|
|
|
|
(14
|
)
|
|
|
(4
|
)
|
Valuation allowance
|
|
|
(82
|
)
|
|
|
114
|
|
|
|
(2
|
)
|
Permanent items
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Tax reserves
|
|
|
22
|
|
|
|
|
|
|
|
1
|
|
True up for prior periods
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
Share-based compensation
|
|
|
3
|
|
|
|
|
|
|
|
1
|
|
Capitalized expenses
|
|
|
19
|
|
|
|
|
|
|
|
|
|
Foreign income
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax provision rate
|
|
|
129
|
%
|
|
|
194
|
%
|
|
|
31
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The significant components of net deferred income tax assets are
as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Reserves and allowances
|
|
$
|
5,855
|
|
|
$
|
9,536
|
|
Other liabilities and accruals
|
|
|
4,612
|
|
|
|
3,261
|
|
|
|
|
|
|
|
|
|
|
Total short term deferred tax assets
|
|
|
10,467
|
|
|
|
12,797
|
|
Other liabilities and accruals long term
|
|
|
2,553
|
|
|
|
967
|
|
Depreciable assets
|
|
|
1,659
|
|
|
|
884
|
|
Net operating loss carryforward
|
|
|
21,282
|
|
|
|
12,878
|
|
Share-based compensation
|
|
|
2,978
|
|
|
|
2,031
|
|
Credits carryforward
|
|
|
1,511
|
|
|
|
863
|
|
|
|
|
|
|
|
|
|
|
Total long term deferred tax assets
|
|
|
29,983
|
|
|
|
17,623
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
40,450
|
|
|
|
30,420
|
|
|
|
|
|
|
|
|
|
|
Less: Valuation allowance
|
|
|
(12,902
|
)
|
|
|
(9,651
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
27,548
|
|
|
$
|
20,769
|
|
|
|
|
|
|
|
|
|
|
The authoritative guidance provided by FASB requires deferred
tax assets and liabilities to be recognized for temporary
differences between the tax basis and financial reporting basis
of assets and liabilities, computed at the expected tax rates
for the periods in which the assets or liabilities will be
realized, as well as for the expected tax benefit of net
operating loss and tax credit carryforwards. Significant
management judgment is required in determining our provision for
income taxes, our deferred tax assets and liabilities and any
valuation allowance recorded against net deferred tax assets.
Our management evaluates the recoverability of these net
deferred tax assets in accordance with the authoritative
guidance provided by FASB. Our ability to utilize the deferred
tax assets and the continuing need for a related valuation
allowance are being monitored on an ongoing basis. During the
88
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
fourth quarter of fiscal 2010, we recorded certain tax
adjustments on valuation allowance, tax contingency reserves and
other temporary items. The impact of these adjustments is
discussed further in this note. At March 31, 2010, we
assessed our ability to utilize net operating losses based on
positive and negative evidence and correspondingly reduced our
reserve of $996,000 of valuation allowance for net operating
losses that we estimate to be utilizable.
At March 31, 2010, we had U.S. net operating loss
carryforwards of approximately $99.7 million, all of which
are subject to the limitations under Section 382 of the
U.S. tax code resulting from change in ownership. These
carryforwards will expire, if not utilized, from fiscal 2011 to
2028 for U.S. tax purposes. None of the U.S. net
operating loss carryforwards represent the stock option
deduction arising from activity under our stock option plan. As
of March 31, 2010, we had net operating loss carryforwards
for foreign income tax purposes of approximately
$9.2 million.
During fiscal 2010, our valuation allowance increased by
$3.2 million from $9.7 million as of March 31,
2009 to $12.9 million as of March 31, 2010. The change
in valuation allowance from fiscal 2009 to fiscal 2010 primarily
relates to the valuation allowances on deferred tax assets
acquired in connection with the Zilog acquisition.
During fiscal 2010, our deferred tax assets increased primarily
due to the acquisition of Zilog. During fiscal 2009, our net
deferred tax assets decreased primarily because of increases in
reserves. During fiscal 2008, our net deferred tax assets were
decreased by the tax benefits associated with a litigation
reserve. Our Swiss subsidiary has a tax holiday that expires in
2010. The tax holiday reduced income tax expense by
approximately $0 in fiscal 2010, $0 in fiscal 2009 and $359,000
in fiscal 2008.
In fiscal 2008, we adopted standards that changed the accounting
for uncertain tax positions. As a result of the adoption, we
recognized $6.2 million for unrecognized tax benefits
primarily consisting of cross border transactions, pending
audits, tax credits and tax positions taken in prior periods. At
the adoption date, we had $6.2 million of gross
unrecognized tax benefits, all of which would affect our
effective tax rate if recognized. No valuation allowance was
placed on any of these unrecognized tax benefits. At the end of
fiscal 2010, we had $6.2 million of gross unrecognized tax
benefits, all of which would affect our effective tax rate if
recognized. Out of the aggregate unrecognized benefits of
$6.2 million, $0 has been classified under Accrued
expenses and other liabilities within Total current
liabilities and the balance of $6.2 million has been
classified under Long term income tax payable on our
consolidated balance sheets. Our liability for unrecognized tax
benefits increased by $938,000 from last year principally due to
the acquisition of Zilog, reserves for tax items, and includes
an increase of $254,000 of accrued interest and penalties. We do
not anticipate any unrecognized tax benefits in the next
12 months that would result in a material change to our
financial position.
We include interest and penalties in the financial statements as
a component of income tax expense. We had $1.1 million of
accrued interest and penalties at March 31, 2010.
89
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The aggregate changes in the balance of gross unrecognized tax
benefits were as follows (in thousands):
|
|
|
|
|
Beginning balance as of March 31, 2007 (date of adoption)
|
|
$
|
6,207
|
|
Lapse of statute of limitations
|
|
|
(690
|
)
|
Increases in balances related to tax positions taken during
prior periods
|
|
|
320
|
|
Decreases in balances related to tax positions taken during
prior periods
|
|
|
(2,156
|
)
|
Increases in balances related to tax positions taken during
current period
|
|
|
889
|
|
|
|
|
|
|
Balance as of March 31, 2008
|
|
|
4,570
|
|
Lapse of statute of limitations
|
|
|
(730
|
)
|
Increases in balances related to tax positions taken during
prior periods
|
|
|
314
|
|
Increases in balances related to tax positions taken during
current period
|
|
|
1,141
|
|
|
|
|
|
|
Balance as of March 31, 2009
|
|
|
5,295
|
|
Lapse of statute of limitations
|
|
|
(1,143
|
)
|
Increases in balances related to tax positions taken during
prior periods
|
|
|
254
|
|
Increases in balances related to tax positions taken during
current period
|
|
|
1,827
|
|
|
|
|
|
|
Balance as of March 31, 2010
|
|
$
|
6,233
|
|
|
|
|
|
|
We have made no provision for U.S. income taxes on
undistributed earnings of certain foreign subsidiaries because
it is our intention to permanently reinvest such earnings in our
foreign subsidiaries. If such earnings were distributed, we
would be subject to additional U.S. income tax expense.
Determination of the amount of unrecognized deferred income tax
liability related to these earnings is not practical.
Under the Tax Reform Act of 1986, the amounts of and benefits
from net operating loss carryforwards and tax credit
carryforwards may be impaired or limited in certain
circumstances. Events that may restrict utilization of net
operating loss and credit carryforwards include, but are not
limited to, certain ownership change limitations and continuity
of business requirements, as defined in Internal Revenue Code
Section 382 and similar state provisions. In the event we
had a change of ownership, defined as a cumulative ownership
change of more than 50% over a three-year period, utilization of
carryforwards could be restricted to an annual limitation. The
annual limitation may result in the expiration of net operating
loss carryforwards and credit carryforwards before utilization.
|
|
18.
|
Commitments
and Contingencies
|
Commitments
We lease certain equipment under capital lease arrangements
expiring through fiscal 2013 at interest rates of 4.4% to 6.0%.
We rent certain of our facilities under operating leases
expiring through fiscal 2022.
90
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Future minimum lease payments under capital, operating leases
and commitments for inventory purchase are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
Operating
|
|
|
Inventory Purchase
|
|
|
|
|
Fiscal Year Ended March 31,
|
|
Leases
|
|
|
Leases
|
|
|
Obligations
|
|
|
Total
|
|
|
2011
|
|
$
|
3,021
|
|
|
$
|
2,105
|
|
|
$
|
12,063
|
|
|
$
|
17,189
|
|
2012
|
|
|
1,319
|
|
|
|
1,923
|
|
|
|
20,712
|
|
|
|
23,954
|
|
2013
|
|
|
437
|
|
|
|
1,055
|
|
|
|
6,000
|
|
|
|
7,492
|
|
2014
|
|
|
|
|
|
|
675
|
|
|
|
3,000
|
|
|
|
3,675
|
|
2015
|
|
|
|
|
|
|
651
|
|
|
|
|
|
|
|
651
|
|
Thereafter
|
|
|
|
|
|
|
3,783
|
|
|
|
|
|
|
|
3,783
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total minimum payments
|
|
|
4,777
|
|
|
$
|
10,192
|
|
|
$
|
41,775
|
|
|
$
|
56,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: interest
|
|
|
236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: current portion
|
|
|
2,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rent expense for fiscal years ended March 31, 2010, 2009
and 2008 amounted to $1.3 million, $1.2 million and
$1.6 million, respectively.
As of March 31, 2010 and 2009, we had cash deposits with
financial institutions of $813,000 and $136,000, respectively,
which were restricted as to use and represent compensating
balances for current or future discounted acceptances and
letters of credit. These balances are included in restricted
cash on our balance sheets.
On November 13, 2009, we entered into a credit agreement
with BOW. The credit agreement includes a letter of credit
subfacility, under which BOW agrees to issue letters of credit
of up to $3.0 million upon the expiration of the current
facility on March 31, 2010. However, borrowing under this
subfacility is limited to the extent of availability under the
$15.0 million revolving line of credit for which the entire
$15.0 million was drawn as of March 31, 2010. The
credit agreement expires on October 31, 2011. See
Note 8, Borrowing Arrangements for further
information regarding the terms of the credit agreement.
At March 31, 2008, we guaranteed, for certain events of
default, a $5.0 million line of credit issued by a German
bank to IXYS GmbH to support a letter of credit facility. There
were approximately $1.4 million of open letters of credit
to support inventory purchases. Westcode had a Letter of Credit
facility from a British bank. There were approximately
£315,000, or $628,000, of open letters of credit to support
inventory purchases. The bank also issued a guarantee on behalf
of the subsidiary for £121,000, or $241,000, in connection
with a product supply contract. At March 31, 2009, we
cancelled the line of credit and letter of credit facilities as
these were not required.
Legal
Proceedings
We are currently involved in a variety of legal matters that
arise in the normal course of business. Were an unfavorable
ruling to occur, there could be a material adverse impact on our
financial condition, results of operations or cash flows.
In June 2000, International Rectifier Corporation filed an
action for patent infringement against us in the United States
District Court for the Central District of California, alleging
that certain of our products sold in the United States infringed
U.S. patents owned by International Rectifier. In September
2006, the U.S. District Court entered a judgment for
$6.2 million in damages and issued a permanent injunction
barring us from selling or distributing the infringing products.
In February 2008, the Federal Circuit Court reversed the
U.S. District Court, vacated the damages award and the
permanent injunction and ruled that there shall be no further
proceedings in the
91
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
case regarding any question of infringement. We reversed the
liability recognized in the financial statement upon the ruling
of the Federal Circuit Court. In July 2008, International
Rectifier filed a petition for a writ of certiorari with the
Supreme Court of the United States. In October 2008, the
U.S. Supreme Court denied the petition for a writ of
certiorari, concluding the litigation.
In a related matter, we incurred litigation costs to defend a
key supplier. The U.S. District Court for Central
California has issued orders in this defense that resulted in
our receipt of about $2.2 million from International
Rectifier for litigation costs incurred. We recorded the receipt
of the funds as a reduction of operating expenses in the quarter
ended March 31, 2009.
In April 2003, LoJack Corporation, or LoJack, filed a suit
against Clare, Inc., one of our subsidiaries, in the Superior
Court of Norfolk County, Massachusetts, claiming breach of
contract, unjust enrichment, breach of the implied covenant of
good faith and fair dealing, failure to perform services and
violation of a Massachusetts statute prohibiting unfair and
deceptive acts and practices, all purportedly resulting from
Clares alleged breach of a contract to develop custom
integrated circuits and a module assembly. In February 2006, the
jury awarded LoJack $36.7 million in damages. In July 2006,
the Superior Court reduced LoJacks damages to
$4.0 million. In July 2007, the Appeals Court of
Massachusetts ruled that Clare owed LoJack $805,000 plus simple
interest at the rate of 12% per annum from April 2003, which
aggregated to $1.2 million. In September 2007, the Supreme
Judicial Court of Massachusetts denied the application for
further appellate review filed by LoJack. The denial by the
Supreme Judicial Court effectively concluded the material
litigation between Clare and LoJack. Clare paid LoJack
$1.2 million in accordance with the opinion of the Appeals
Court. The remaining reserve of $13.0 million was reversed
during fiscal 2008.
Other
Commitments and Contingencies
On occasion, we provide limited indemnification to customers
against intellectual property infringement claims related to our
products. To date, we have not experienced significant activity
or claims related to such indemnifications. We also provide in
the normal course of business indemnification to our officers,
directors and selected parties. We are unable to estimate any
potential future liability, if any. Therefore, no liability for
these indemnification agreements has been recorded as of
March 31, 2010 and 2009.
92
IXYS
CORPORATION
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Selected
Quarterly Financial Data (unaudited, in thousands, except per
share amounts)
Fiscal
Year Ended March 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2009
|
|
|
Net revenues
|
|
$
|
76,561
|
|
|
$
|
64,032
|
|
|
$
|
53,746
|
|
|
$
|
48,885
|
|
Gross profit
|
|
|
24,770
|
|
|
|
15,711
|
|
|
|
12,608
|
|
|
|
10,344
|
|
Operating income (loss)
|
|
|
5,469
|
|
|
|
1,718
|
|
|
|
(909
|
)
|
|
|
(2,573
|
)
|
Net income (loss)
|
|
$
|
4,022
|
|
|
$
|
399
|
|
|
$
|
(1,230
|
)
|
|
$
|
(3,868
|
)
|
Net income (loss) per share basic(1)
|
|
$
|
0.13
|
|
|
$
|
0.01
|
|
|
$
|
(0.04
|
)
|
|
$
|
(0.13
|
)
|
Net income (loss) per share diluted(1)
|
|
$
|
0.13
|
|
|
$
|
0.01
|
|
|
$
|
(0.04
|
)
|
|
$
|
(0.13
|
)
|
Weighted average shares used in per share calculation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
31,320
|
|
|
|
31,100
|
|
|
|
30,901
|
|
|
|
30,679
|
|
Diluted
|
|
|
31,409
|
|
|
|
31,269
|
|
|
|
30,901
|
|
|
|
30,679
|
|
Fiscal
Year Ended March 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2008
|
|
|
2008
|
|
|
Net revenues
|
|
$
|
58,244
|
|
|
$
|
58,337
|
|
|
$
|
77,635
|
|
|
$
|
79,336
|
|
Gross profit(2)
|
|
|
4,745
|
|
|
|
12,654
|
|
|
|
23,797
|
|
|
|
24,762
|
|
Operating income (loss)(2)
|
|
|
(11,231
|
)
|
|
|
(5,037
|
)
|
|
|
7,933
|
|
|
|
8,309
|
|
Net income (loss)(2)
|
|
$
|
(10,910
|
)
|
|
$
|
(3,982
|
)
|
|
$
|
6,059
|
|
|
$
|
5,484
|
|
Net income (loss) per share basic(1)(2)
|
|
$
|
(0.36
|
)
|
|
$
|
(0.13
|
)
|
|
$
|
0.19
|
|
|
$
|
0.18
|
|
Net income (loss) per share diluted(1)(2)
|
|
$
|
(0.36
|
)
|
|
$
|
(0.13
|
)
|
|
$
|
0.18
|
|
|
$
|
0.17
|
|
Weighted average shares used in per share calculation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
30,633
|
|
|
|
30,979
|
|
|
|
31,554
|
|
|
|
31,181
|
|
Diluted
|
|
|
30,633
|
|
|
|
30,979
|
|
|
|
32,887
|
|
|
|
32,226
|
|
|
|
|
(1) |
|
The sum of the quarterly net income (loss) per share are not
equal to the annual net income (loss) per share due to the use
of quarterly weighted average shares used to determine the
quarterly net income (loss) per share as compared to the annual
weighted average shares used to determine the annual net income
(loss) per share. |
|
(2) |
|
During the fourth quarter of fiscal 2009, we recorded a $660,000
adjustment to increase cost of goods sold as a result of an
accumulated overstatement of inventory in prior quarters. The
impact of this inventory overstatement was not material to any
of the prior quarterly periods presented. |
93
|
|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
|
Not applicable.
|
|
Item 9A.
|
Controls
and Procedures
|
Disclosure
Controls and Procedures
An evaluation was carried out under the supervision and with the
participation of our Chief Executive Officer and our Chief
Financial Officer of the effectiveness of our disclosure
controls and procedures (as defined in
Rule 13a-15(e)
under the Securities Exchange Act of 1934, as amended, or
Exchange Act) as of March 31, 2010. This evaluation
included various processes that were carried out in an effort to
ensure that information required to be disclosed in our
Securities and Exchange Commission, or SEC, reports is recorded,
processed, summarized and reported within the time periods
specified by the SEC. In this evaluation, the Chief Executive
Officer and the Chief Financial Officer considered whether our
disclosure controls and procedures were also effective to ensure
that information required to be disclosed in the reports that we
file or submit under the Exchange Act is accumulated and
communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, to allow timely decisions
regarding required disclosure. This evaluation also included
consideration of certain aspects of our internal controls and
procedures for the preparation of our financial statements. Our
Chief Executive Officer and Chief Financial Officer concluded
that, as of March 31, 2010, our disclosure controls and
procedures were effective.
Managements
Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term
is defined in Exchange Act
Rules 13a-15(f)
and
15d-15(f).
Under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief
Financial Officer, we conducted an evaluation of the
effectiveness of our internal control over financial reporting
as of March 31, 2010. In making this assessment, our
management used the criteria set forth in Internal
Control-Integrated Framework, which was issued by the
Committee of Sponsoring Organizations of the Treadway
Commission. Our management has concluded that, as of
March 31, 2010, our internal control over financial
reporting was effective. As they were recent acquisitions within
the year, Zilog, Inc. and the business acquired from Leadis
Technology, Inc. have not yet been incorporated into our
internal control over financial reporting.
BDO Seidman, LLP, the independent registered public accounting
firm that audited the financial statements included in this
Annual Report on
Form 10-K,
has issued an attestation report on our internal control over
financial reporting, which is included elsewhere herein.
Changes
in Internal Control over Financial Reporting
There were no changes to our internal control over financial
reporting (as defined in
Rules 13a-15(f)
and
15d-15(f)
under the Exchange Act) that occurred during the fourth quarter
of fiscal 2010 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.
Inherent
Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief
Financial Officer, does not expect that our procedures or our
internal controls will prevent or detect all errors and all
fraud. An internal control system, no matter how well conceived
and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met.
Because of the inherent limitations in all control systems, no
evaluation of our controls can provide absolute assurance that
all control issues, errors and instances of fraud, if any, have
been detected.
94
Report of
Independent Registered Public Accounting Firm
Board of Directors and Stockholders
IXYS Corporation
Milpitas, California
We have audited IXYS Corporations internal control
over financial reporting as of March 31, 2010, based on
criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria).
IXYS Corporations management is responsible for
maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control
over financial reporting, included in the accompanying
Item 9A, Control and Procedures. Our
responsibility is to express an opinion on the companys
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk. Our audit also included performing such other
procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our
opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
As indicated in the accompanying Item 9A, Control and
Procedures, managements assessment of and conclusion on
the effectiveness of internal control over financial reporting
did not include the internal controls of Zilog, Inc. and certain
businesses of Leadis Technology, Inc. which were acquired on
February 18, 2010 and September 14, 2009,
respectively, and both of which are included in the consolidated
balance sheet of IXYS Corporation as of March 31,
2010, and the related consolidated statements of operations,
stockholders equity and comprehensive income (loss), and
cash flows for the year then ended. Zilog, Inc. and certain
businesses of Leadis Technology, Inc. constituted 14% of total
assets as of March 31, 2010 and 7% of total net revenues
for the year then ended. Management did not assess the
effectiveness of internal control over financial reporting of
Zilog, Inc. and certain businesses of Leadis Technology, Inc.
because of the timing of the acquisitions, which were completed
on February 18, 2010 and September 14, 2009,
respectively. Our audit of internal control over financial
reporting of IXYS Corporation also did not include an
evaluation of the internal control over financial reporting of
Zilog, Inc. and certain businesses of Leadis Technology, Inc.
95
In our opinion, IXYS Corporation maintained, in all
material respects, effective internal control over financial
reporting as of March 31, 2010, based on the COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of IXYS Corporation as of
March 31, 2010 and 2009, and the related consolidated
statements of operations, stockholders equity and
comprehensive income (loss), and cash flows for each of the
three years in the period ended March 31, 2010 and our
report dated June 11, 2010 expressed an unqualified opinion
thereon.
/s/ BDO
Seidman, LLP
San Francisco, California
June 11, 2010
96
|
|
Item 9B.
|
Other
Information
|
On June 9, 2010, the Compensation Committee of the Board of
Directors of our company awarded Dr. Nathan Zommer, our
Chairman of the Board and Chief Executive Officer, and Uzi
Sasson, our President, Chief Operating Officer and Chief
Financial Officer, $330,000 and $165,000, respectively, as their
cash performance compensation for fiscal 2010.
PART III
|
|
Item 10.
|
Directors,
Executive Officers and Corporate Governance
|
The information required by this item, other than with respect
to our executive officers and Code of Ethics, is incorporated
herein by reference to our Proxy Statement for our 2010 Annual
Meeting of Stockholders to be filed with the SEC within
120 days after the end of the fiscal year ended
March 31, 2010, or our 2010 Proxy Statement, under the
captions Election of Directors, Information
Regarding the Board and Corporate Governance and
Section 16(A) Beneficial Ownership Reporting
Compliance.
Executive
Officers
The information regarding our executive officers is set forth in
Part I of this Annual Report on
Form 10-K
under the caption Executive Officers of the
Registrant and is incorporated herein by reference.
Code of
Ethics
We have adopted a Code of Ethics that applies to all of our
directors, officers and employees, including our principal
executive officer, principal financial officer and principal
accounting officer. The Code of Ethics is posted on our website
at www.ixys.com under the caption Investor Relations.
We intend to satisfy the disclosure requirement under
Item 5.05 of
Form 8-K
regarding an amendment to, or waiver from, a provision of this
Code of Ethics by posting such information on our website, at
the address and location specified above and, to the extent
required by the listing standards of the NASDAQ Stock Market, by
filing a Current Report on
Form 8-K
with the SEC disclosing such information.
|
|
Item 11.
|
Executive
Compensation
|
The information required by this item is incorporated by
reference to our 2010 Proxy Statement under the captions
Executive Compensation and Information
Regarding the Board and Corporate Governance.
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
The information required by this item is incorporated by
reference to our 2010 Proxy Statement under the captions
Equity Compensation Plan Information and
Security Ownership of Certain Beneficial Owners and
Management.
|
|
Item 13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
The information required by this item is incorporated by
reference to our 2010 Proxy Statement under the captions
Transactions with Related Persons and
Information Regarding the Board and Corporate
Governance.
|
|
Item 14.
|
Principal
Accounting Fees and Services
|
The information required by this item is incorporated by
reference to our 2010 Proxy Statement under the caption
Ratification of Selection of Independent Registered Public
Accounting Firm.
97
PART IV
|
|
Item 15.
|
Exhibits
and Financial Statement Schedules
|
(a) The following documents are filed as part of this
report:
(1) Financial Statements.
|
|
|
|
|
|
Report of Independent Registered Public Accounting Firm
|
|
|
|
|
|
Consolidated Balance Sheets as of March 31, 2010 and 2009
|
|
|
|
|
|
Consolidated Statements of Operations for the years ended
March 31, 2010, 2009 and 2008
|
|
|
|
|
|
Consolidated Statements of Stockholders Equity and
Comprehensive Income (Loss) for the years ended March 31,
2010, 2009 and 2008
|
|
|
|
|
|
Consolidated Statements of Cash Flows for the years ended
March 31, 2010, 2009 and 2008
|
|
|
|
|
|
Notes to Consolidated Financial Statements
|
|
|
(2) Financial statements schedules. All schedules are
omitted because they are not applicable or the required
information is shown in the financial statements or the notes
thereto.
(3) Exhibits.
|
|
|
|
|
Exhibit
|
|
Title
|
|
|
3
|
.1
|
|
Amended and Restated Certificate of Incorporation of IXYS
Corporation, as filed with the Secretary of State for the State
of Delaware on March 23, 2001 (filed on June 28, 2001
as Exhibit 3.1 to the Annual Report on
Form 10-K
(No. 000-26124)
and incorporated herein by reference).
|
|
3
|
.2
|
|
Amended and Restated Bylaws of IXYS Corporation (filed on
February 7, 2008 as Exhibit 3.2 to the Quarterly
Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.1
|
|
Loan Agreement dated June 2, 2005 by and between IXYS
Semiconductor GmbH and IKB Deutsche Industriebank AG (filed on
August 12, 2005 as Exhibit 10.2 to the Quarterly
Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.2
|
|
Collateral Agreement dated July 14, 2005 by and among IXYS
Corporation, IXYS Semiconductor GmbH and IKB Deutsche
Industriebank AG (filed on August 12, 2005 as
Exhibit 10.3 to the Quarterly Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.3*
|
|
Form of Indemnity Agreement for directors and officers (filed on
June 12, 2008 as Exhibit 10.3 to the Annual Report on
Form 10-K
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.4*
|
|
List of signatories to Indemnity Agreement (filed on
June 12, 2008 as Exhibit 10.3 to the Annual Report on
Form 10-K
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.5*
|
|
IXYS Corporation 1999 Equity Incentive Plan (filed on
May 18, 2006 as Exhibit 10.1 to the Current Report on
Form 8-K
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.6*
|
|
IXYS Corporation Amended and Restated 1999 Employee Stock
Purchase Plan (filed on November 11, 2007 as
Exhibit 10.1 to the Quarterly Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.7*
|
|
IXYS Corporation 1999 Non-Employee Directors Equity
Incentive Plan (filed on July 8, 1999 as Exhibit 10.12
to the Annual Report on
Form 10-K
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.8*
|
|
Form of Stock Option Agreement for the IXYS Corporation 1999
Equity Incentive Plan (filed on November 9, 2004 as
Exhibit 10.3 to the Quarterly Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.9*
|
|
Form of Restricted Stock Unit Award Agreement for the IXYS
Corporation 1999 Equity Incentive Plan (filed on May 18,
2006 as Exhibit 10.2 to the Current Report on
Form 8-K
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.10*
|
|
Form of Stock Option Agreement for the IXYS Corporation 1999
Non-Employee Directors Equity Incentive Plan (filed on
November 9, 2004 as Exhibit 10.1 to the Quarterly
Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
98
|
|
|
|
|
Exhibit
|
|
Title
|
|
|
10
|
.11*
|
|
Form of Stock Option Agreement for the IXYS Corporation 1999
Non-Employee Directors Equity Incentive Plan (filed on
November 9, 2004 as Exhibit 10.2 to the Quarterly
Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.12*
|
|
Form of Stock Option Agreement for the IXYS Corporation 1999
Equity Incentive Plan with net exercise provision (filed on
June 22, 2006 as Exhibit 10.23 to the Annual Report on
Form 10-K
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.13*
|
|
Form of Stock Option Agreement for the IXYS Corporation 1999
Equity Incentive Plan for non-employee directors, (filed on
June 22, 2006 as Exhibit 10.24 to the Annual Report on
Form 10-K
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.14*
|
|
Form of Stock Option Agreement for the IXYS Corporation 1999
Non-Employee Directors Equity Incentive Plan with net
exercise provision, (filed on June 22, 2006 as
Exhibit 10.25 to the Annual Report on
Form 10-K
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.15*
|
|
Form of Stock Award (filed on February 14, 2006 as
Exhibit 10.5 to the Quarterly Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.16*
|
|
Assumption Agreement dated August 2, 2007 by and among
La Salle Bank National Association, Barber Lane Associates
L.P., Menlo Equities LLC, IXYS Buckeye, LLC and IXYS Corporation
(filed on November 11, 2007 as Exhibit 10.2 to the
Quarterly Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.17*
|
|
Limited Guaranty dated August 2, 2007 by IXYS Corporation
in favor of La Salle Bank National Association (filed on
November 11, 2007 as Exhibit 10.3 to the Quarterly
Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.18*
|
|
Promissory Note Secured by Deed of Trust dated December 21,
2000 made by Barber Lane Associates L.P. (filed on
November 11, 2007 as Exhibit 10.4 to the Quarterly
Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.19*
|
|
Deed of Trust dated December 21, 2000 on 1590 Buckeye
Drive, Milpitas, California (filed on November 11, 2007 as
Exhibit 10.5 to the Quarterly Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.20*
|
|
Fourth Amended Executive Employment Agreement by and between
IXYS Corporation and Nathan Zommer, effective as of
August 1, 2009 (filed on August 10, 2009 as
Exhibit 10.1 to the Quarterly Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.21*
|
|
First Amendment Executive Employment Agreement by and between
IXYS Corporation and Uzi Sasson, effective as of August 1,
2009 (filed on August 10, 2009 as Exhibit 10.2 to the
Quarterly Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.22
|
|
Credit Agreement dated as of November 13, 2009 by and
between Bank of the West and IXYS Corporation (filed on
February 5, 2010 as Exhibit 10.1 to the Quarterly
Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.23*
|
|
IXYS Corporation 2009 Equity Incentive Plan (filed on
August 10, 2009 as Exhibit 10.3 to the Quarterly
Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.24*
|
|
Notice of Stock Option Grant and Agreement for the IXYS
Corporation 2009 Equity Incentive Plan (filed on August 10,
2009 as Exhibit 10.4 to the Quarterly Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.25*
|
|
Zilog, Inc. 2002 Omnibus Stock Incentive Plan.
|
|
10
|
.26*
|
|
Form of Nonqualified Stock Option Agreement for Stock Options
pursuant to the Zilog, Inc. 2002 Omnibus Stock Incentive Plan.
|
|
10
|
.27*
|
|
Zilog, Inc. 2004 Omnibus Stock Incentive Plan.
|
|
10
|
.28*
|
|
Form of Nonqualified Stock Option Agreement for the Zilog, Inc.
2004 Omnibus Stock Incentive Plan.
|
|
21
|
.1
|
|
List of Subsidiaries.
|
|
23
|
.1
|
|
Consent of BDO Seidman, LLP.
|
|
24
|
.1
|
|
Power of Attorney (included on the signature page).
|
99
|
|
|
|
|
Exhibit
|
|
Title
|
|
|
31
|
.1
|
|
Certification of Chief Executive Officer pursuant to
Rule 13a-14(a)
of the Securities and Exchange Commission.
|
|
31
|
.2
|
|
Certification of Chief Financial Officer pursuant to the
Rule 13a-14(a)
of the Securities and Exchange Commission.
|
|
32
|
.1
|
|
Certification required by
Rule 13a-14(b)
of the Securities and Exchange Commission and Section 1350
of Chapter 63 of Title 18 of the United States Code
(18 U.S.C. 1350).
|
|
|
|
* |
|
Management contract or compensatory plan or arrangement. |
(b) Exhibits. See Item 15(a)(3) above.
(c) Financial Statement Schedules. See Item 15(a)(2)
above.
100
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
IXYS CORPORATION
Nathan Zommer
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Dated: June 11, 2010
POWER OF
ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Nathan Zommer
and Uzi Sasson, and each or any one of them, his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign any and all amendments (including
post-effective amendments) to this Report, and to file the same,
with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and
thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, or their or
his substitutes or substitute, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Nathan
Zommer
Nathan
Zommer
|
|
Chairman of the Board (Director) and
Chief Executive Officer
(Principal Executive Officer)
|
|
June 11, 2010
|
|
|
|
|
|
/s/ Uzi
Sasson
Uzi
Sasson
|
|
President, Chief Operating Officer and Chief Financial
Officer
(Principal Financial Officer and
Principal Accounting Officer)
|
|
June 11, 2010
|
|
|
|
|
|
/s/ Donald
L. Feucht
Donald
L. Feucht
|
|
Director
|
|
June 11, 2010
|
|
|
|
|
|
/s/ Samuel
Kory
Samuel
Kory
|
|
Director
|
|
June 11, 2010
|
|
|
|
|
|
/s/ S.
Joon Lee
S.
Joon Lee
|
|
Director
|
|
June 11, 2010
|
|
|
|
|
|
/s/ Timothy
A. Richardson
Timothy
A. Richardson
|
|
Director
|
|
June 11, 2010
|
|
|
|
|
|
/s/ James
M. Thorburn
James
M. Thorburn
|
|
Director
|
|
June 11, 2010
|
101
Exhibit Index
|
|
|
|
|
Exhibit
|
|
Title
|
|
|
3
|
.1
|
|
Amended and Restated Certificate of Incorporation of IXYS
Corporation, as filed with the Secretary of State for the State
of Delaware on March 23, 2001 (filed on June 28, 2001
as Exhibit 3.1 to the Annual Report on
Form 10-K
(No. 000-26124)
and incorporated herein by reference).
|
|
3
|
.2
|
|
Amended and Restated Bylaws of IXYS Corporation (filed on
February 7, 2008 as Exhibit 3.2 to the Quarterly
Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.1
|
|
Loan Agreement dated June 2, 2005 by and between IXYS
Semiconductor GmbH and IKB Deutsche Industriebank AG (filed on
August 12, 2005 as Exhibit 10.2 to the Quarterly
Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.2
|
|
Collateral Agreement dated July 14, 2005 by and among IXYS
Corporation, IXYS Semiconductor GmbH and IKB Deutsche
Industriebank AG (filed on August 12, 2005 as
Exhibit 10.3 to the Quarterly Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.3*
|
|
Form of Indemnity Agreement for directors and officers (filed on
June 12, 2008 as Exhibit 10.3 to the Annual Report on
Form 10-K
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.4*
|
|
List of signatories to Indemnity Agreement (filed on
June 12, 2008 as Exhibit 10.3 to the Annual Report on
Form 10-K
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.5*
|
|
IXYS Corporation 1999 Equity Incentive Plan (filed on
May 18, 2006 as Exhibit 10.1 to the Current Report on
Form 8-K
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.6*
|
|
IXYS Corporation Amended and Restated 1999 Employee Stock
Purchase Plan (filed on November 11, 2007 as
Exhibit 10.1 to the Quarterly Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.7*
|
|
IXYS Corporation 1999 Non-Employee Directors Equity
Incentive Plan (filed on July 8, 1999 as Exhibit 10.12
to the Annual Report on
Form 10-K
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.8*
|
|
Form of Stock Option Agreement for the IXYS Corporation 1999
Equity Incentive Plan (filed on November 9, 2004 as
Exhibit 10.3 to the Quarterly Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.9*
|
|
Form of Restricted Stock Unit Award Agreement for the IXYS
Corporation 1999 Equity Incentive Plan (filed on May 18,
2006 as Exhibit 10.2 to the Current Report on
Form 8-K
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.10*
|
|
Form of Stock Option Agreement for the IXYS Corporation 1999
Non-Employee Directors Equity Incentive Plan (filed on
November 9, 2004 as Exhibit 10.1 to the Quarterly
Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.11*
|
|
Form of Stock Option Agreement for the IXYS Corporation 1999
Non-Employee Directors Equity Incentive Plan (filed on
November 9, 2004 as Exhibit 10.2 to the Quarterly
Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.12*
|
|
Form of Stock Option Agreement for the IXYS Corporation 1999
Equity Incentive Plan with net exercise provision (filed on
June 22, 2006 as Exhibit 10.23 to the Annual Report on
Form 10-K
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.13*
|
|
Form of Stock Option Agreement for the IXYS Corporation 1999
Equity Incentive Plan for non-employee directors, (filed on
June 22, 2006 as Exhibit 10.24 to the Annual Report on
Form 10-K
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.14*
|
|
Form of Stock Option Agreement for the IXYS Corporation 1999
Non-Employee Directors Equity Incentive Plan with net
exercise provision, (filed on June 22, 2006 as
Exhibit 10.25 to the Annual Report on
Form 10-K
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.15*
|
|
Form of Stock Award (filed on February 14, 2006 as
Exhibit 10.5 to the Quarterly Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.16*
|
|
Assumption Agreement dated August 2, 2007 by and among
La Salle Bank National Association, Barber Lane Associates
L.P., Menlo Equities LLC, IXYS Buckeye, LLC and IXYS Corporation
(filed on November 11, 2007 as Exhibit 10.2 to the
Quarterly Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.17*
|
|
Limited Guaranty dated August 2, 2007 by IXYS Corporation
in favor of La Salle Bank National Association (filed on
November 11, 2007 as Exhibit 10.3 to the Quarterly
Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
|
|
|
|
Exhibit
|
|
Title
|
|
|
10
|
.18*
|
|
Promissory Note Secured by Deed of Trust dated December 21,
2000 made by Barber Lane Associates L.P. (filed on
November 11, 2007 as Exhibit 10.4 to the Quarterly
Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.19*
|
|
Deed of Trust dated December 21, 2000 on 1590 Buckeye
Drive, Milpitas, California (filed on November 11, 2007 as
Exhibit 10.5 to the Quarterly Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.20*
|
|
Fourth Amended Executive Employment Agreement by and between
IXYS Corporation and Nathan Zommer, effective as of
August 1, 2009 (filed on August 10, 2009 as
Exhibit 10.1 to the Quarterly Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.21*
|
|
First Amendment Executive Employment Agreement by and between
IXYS Corporation and Uzi Sasson, effective as of August 1,
2009 (filed on August 10, 2009 as Exhibit 10.2 to the
Quarterly Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.22
|
|
Credit Agreement dated as of November 13, 2009 by and
between Bank of the West and IXYS Corporation (filed on
February 5, 2010 as Exhibit 10.1 to the Quarterly
Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.23*
|
|
IXYS Corporation 2009 Equity Incentive Plan (filed on
August 10, 2009 as Exhibit 10.3 to the Quarterly
Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.24*
|
|
Notice of Stock Option Grant and Agreement for the IXYS
Corporation 2009 Equity Incentive Plan (filed on August 10,
2009 as Exhibit 10.4 to the Quarterly Report on
Form 10-Q
(No. 000-26124)
and incorporated herein by reference).
|
|
10
|
.25*
|
|
Zilog, Inc. 2002 Omnibus Stock Incentive Plan.
|
|
10
|
.26*
|
|
Form of Nonqualified Stock Option Agreement for Stock Options
pursuant to the Zilog, Inc. 2002 Omnibus Stock Incentive Plan.
|
|
10
|
.27*
|
|
Zilog, Inc. 2004 Omnibus Stock Incentive Plan.
|
|
10
|
.28*
|
|
Form of Nonqualified Stock Option Agreement for the Zilog, Inc.
2004 Omnibus Stock Incentive Plan.
|
|
21
|
.1
|
|
List of Subsidiaries.
|
|
23
|
.1
|
|
Consent of BDO Seidman, LLP.
|
|
24
|
.1
|
|
Power of Attorney (included on the signature page).
|
|
31
|
.1
|
|
Certification of Chief Executive Officer pursuant to
Rule 13a-14(a)
of the Securities and Exchange Commission.
|
|
31
|
.2
|
|
Certification of Chief Financial Officer pursuant to the
Rule 13a-14(a)
of the Securities and Exchange Commission.
|
|
32
|
.1
|
|
Certification required by
Rule 13a-14(b)
of the Securities and Exchange Commission and Section 1350
of Chapter 63 of Title 18 of the United States Code
(18 U.S.C. 1350).
|
|
|
|
* |
|
Management contract or compensatory plan or arrangement. |