PART I
ITEM 1. BUSINESS
Except for historical information contained in this Annual Report on Form 10-K (
“
Form 10-K
”
), certain statements set forth herein, including statements regarding future revenues and profits; the anticipated trends in the Company’s revenue and the Company’s expectations regarding the duration of the weak cycle; future conditions in the Company’s markets; availability of resources and manufacturing capacity; resolution of certain tax matters; and the anticipated impact of current and future lawsuits and investigations are forward-looking statements that are dependent on certain risks and uncertainties including such factors, among others, as the timing, volume and pricing of new orders for the Company’s products, timely ramp-up of new facilities, the timely introduction of new processes and products, general conditions in the world economy and financial markets and other factors described below. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Words such as
“
expect,
”
“
anticipate,
”
“
forecast,
”
“
intend,
”
“
plan,
”
“
believe,
”
“
seek,
”
“
estimate,
”
and variations of such words and similar expressions are intended to identify such forward-looking statements. See
“Item 1A -
Risk Factors
”
in this Form 10-K for a more thorough list of potential risks and uncertainties.
General
Linear Technology Corporation (together with its consolidated subsidiaries,
“
Linear,
”
“
Linear Technology
”
or the
“
Company
”
), a member of the S&P 500, has been designing, manufacturing and marketing a broad line of high performance analog integrated circuits for major companies worldwide for over three decades. The Company’s products provide an essential bridge between our analog world and the digital electronics in communications, networking, industrial,
transportation
, computer, medical, instrumentation, consumer, and military and aerospace systems. Linear Technology produces power management, data conversion, signal conditioning, RF and interface ICs, µModule
®
subsystems, and wireless sensor network products. The Company is a Delaware corporation; it was originally organized and incorporated in California in 1981. The Company competes primarily on the basis of performance, functional value, quality, reliability and service.
Recent Developments
On July 26, 2016, the Company announced that it had entered into a definitive merger agreement (the “Analog Merger Agreement”) with Analog Devices, Inc., a Massachusetts corporation (“Analog Devices”), under which a wholly owned subsidiary of Analog Devices will merge with and into the Company, and the Company will survive as a wholly owned subsidiary of Analog Devices (the “Analog Acquisition”). Under the terms of the Analog Merger Agreement, Linear Technology stockholders who do not exercise their appraisal rights under Delaware law will have the right to receive, for each Linear Technology share held by such
stockholders
, $46.00 in cash (the “Cash Consideration”) and 0.2321 shares of Analog Devices common stock, par value $0.16 2/3 per share (the “Stock Consideration,” and together with the Cash Consideration, the “Merger Consideration”) (with the ratio of Stock Consideration to Cash Consideration
subject to adjustment
pursuant to the terms of the Analog Merger Agreement so that the aggregate number of shares issued by Analog Devices
as
Stock Consideration will not exceed 19.9% of the total outstanding common stock of Analog Devices prior to the Analog Acquisition). Each of the Company’s equity awards that were outstanding as of July 22, 2016 and are unvested as of the closing of the Analog Acquisition will be converted into the right to receive the Merger Consideration in respect of each share of the Company’s common stock underlying such award when such award vests. Each of the
Company’s
other equity awards that were granted after July 22, 2016 and are unvested as of the closing of the Analog Acquisition will be converted into the right to receive 0.9947 shares of Analog Devices common stock in respect of each share of the Company’s common stock underlying such award when such award vests.
The transaction has been approved by both
the Company’s
Board of Directors
and the
board of directors
of Analog Devices,
and the completion of the Analog Acquisition is subject to customary closing conditions including, among others, the approval of Linear Technology’s stockholders and various regulatory approvals. The transaction is expected to close during the first half of calendar 2017. For additional information on the Analog Merger Agreement and the Analog Acquisition, please refer to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 29, 2016. The
Company cannot guarantee that the Analog Acquisition will be completed or that, if completed, it will be exactly on the terms set forth in the Analog Merger Agreement.
Available Information
The Company makes available free of charge through its website, www.linear.com, its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and all amendments to those reports as soon as reasonably practicable after such materials are electronically filed with the Securities and Exchange Commission (
“
SEC
”
). These reports may also be requested by contacting
Don
ald P.
Zerio, Vice President of Finance and Chief Financial Officer, 1630 McCarthy Blvd., Milpitas, CA 95035. The Company’s Internet
website and the information contained therein or incorporated therein are not intended to be incorporated into this Annual Report on Form 10-K. In addition, the public may read and copy any materials the Company files with the
SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549 or may obtain information by calling the SEC at 1-800-SEC-0330. Moreover, the SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding reports that the Company files electronically with the SEC at http://www.sec.gov.
The Linear Circuit Industry
Semiconductor components are the electronic building blocks used in electronic systems and equipment. These components are classified as either discrete devices (such as individual transistors) or integrated circuits (in which a number of transistors and other elements are combined to form a more complicated electronic circuit). Integrated circuits (
“
ICs
”
) may be divided into two general categories, digital and linear (or analog). Digital circuits, such as memory devices and microprocessors, generally process on-off electrical signals, represented by binary digits,
“
1
”
and
“
0.
”
In contrast, linear integrated circuits monitor, condition, amplify or transform continuous analog signals associated with physical properties, such as temperature, pressure, weight, light, sound or speed, and play an important role in bridging between real world phenomena and a variety of electronic systems. Linear integrated circuits also provide voltage regulation and power control to electronic systems, especially in hand-held and larger battery powered systems where battery management and high power efficiency are needed.
The Company believes that several factors generally distinguish the linear integrated circuit business from the digital integrated circuit business, including:
Importance of Individual Design Contribution
. The Company believes that the creativity of individual design engineers is of particular importance in the linear integrated circuit industry. The design of a linear integrated circuit generally involves greater variety and less repetition of integrated circuit elements than digital design. In addition, the interaction of linear integrated circuit elements is complex, and the exact placement of these elements in the integrated circuit is critical to the circuit’s precision and performance. Computer-aided engineering and design tools for linear integrated circuits are not as accurate in modeling circuits as those tools used for designing digital circuits. As a result, the contributions of a relatively small number of individual design engineers are generally of greater importance in the design of linear integrated circuits than in the design of digital circuits.
Smaller Capital Requirements
. Digital circuit design attempts to minimize device size and maximize speed by increasing circuit densities. The process technology necessary for increased density requires very expensive wafer fabrication equipment. In contrast, linear integrated circuit design focuses on precise matching and placement of integrated circuit elements, and linear integrated circuits often require large feature sizes to achieve precision and high voltage operation. Accordingly, the linear integrated circuit manufacturing process generally requires smaller initial capital expenditures, particularly for photomasking equipment and clean room facilities, and less frequent replacement of manufacturing equipment because the equipment has, to date, been less vulnerable to technological obsolescence.
Market Diversity; Relative Pricing Stability
. Because of the varied applications for linear integrated circuits, manufacturers typically offer a greater variety of device types to a more diverse group of customers, who typically have smaller volume requirements per device, than is true for digital IC manufacturers. As a result, linear integrated circuit
manufacturers are often less dependent upon particular products or customers; linear integrated circuit markets are generally more fragmented; and competition within those markets tends to be more diffused.
The Company believes that competition in the integrated linear market is particularly dependent upon performance, functional value, quality, reliability and service. As a result, linear integrated circuit pricing has generally been more stable than most digital circuit pricing.
Products and Markets
Linear Technology produces a wide range of products for a variety of customers and markets. The Company emphasizes standard products and multi-customer application specific products to address larger markets and to reduce the risk of dependency upon a single customer’s requirements. The Company targets the high performance segment of the analog integrated circuit market.
“
High performance
”
may be characterized by higher precision, higher efficiency, lower noise, lower power, higher linearity, higher speed, higher voltage, more subsystem integration on a single chip and many other special features. Increased demand for more complex integrated analog solutions has fostered the expansion of the Company’s products to include fully integrated module solutions for system power, signal processing and data acquisition applications. The Company’s SmartMesh IP and SmartMesh WirelessHART technology offers complete wireless network based solutions using low power electronic components, board level products with mesh networking and software addressing high level applications such as industrial process automation, data center energy management, building energy management, renewable energy monitoring, and transportation management systems. The Company focuses virtually all of its design efforts on proprietary products, which at the time of introduction are original designs by the Company offering unique characteristics differentiating them from those offered by competitors.
Although the types and mix of linear products vary by application, the Company’s principal product categories are as follows:
Amplifiers
- These circuits amplify the output voltage or current of a device. The amplification represents the ratio of the output voltage or current to the input voltage or current. The most widely used device is the operational amplifier due to its versatility and precision.
High Speed Amplifiers
- These amplifiers are used to amplify signals from 5 megahertz to 2 gigahertz for applications such as video, fast data acquisition and wireless communications.
Voltage Regulators
- Voltage regulators deliver a tightly controlled voltage to power electronic systems. This category of product consists primarily of two types, the linear regulator and the switch-mode regulator. Switch-mode regulators are also used to convert voltage up or down within an electronic system for power management and battery charging.
Voltage References
- These circuits serve as electronic benchmarks providing a constant voltage for measurement systems usage. Precision references have a constant output independent of input, temperature changes or time.
Interface
s
- Interface circuits act as an intermediary to transfer digital signals between or within electronic systems. These circuits are used in computers, modems, instruments, networking equipment and remote data acquisition systems.
Data Converters
- These circuits change linear (analog) signals into digital signals, or vice versa, and are often referred to as data acquisition subsystems, A/D converters and D/A converters. The accuracy and speed with which the analog signal is converted to its digital counterpart (and vice versa) is considered a key characteristic for these devices. Low
er
speed data converters
offer
resolution up to
32
bits, while high speed converters may operate in the region of 100’s of megahertz sample rates.
Battery Stack Monitors
- These circuits monitor the voltage on individual battery cells that are connected in series. By combining many of these circuits, the voltage of every cell in very high voltage battery string can be monitored. This is a
necessary function to maintain the health, longevity and safety of such systems. High voltage battery strings are used in electric and hybrid electric vehicles, battery back-up systems, portable power systems and other high power battery systems.
Silicon Oscillators and Timer Blox
TM
- These general purpose circuits provide a wide range of timing functions and clock signals for frequencies ranging from less than 1Hz up to 170MHz. They operate without a quartz crystal or ceramic resonator, and are designed to be simple, small and robust. The functions provided by these parts cover a broad range of applications, including event synchronization and timing, switching regulation, signal-generation, analog-to-digital conversion and digital-to-analog conversion.
PLL Synthesizers and Clock Distribution
- A phase locked loop (
“
PLL
”
) locks the phase and frequency of a higher frequency device (usually a voltage controlled oscillator) to a more stable, lower frequency device. As a black box, the PLL can be viewed as a frequency multiplier. A PLL is employed when there is the need for a stable reference high frequency local oscillator source. Example applications are numerous and include wireless/optical communications and networking, medical devices and instrumentation.
SmartMesh® Embedded Wireless Sensor Network
-
SmartMesh®IP and SmartMesh Wir
e
lessHART products consist of low power electronic components, board level products, and software. SmartMesh® sensor networks are comprised of a self-forming mesh of nodes, or
“
motes,
”
which collect and relay data, and a network manager that monitors and manages network performance and sends data to the host applicatio
n, enabling wireless monitoring and
control of physical attributes such as temperature, pressure, light, sound and motion. This is particu
larly important for industrial internet of things (
“
I
oT
”
)
applications, where wireless sensor networks may be deployed in harsh and remote environments. With an average power consumption of less than 50µA in heavy usage applications, SmartMesh products deliver over 10 year battery life, enabling wireless sensor nodes to be placed anywhere. Since all SmartMesh products include secure, pre
compiled network stacks, dynamic mesh optimization software, and network diagnostics software, developers can focus on rapid industrial IoT application development.
Isolated µModule Transceivers
- Isolated µModule transceivers use magnetically coupled technology to provide data and power isolation in a system in a package module. They integrate inductive/magnetic components, dedicated integrated circuit functions and power on a single substrate printed circuit board, all encapsulated in a standard plastic package.
Radio
and
Microwave
Frequency Circuits
- These circuits include mixers, modulators, demodulators, amplifiers, drivers, filters, oscillators/synthesizers and power detectors and controllers
. Frequency capabilities reach
up to
40GHz. They are used in 2G, 3G, 4G LTE,
and
the emerging 5G
wireless and cable infrastructure, cellphones, wireless data communications, microwave, backhaul, military, radars, precision GPS and satellite communications
.
Power Over Ethernet (
“
PoE
”
) Controllers -
PoE controller circuits enable efficient transmission of voltage and current over standard Ethernet cables to power equipment or devices connected to the network.
µModule Power Products -
A DC/DC µModule simplifies the design of a complex power circuit, such as point of load regulation, LED drivers and battery charging by integrating a complete circuit into a protective and encapsulated package that is tiny, thin and light-weight. These devices are so small that they resemble a surface-mount IC. The customer design requires limited knowledge of analog and DC/DC regulator circuits and these products enable a quick time-to-market power supply solution for digital systems using FPGAs, ASICs, DSPs, or microcontrollers.
Signal Chain µModule Products-
Complete signal chain functions utilizing data converters, filter
s
, amplifiers, RF circuits, and related passive components are encapsulated as system-in-a-package modules. Signal Chain µModule products simplify the design and eliminate circuit board layout problems and individual component selection for high performance systems, while requiring only normal IC handling and board manufacturing processes.
Other
- Other linear circuits include buffers, power monitors, motor controllers, coulomb counters, diodes/bridges, hot swap circuits, comparators, sample-and-hold devices, timers, drivers and filters (both switched capacitor and continuous time)
which are used to limit and/or manipulate signals in such applications as base stations, navigation systems and industrial applications.
Linear circuits are used in various applications including factory automation, process control, industrial and laboratory instrumentation, security monitoring devices, complex medical devices, telecommunications, networking products such as power over Ethernet switches; automotive electronics, tablet, notebook and desktop computers; computer peripherals, video/multimedia, military, space and other harsh environment systems; and high-end consumer products. The Company focuses its product development and marketing efforts on high performance applications where the Company believes it can position itself competitively with respect to product performance and functional value. The following table sets forth examples of product families by end-market applications:
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Market
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End Applications/Products
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Example Product Families
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Industrial/Medical
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Flow or rate metering
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D to A converters
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Position/pressure
/
temperature sensing and controls
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Power monitors and controllers
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Robotics
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Current sense amplifiers
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Energy management/harvesting
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Differential amplifier
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High brightness lighting
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High speed A/D converters
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Process control data communication
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SAR A/D and Delta-Sigma converters
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Factory automation
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High speed operational amplifiers
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Security and surveillance system
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Interface (RS 485/232) products
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Remote meter reading
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Precision operational amplifiers
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Wireless sensor networks
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Instrumentation amplifiers
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RFID transponders
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Silicon oscillators
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GPS surveying instruments
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Precision comparators and voltage references
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Scanning electron microscopes
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Monolithic filters
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Solar power
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Switching voltage regulators
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Machine vision equipment
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Hot swap circuits
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Voltmeters/multimeters/ oscilloscopes/curve tracers
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DC-DC converters
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Test equipment
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µModule power products
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Logic/network analyzers
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PoE interface controllers
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Weighing scales
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Push button controllers
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Analytic and test equipment
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Ideal diode controllers
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Gas chromatographs
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Surge stoppers
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X-Ray, EKG, MRI, PET, CAT scanners
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Battery stack monitors
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Particle accelerators
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Smartmesh®
embedded wireless sensor networks
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DNA and blood analyzers
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Patient monitors
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Infusion pumps
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IR cameras
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Ultra sound diagnostic equipment
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Space/Military/Harsh
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Communications
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Space qualified (JAN/QML)
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Environment
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Satellites
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Radiation hardened
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Guidance and navigation systems
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Military plastic
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Displays
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Military hermetic (SMD’s)
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Firing controls
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Extreme temperature
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Ground support equipment
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Sonar systems
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Surveillance equipment
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Ordnance
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Radar systems
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GPS
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JTRS manpacks
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Automotive
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Entertainment systems
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Battery gas gauges
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Hybrid/electric vehicle battery systems
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Isolated µModule power products
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Navigation and safety system
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Low drop out voltage regulators
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Headlamps
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LED driver controllers
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Daytime running lights
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Li-ion battery chargers
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Dashboard instrumentation
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CAN transceivers
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Emission controls
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Ideal diodes
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Collision avoidance systems
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Surge Stoppers
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Radar adaptive cruise control
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Monitors over/under voltage
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Heads-up-displays
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Protection controllers
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Idle stop and go systems
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Timer Blox
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Electronic steering and braking
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Battery management systems
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Antenna power supplies
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Precision voltage references
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LED lighting
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Comparators
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Parking assistance
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Current sense amplifiers
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Lane recognition
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High speed and SAR ADC’s
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Communications
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Smart phones
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DC - DC converters
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Cellular phones
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V.35 transceivers
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Cellular base stations (CDMA/WCDMA/
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Isolated µModule power products
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GSM/LTE/ WiMAX)
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Variable gain amplifiers
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Point-to-point wireless modems
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High-speed amplifiers
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PBX switches
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High speed A/D converters
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Optical networking
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Digital power monitors
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Channel service units/data service units
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Active diode bridge controllers
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Cable modems/networks
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RF Power detectors
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Internet appliances
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Low noise operational amplifiers
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Servers/ routers/switches
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Micropower products
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Power over Ethernet
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Power management products
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Wireless access points
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Switched capacitor filters
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Wireless microphones
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I
2
C bus buffers
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Software defined radios
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Voltage references
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Wireless sensor networks
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Voltage regulators/supervisors
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Data converter products
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Hot Swap controllers
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Multi-protocol circuits
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Thermoelectric coolers
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µModule power products
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Power amplifier controllers
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Ideal diode bridge controller
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Mixers/Modulators/Demodulators
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Battery chargers
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Power over Ethernet controllers
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Multi-Phase switching regulators
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Smartmesh®
wireless sensor networks
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Computer/High-End
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Communications/interface modems
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Consumer
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Disk drives
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Battery chargers
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Solid state disc drives
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DC - DC converters
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Notebook computers
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Electronic circuit breakers
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Desktop computers
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Hot Swap controllers
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Workstations
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Line drivers/ receivers
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LCD monitors/projectors
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USB power controller/ chargers
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Plotters/printers
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Low drop out linear regulators
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Digital still cameras
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Micropower products
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Satellite radios
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Multi-Phase switching regulators
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Battery chargers
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PCMCIA power switching
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Electronic toys
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Power management
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Video/multimedia systems
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Power sequencing/monitoring
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Digital video recorders
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Isolated µModule transceivers
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Set top boxes/Satellite TV receivers
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Video amplifiers
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LCD display TVs
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High speed A/D converters
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Bluetooth headsets
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Nano current voltage supervisors
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Hand-held GPS units
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Operational amplifiers
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Tablet PCs
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Voltage references
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Media players
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Video/multimedia systems
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Wearables
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Marketing and Customers
The Company markets its products worldwide primarily through a direct sales staff and through electronics distributors to a broad range of customers in diverse industries.
Arrow Electronics In
c
. (
“
Arrow
”
), the Company’s largest distributor, distributes the Company’s products worldwide
.
Arrow is one of the largest distributors of electronic components in the world with reve
nues of $2
3
.
3
billion in
its fiscal year
end
ed December 31, 2015
. Arrow’s global components business segment covers the world’s largest electronics markets - the Americas, EMEA (Europe, Middle East, and Africa), and Asia Pacific regions.
As of
July 3, 2016
and
June 28, 2015
, Arrow accounted worldwide for
42%
and
36%
of the Company’s total net accounts receivable, respectively. Arrow worldwide accounted for
34%
,
32%
and 31% of the Company’s worldwide net revenues in fiscal
2016
,
2015
and
2014
, respectively. Arrow, like the Company’s other distributors, is not an end customer, but rather serves as a channel of sale to many end users of the Company’s products.
No end customer accounted for more than 10% of the Company’s worldwide net revenues for any of the periods presented.
The Company’s products require a sophisticated technical sales effort. The Company’s sales organization is divided into domestic and international regions. The Company’s sales offices are located throughout most major metropolitan areas in the United States. Internationally, the Company has sales offices in or near: Dortmund, Helsinki, London, Milan, Munich, Paris, C
op
enhagen, Stockholm, Oulu, Stuttgart, Sydney, Melbourne, Beijing, Hong Kong, Tokyo, Nagoya, Osaka, Seoul, Shanghai, Shenzhen, Chengdu, Xian, Wuhan, Singapore, Taipei, Tel Aviv, Bangalore, Montreal, Ottawa, Toronto, Calgary, and Vancouver.
The Company’s export sales are billed and payable in United States dollars, and thus export sales are generally not directly subject to fluctuating currency exchange rates.
The Company has an agreement with one independent sales representative in South America. Commissions are paid to sales representatives upon shipments either directly from the Company or through distributors. The Company has agreements with four independent distributors in North America, five in Europe, three in China, seven in Japan, three in Taiwan, two in Russia, and one each in Korea, Singapore, Malaysia, Thailand, India, South Africa, Philippines, Israel, Brazil, Australia, and New Zealand.
The Company’s agreements with domestic distributors allow for price protection on certain distribution inventory if the Company lowers the prices of its products. The Company’s agreements with domestic distributors also allow for stock rotation privileges of up to 5% of quarterly purchases, which enable distributors to rotate slow moving inventory. The Company’s sales to international distributors are made under agreements which permit limited stock return privileges but not sales price rebates. The agreements generally permit distributors to exchange up to 5% of eligible purchases on a semi-annual basis. See Critical Accounting Policies and Note 1 of Notes to Consolidated Financial Statements of this Form 10-K, which contains information
regarding the Company’s revenue recognition policy.
During fiscal years 2016, 2015 and 2014, international revenues were $1,02
8.0 million or 72% of revenues,
$1,066.9 million or 72% of revenues, and $1,010.3 million or 73% of revenues, respectively. The Company’s export sales are billed and payable in United States dollars, and thus export sales are generally not directly subject to fluctuating currency exchange rates. During fi
scal years 2016, 2015 and 2014,
domestic revenues were $396.0
million or 28% of
revenues, $408.2 million or 28% of revenues, and $378.1 million or 27% of revenues, respectively.
The Company’s backlog of released and firm orders was approximately
$187.0
million at
July 3, 2016
as compared with
$153.9
million at
June 28, 2015
. T
he Company defines backlog as consisting of distributor stocking orders and OEM orders for which a delivery schedule has been specified by the OEM customer for product shipment within six months. Although the Company receives volume purchase orders, most of these purchase orders are cancelable, generally outside of thirty days of delivery, by the customer without significant penalty. Lead-time for the release of purchase orders depends upon the scheduling practices of the individual customer and the availability of individual products, so the rate of booking new orders varies from month to month. Also, the Company’s agreements with certain domestic distributors provide for price protection. Consequently, the Company does not believe that its backlog
at any time is necessarily representative of actual sales for any succeeding period.
In the operating history of the Company, seasonality of business has not been a material factor, although the results of operations for the first and second fiscal quarters of each year are slightly impacted by customary summer vacation and calendar year-end holidays. In addition, industrial customers typically have stronger demand in the first half of the calendar year.
The Company’s warranty policy provides for the replacement of defective parts. In certain large contracts, the Company has agreed to negotiate in good faith a product warranty in the event that an epidemic failure of its parts was to take place. To date there have been no significant occurrences
of epidemic failure
.
Warranty expense has been nominal to date. Refer to Note 1 of Notes to Consolidated Financial Statements of this Form 10-K, which contains information regarding the Company’s warranty policy.
Manufacturing
The Company’s wafer fabrication facilities are located in Camas, Washington (
“
Camas
”
) and Milpitas, California (
“
Hillview
”
). Each facility was built to Company specifications to support a number of sophisticated process technologies and to satisfy rigorous quality assurance and reliability requirements of United States military specifications and major worldwide OEM customers. In addition to wafer fabrication facilities, the Company has an assembly and test facility located in Malaysia and a test and distribution facility located in Singapore. All of the Company’s wafer fabrication, assembly, and test facilities have received ISO 9001, TS 16949 and ISO 14001 certifications.
The Company’s wafer fabrication facilities located in Camas and Hillview produce six-inch diameter wafers for use in the production of the Company’s devices. The Company currently uses similar manufacturing processes in both its Camas and Hillview facilities.
The Company’s basic process technologies include high-speed bipolar, high gain low noise bipolar, radio frequency bipolar, silicon gate complementary metal-oxide semiconductor (
“
CMOS
”
) and BiCMOS. The Company also has two proprietary complementary bipolar processes. The Company’s bipolar processes are typically used in linear integrated circuits where high voltages, high power, high frequency, low noise or effective component matching is necessary. The Company’s proprietary silicon gate CMOS processes provide switch characteristics required for many linear integrated circuit functions, as well as an efficient mechanism for combining linear and digital circuits on the same chip. The Company’s CMOS processes were developed to address the specific requirements of linear integrated circuit functions. The complementary bipolar processes were developed to address higher speed analog functions. The Company’s basic processes can be combined with a number of adjunct processes to create a diversity of IC components. A minor portion of the Company’s wafer manufacturing, particularly very small feature size products, is done at two independent foundries. The accompanying chart provides a brief overview of the Company’s IC process capabilities:
|
|
|
Process Families
|
Benefits/ Market Advantages
|
Product Application
|
P-Well SiGate CMOS
|
General purpose, stability
|
Switches, filters, data conversion, chopper amplifiers
|
N-Well SiGate CMOS
|
Speed, density, stability
|
Switches, data conversion
|
Bi-CMOS
|
Speed, density, stability, flexibilities
|
Data conversion, power controller, battery management
|
High Power Bipolar
|
Power (100 watts), high current (10 amps)
|
Linear and smart power products, switching regulators
|
Low Noise Bipolar
|
Precision, low current, low noise, high gain
|
Op amps, voltage references
|
High Speed Bipolar
|
Fast, wideband, video high data rate
|
Op amps
, video, comparators, switching
regulators
|
JFETS
|
Speed, precision, low current
|
Op amps, switches, sample and hold
|
Rad-Hard
|
Total dose radiation hardened
|
All space products
|
Complementary Bipolar
|
Speed, low distortion, precision
|
Op amps, video amps, converters
|
CMOS/Thin Films
|
Stability, precision
|
Filters, data conversion
|
High Voltage CMOS
|
High voltage general purpose compatible with Bipolar
|
Switches, chopper amplifiers
|
Bipolar/Thin Films
|
Precision, stability, matching
|
Converters, amplifiers
|
RF Bipolar
|
High speed, low power
|
RF wireless, high speed data communications
|
BCD (Bipolar CMOS DMOS)
|
Higher density, high speed, lower current
|
Switchers, controllers
|
The Company emphasizes quality and reliability from initial product design through manufacturing, packaging and testing. The Company’s design team focuses on fault tolerant design and optimum location of integrated circuit elements to enhance reliability. Linear Technology’s wafer fabrication facilities have been designed to minimize wafer handling and the impact of operator error through the use of microprocessor-controlled equipment. The Company has received Defense Supply Center, Columbus (DSCC,) Jan Class S Microcircuit Certification, which enables the Company to manufacture products intended for use in space or for critical applications where replacement is extremely difficult or impossible and where reliability is
imperative. The Company has also received MIL-PRF-38535 Qualified Manufacturers Listing (QML) certification for military products from DSCC.
The majority of processed wafers are sent to the Company’s assembly facility in Penang, Malaysia and a small portion are sent to offshore independent assembly subcontractors. The
Penang facility opened in fiscal year 1995 and generally services approximately 80%-85% of the Company’s assembly requirements. The Company’s primary
assembly subcontractor is UTAC, located in Thailand. The Company also maintains domestic assembly operations to satisfy particular customer requirements, especially those for military applications, and to provide rapid turnaround for new product development.
After assembly, most products are sent to the Company’s Singapore facility for final testing, inspection and packaging as required. The Singapore facility opened in fiscal year 1990. Some products are returned to Milpitas for the same back-end processing. The Company’s Singapore facility serves as a major warehouse and distribution center with the bulk of the Company’s shipments to end customers originating from this facility.
Manufacturing of individual products, from wafer fabrication through final testing, may take from eight to sixteen weeks. Since the Company sells a wide variety of device types, and customers typically expect delivery of products within a short period of time following order, the Company maintains a substantial work-in-process and finished goods inventory.
Based on its anticipated production requirements, the Company believes it will have sufficient available resources and manufacturing capacity for fiscal
year
2017
.
Patents, Licenses and Trademarks
The Company has been
awarded 1,401
United States and international patents and has considerable pending and published patent applications outstanding. Although the Company believes that
these patents and patent applications may have value, the Company’s future success will depend primarily upon the technical abilities and creative skills of its personnel, rather than on its patents.
The Company relies on patents, trademarks, international treaties and organizations, and foreign laws to protect and enforce its intellectual property. The Company continually assesses whether to seek formal protection for particular innovations and technologies, such litigation is likely to be expensive and time consuming to resolve. In addition, such litigation can result in the diversion of management’s time and attention away from business operations.
As is common in the semiconductor industry, the Company has at times been notified of claims that it may be infringing patents issued to, or other proprietary rights held by others
,
and has periodically been involved in litigation pertaining to such matters. If it appears necessary or desirable, the Company may seek licenses under such patents or rights, although there can be no assurance that all necessary licenses can be obtained by the Company on acceptable terms. In addition, from time to time the Company may negotiate with other companies to license patents, products or process technology for use in its business.
Research and Development
The Company’s ability to compete depends in part upon its continued introduction of technologically innovative products on a timely basis. To facilitate this need, the Company has organized its product development efforts into four groups: two power product groups (D power and S power); mixed signal products; and signal conditioning products including high frequency products and wireless sensor network products. Linear Technology’s product development strategy emphasizes a broad line of standard high performance products to address a diversity of customer applications. The Company’s research and development (
“
R&D
”
) efforts are directed primarily at designing and introducing new products and to a lesser extent developing new processes and advanced packaging.
As of
July 3, 2016
, the Company
had 1,
3
1
6
employees involved in research, development and engineering related functions, as compared to
1,289
employees as of
June 28, 2015
. T
he Company has remote design centers throughout the United
States, as well as in Singapore, China and Germany as part of the Company’s
strategy of obtaining and retaining analog engineering design talent
.
During fiscal years 2016, 2015, and 2014, the Company incurred research and development expense of $276.5 million, $266.8 million, and $250.4 million, respectively.
Government Contracts
The Company currently has no material U.S. Government contracts.
Employees
As of
July 3, 2016
, the Company had 4,
9
23
employees, including 4
82
in marketing and sales, 1,
316
in research, development and engineering related functions,
3,027
in manufacturing and production, and
98
in management, administration and finance. The Comp
any has never had a work stoppage, no employees are represented by a labor organization, and the Company considers its employee relations to be good.
Competition
The Company competes in the high performance segment of the linear market. The Company’s major competitors include Analog Devices, Intersil, Maxim Integrated Products and Texas Instruments. The principal elements of competition include product performance, functional value, quality and reliability, technical service and support, price, diversity of product line and delivery capabilities. The Company believes it competes favorably with respect to these factors, although the Company may be at a disadvantage in comparison to larger companies with broader product lines and greater technical service and support capabilities.
Executive Officers
of the Registrant
The executive officers of the Company, and their ages as of August 1, 201
6
, are as follows:
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
Robert H. Swanson, Jr.
|
|
77
|
|
Executive Chairman of the Board of Directors
|
Lothar Maier
|
|
61
|
|
Chief Executive Officer
|
Paul Chantalat
|
|
66
|
|
Vice President Quality and Reliability
|
Donald P. Zerio
|
|
56
|
|
Vice President of Finance and Chief Financial Officer; Secretary
|
Robert C. Dobkin
|
|
72
|
|
Vice President of Engineering and Chief Technical Officer
|
Alexander R. McCann
|
|
50
|
|
Vice President and Chief Operating Officer
|
Richard Nickson
|
|
66
|
|
Vice President of North American Sales
|
David A. Quarles
|
|
50
|
|
Vice President of International Sales
|
Donald Paulus
|
|
59
|
|
Vice President and General Manager, D Power Products
|
Steve Pietkiewicz
|
|
56
|
|
Vice President and General Manager, S Power Products
|
Robert Reay
|
|
55
|
|
Vice President and General Manager, Mixed Signal Products
|
Erik M. Soule
|
|
52
|
|
Vice President and General Manager, Signal Conditioning Products
|
Mr. Swanson, a founder of the Company, has served as Executive Chairman of the Board of Directors since January 2005. Prior to that time he served as Chairman of the Board of Directors and Chief Executive Officer since April 1999, and prior to that time as President, Chief Executive Officer and a director of the Company since its incorporation in September 1981. From August 1968 to July 1981, he was employed in various positions at National Semiconductor Corporation (
“
National
”
), a manufacturer of integrated circuits, including Vice President and General Manager of the Linear Integrated Circuit Operation and Managing Director in Europe. Mr. Swanson has a B.S. degree in Industrial Engineering from Northeastern University.
Mr. Maier was named Chief Executive Officer of Linear Technology in January 2005. Prior to that, Mr. Maier served as the Company’s Chief Operating Officer from April 1999 to January 2005. Before joining Linear Technology, Mr. Maier held various management positions at Cypress Semiconductor Corp. from July 1983 to March 1999, most recently as Senior Vice President and Executive Vice President of Worldwide Operations. He holds a B.S. degree in Chemical Engineering from the University of California at Berkeley.
Mr. Chantalat has served as Vice President of Quality and Reliability since July 1991. From January 1989 to July 1991, he held the position of Director of Quality and Reliability. From July 1983 to January 1989, he held the position of Manager of Quality and Reliability. From February 1976 to July 1983, he was employed in various positions at National where his most recent position was Group Manager of Manufacturing Quality Engineering. Mr. Chantalat received a B.S. and an M.S. in Electrical Engineering from Stanford University in 1970 and 1972, respectively.
Mr. Zerio has served as Vice President of Finance and Chief Financial Officer of the Company since June 2015. Prior to that Mr. Zerio served as the Company’s Corporate Controller for eleven years, and prior to that, International Controller. Mr. Zerio has over 25 years of financial experience in the technology industry gained from senior financial management positions with large multinational companies, small emerging growth companies and PricewaterhouseCoopers. Mr. Zerio received a B.S. degree in Accounting from the University of Connecticut.
Mr. Dobkin, a founder of the Company, has served as Vice President of Engineering and Chief Technical Officer since April 1999, and as Vice President of Engineering from September 1981 to April 1999. From January 1969 to July 1981, he was employed in various positions at National, where his most recent position was Director of Advanced Circuit Development. Mr. Dobkin has extensive experience in linear integrated circuit design. Mr. Dobkin attended the Massachusetts Institute of Technology.
Mr. McCann was named Chief Operating Officer of Linear Technology in January 2005, prior to that Mr. McCann served as Vice President of Operations since January 2004. Prior to joining the Company, he was Vice President of Operations at NanoOpto Corporation in Somerset, NJ from July 2002 to December 2003, Vice President of Worldwide Operations at Anadigics Inc. in Warren, NJ from December 1998 to June 2002 and held various management positions at National Semiconductor UK Ltd. from August 1985 to September 1998. Mr. McCann received a B.S. (equivalent) in Electrical and Electronic Engineering in 1985 from James Watt College and an MBA in 1998 from the University of Glasgow Business School.
Mr. Nickson has served as Vice President of North American Sales since October 2001. From July 2001 until October 2001 he was Director of USA Sales. From February 1998 until July 2001, he was European Sales Director. From August 1993 until January 1998, he held the position of Northwest Area Sales Manager. From April 1991 to August 1993, he was President and Co-founder of Focus Technical Sales. From August 1983 to April 1991, he served with National in various positions where his most recent position was Vice President of North American Sales. Mr. Nickson was Founder and President of Micro-Tex, Inc. from June 1980 to August 1983. Prior to 1980, Mr. Nickson spent seven years in semiconductor sales, including four years with Texas Instruments. He received a B.S. in Mathematics from Illinois Institute of Technology in 1971.
Mr. Quarles has served as Vice President of International Sales since August 2001. From October 2000 to August 2001, he held the position of Director of Marketing. From July 1996 to September 2000, he held the position of Director of Asia-Pacific Sales stationed in Singapore. From June 1991 to July 1996, he worked as a Sales Engineer and later as District Sales Manager for the Bay Area sales team. Prior to Linear, Mr. Quarles worked two years as a Sales Engineer at National. Mr. Quarles received a B.S. in Electrical Engineering in 1988 from Cornell University.
Mr. Paulus has served as Vice President and General Manager of D Power Products since June 2003. He joined the Company in October 2001 as Director of Satellite Design Centers. Prior to joining the Company, he was a founder of Integrated Sensor Solutions, Inc. (
“
ISS
”
) serving as Vice President of Engineering and Chief Operating Officer from November 1991 to August 1999. ISS was acquired by Texas Instruments, Inc. (
“
TI
”
) in 1999, and Mr. Paulus served as TI’s General Manager, Automotive Sensors and Controls in San Jose until October 2001. Prior to ISS, Mr. Paulus served in various engineering and
management positions with Sierra Semiconductor from February 1989 to November 1991, Honeywell Signal Processing Technologies from December 1984 to February 1989, and Bell Laboratories from June 1979 to December 1984. Mr. Paulus received a B.S. in Electrical Engineering from Lehigh University, an M.S. in Electrical Engineering from Stanford University and an MBA from the University of Colorado.
Mr. Pietkiewicz has served as Vice President and General Manager of S Power Products since July 2007 and as General Manager of S Power Products since April 2005. From March 1995 until April 2005 he was a Design Engineering Manager responsible for switching regulator and linear regulator integrated circuits. Mr. Pietkiewicz began his employment at the Company as a design engineer in December 1987 after serving as a design engineer at Precision Monolithics, Inc. from May 1981 until July 1985, and Analog Devices Inc. from July 1985 until December 1987. Mr. Pietkiewicz received his BSEE degree from the University of California at Berkeley in 1981.
Mr. Reay has served as Vice President and General Manager of Mixed Signal Products since January 2002 and as General Manager of Mixed Signal Products since November 2000. From January 1992 to October 2000 he was the Design Engineering Manager responsible for a variety of product families including interface, supervisors, battery chargers and hot swap controllers. Mr. Reay joined Linear Technology in April 1988 as a design engineer after spending four years at GE Intersil. Mr. Reay received a B.S. and M.S. in Electrical Engineering from Stanford University in 1984.
Mr. Soule has served as Vice President and General Manager of Signal Conditioning Products since July 2007 and as General Manager of Signal Conditioning Products since October 2004. He joined the Company in September 2002 as Product Marketing Manager of Signal Conditioning Products. Prior to Linear Technology, Mr. Soule was Director of Marketing at Sensory, Inc. from 1997 to 2002. Prior to Sensory, he held various engineering and management positions at National from 1994 to 1997 and from 1986 to 1990 and Avocet, Inc. from 1990 to 1994. Mr. Soule received a B.S. in Electrical Engineering from Rensselaer Polytechnic Institute in 1986 and an MBA from San Jose State University in 1996.
ITEM 1A. RISK FACTORS
A description of the risk factors associated with the Company is set forth below.
Risks Related to the Analog Acquisition
Our business relationships may be subject to disruption due to uncertainty associated with the Analog Acquisition, which could have an adverse effect on our results of operations, cash flows and financial position and, following the completion of the Analog Acquisition, those of the combined company.
Parties with which we do business
may
be
uncertain
as
to
the
effects
on
them
from
the
Analog Acquisition and related transactions, including with respect to
their
current or future business relationships with us or the combined company.
These
relationships may be subject to disruption
,
as customers, suppliers and other persons with whom we have
business relationships
may delay or defer certain business decisions or might decide
to terminate, change or renegotiate their relationships with us, or consider entering into business relationships with parties other than us or the combined company. These disruptions could have an adverse effect on our results of operations, cash flows and financial position or those of the combined company following the completion of the Analog Acquisition. The risk, and adverse effect, of any disruption could be exacerbated by a delay in completion of the Analog Acquisition or termination of the Analog Merger Agreement.
The Analog Merger Agreement subjects us to restrictions on our business activities.
The Analog Merger Agreement subjects us to restrictions on our business activities and generally obligates us to
generally
operate our businesses in all material respects in the ordinary course. These restrictions could have an adverse effect on our results of operations, cash flows and financial position.
Completion of the Analog Acquisition is subject to the conditions contained in the Analog Merger Agreement, and if these conditions are not satisfied or waived, the Analog Acquisition will not be completed.
Our obligations and the obligations of Analog Devices to complete the Analog Acquisition are subject to the satisfaction or waiver of a number of conditions, including the a
pproval
of the Analog
Acquisition proposal
by our stockholders, the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”) and the receipt of all other required regulatory approvals. For a more complete summary of the required regulatory approvals and the conditions to the closing of the Analog Acquisition, please review the Analog Merger Agreement in its entirety, which was filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 29, 2016.
Many of the conditions to closing of the Analog Acquisition are not within our control, and we cannot predict when or if these conditions will be satisfied. If any of these conditions
are
not satisfied or waived prior to April 26, 2017, which date will automatically be extended to October 26, 2017 under certain circumstances, it is
possible that the Analog Merger
Agreement will be terminated. Although we and Analog Devices have agreed in the Analog Merger Agreement to use reasonable best efforts, subject to certain limitations, to complete the Analog Acquisition as soon
as practicable, these and other
conditions to the completion of the Analog Acquisition may not be satisfied. The failure to satisfy all of the required conditions could delay the completion of the Analog Acquisition for a significant period of time or prevent it from occurring. There can be no assurance that the conditions to the closing of the Analog Acquisition will be satisfied or waived or that the Analog Acquisition will be completed. See the risk factor
below
titled “Failure to complete the Analog Acquisition could negatively affect
our
stock price
,
future business and financial results
.
”
The Analog Acquisition is subject to the expiration of applicable waiting periods, and the receipt of approvals, consents or clearances from domestic and foreign regulatory authorities that may impose conditions that could have an adverse effect on us or the combined company or, if not obtained, could prevent completion of the Analog Acquisition.
Before the Analog Acquisition may be completed, any waiting period (or extension thereof) applicable to the Analog Acquisition must have expired or been terminated, and any approvals, consents or clearances required in connection with the Analog Acquisition must have been obtained, in each case, under the HSR Act and under the antitrust and competition laws of China, Israel, Japan, Korea, the European Union (to the extent it has jurisdiction as a result of a referral request made pursuant to Article 4(5) of the EC Merger Regulation or Article 22 of the EC Merger Regulation, which we refer to in this annual report as a European Union specified merger control action), Romania (to the extent required by applicable law, unless a European specified merger control action occurs), Germany (unless a European Union specified merger control action occurs) and the United Kingdom (unless a European Union specified merger control action occurs, and to the extent there is a publication by the United Kingdom Competition & Markets Authority of an Invitation to Comment in relation to the transaction, on its website and/or on the Regulatory News Service of the London Stock Exchange). In addition, the Analog Acquisition may be reviewed under antitrust statutes of other governmental authorities, including U.S. state laws. In deciding whether to grant the required regulatory approval, consent or clearance, the relevant governmental entities will consider the effect of the Analog Acquisition on competition within their relevant jurisdiction. The terms and conditions of the approvals, consents and clearances that are granted may impose requirements, limitations or costs on, or place restrictions on the conduct of, the combined company’s business. Under the Analog Merger Agreement, we and Analog Devices have agreed to use reasonable best efforts to obtain such approvals, consents and clearances and therefore may be required to comply with conditions or limitations imposed by governmental authorities. However, Analog Devices will not be required to do any of the following in order to obtain any regulatory approval or otherwise to consummate the Analog Acquisition, and any requirement to do any of the following in order to obtain a required regulatory approval would result in the conditions to the consummation of the Analog Acquisition not being satisfied, unless waived by Analog Devices: (i) sell, divest, exclusively license, hold separate, or otherwise dispose of, or (ii) grant any non-exclusive license, accept any operational restrictions or take or commit to take any
actions which restrictions or actions would limit Analog Devices’ or any of its affiliates’ freedom of action, in each case with respect to assets, licenses, product lines, operations or businesses of Analog Devices, Linear Technology or any of their respective subsidiaries that individually or in the aggregate generated total collective revenues in excess of $125 million in Analog Devices or Linear Technology’s fiscal year 2016, which we refer to in this annual report as the revenue cap. For purposes of clause (ii), the revenues of the asset, license, product line, operation or business impacted by such non-exclusive license, operational restriction or action will be considered in determining whether the revenue cap is met only if such restrictions would limit Analog Devices’ or its affiliates’ freedom of action with respect to the impacted asset, product line, operation or business after the effective time in a manner that is material to such impacted asset, product line, operation or business or, in the case of a non-exclusive license, the adverse effect of such license is non-de minimis with respect to the impacted asset, product line, operation or business. Analog Devices will also not be required to agree to or accept any obligation to permit any third party to invest (directly or indirectly, including through a joint venture or similar arrangement) in Analog Devices, Linear Technology, or any of their subsidiaries or affiliates. There can be no assurance that regulators will not impose conditions, terms, obligations or restrictions and that such conditions, terms, obligations or restrictions will not have the
effect of delaying completion of the Analog Acquisition or imposing additional material costs on or materially limiting the revenues of the combined company following the completion of the Analog Acquisition. In addition, neither we nor Analog Devices can
provide
assurance that any such conditions, terms, obligations or restrictions will not result in the delay or abandonment of the Analog Acquisition.
The Analog Merger Agreement limits our ability to pursue alternatives to the Analog Acquisition and may discourage other companies from trying to acquire the Company.
The Analog Merger Agreement contains provisions that make it more difficult for us to sell our business to a party other than Analog Devices. These provisions include a general prohibition on the Company soliciting any acquisition proposal or offer for a competing transaction. Further, there are only limited exceptions to (i) our agreement that our Board of Directors will not withdraw or modify in a manner adverse to Analog Devices the recommendation of the our Board of Directors that our stockholders vote in favor of the adoption of the Analog Merger Agreement and (ii) our agreement not to enter into an
agreement with respect to a company takeover proposal. In addition, we are required to pay Analog Devices a termination fee of $490 million if the Analog Merger Agreement is terminated in certain circumstances relating to our entry into an agreement for an alternative transaction or a change in the recommendation of our Board of Directors with respect to the Analog Acquisition.
These provisions could discourage a third party that might have an interest in acquiring all or a significant part of the Company from considering or proposing that acquisition, even if that party were prepared to pay consideration with a higher per share value than the value proposed to be received or realized in the Analog Acquisition. These provisions might also result in a potential competing acquirer proposing to pay a lower price than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances.
Failure to complete the Analog Acquisition could negatively affect our stock price and our future business and financial results.
If the Analog Acquisition is not completed for any reason, including as a result of our stockholders failing to a
pprove
the Analog
Acquisition proposal
, our ongoing business may be adversely affected
,
and, without realizing any of the benefits of having completed the Analog Acquisition, we
could
be subject to a number of
negative consequences
, including the following:
|
·
|
|
we may experience negative reactions from the financial markets, including negative impacts on our stock price;
|
|
·
|
|
we may experience negative reactions f
rom our customers and suppliers
,
or
negative
publicity
generally
;
|
|
·
|
|
we may experience negative reactions from our employees and may not be able to retain key management personnel and other key employees;
|
|
·
|
|
we
will
have
incurred,
and
will
continue
to
incur,
significant
non-recurring
costs
in
connection
with
the
Analog
Acquisition
that
we
may
be
unable
to
recover;
|
|
·
|
|
the Analog Merger Agreement places certain restrictions on the conduct of our business prior to completion of the
Analog Acquisition
, the waiver of which is subject to the consent of Analog Devices (not to be unreasonably withheld, conditioned or delayed in certain circumstances), which may prevent us from making certain acquisitions, taking certain other specified actions or otherwise pursuing business opportunities during the pendency of the
Analog Acquisition
that may be beneficial to us
if
the
Analog
Acquisition
were
not
to
occur
; and
|
|
·
|
|
matters relating to the
Analog Acquisition
(including integration planning) will require substantial commitments of time and resources by our management, which could otherwise
have been
devoted to day-to-day operations and other opportunities that may be beneficial to us as an independent company.
|
In addition, upon termination of the Analog Merger Agreement, we are required to pay Analog Devices a termination fee of $490 million if the Analog Merger Agreement is terminated in certain circumstances relating to our entry into an agreement for an alternative transaction or a change in the recommendation of our Board of Directors with respect to the Analog Acquisition. Finally, we could be subject to litigation related to any failure to complete the Analog Acquisition or related to any enforcement proceeding commenced against us to perform our obligations under the Analog
Merger Agreement. If the Analog Acquisition is not completed, any of these risks may materialize and may adversely affect our
business, financial condition, financial results and stock price.
Uncertainties associated with the Analog Acquisition may cause a loss of our management personnel and our other key employees, which could adversely affect our future business and operations or those of the combined company following the Analog Acquisition.
We are dependent on the experience and industry knowledge of our officers and other key employees to execute our business plans. The combined company’s success after the Analog Acquisition
,
or
our
success
as
a
stand-alone
company
if
the
Analog
Acquisition
is
not
completed,
will depend in part upon our ability to retain key management personnel and other key employees. Current and prospective employees of the Company may experience uncertainty about their future roles with the combined company following the Analog Acquisition, which may materially adversely affect our ability to attract and retain key personnel during the pendency of the Analog Acquisition. Accordingly, no assurance can be given that either we or the combined company will be able to retain our key management personnel and our other key employees
.
Lawsuits may
in the future
be
filed against us or our directors challenging the Analog Acquisition, and an adverse ruling in any such lawsuit may prevent the Analog Acquisition from becoming effective or from becoming effective within the expected timeframe.
Transactions like the Analog Acquisition are frequently the subject to litigation or other legal proceedings, including actions alleging that our Board of Directors breached its fiduciary duty to our stockholders by entering
into the Analog Merger Agreement,
by failing to obtain a greater value in the transaction for our stockholders or otherwise. We believe that any such litigation or procee
dings would be without merit, but there can be no assurance that they will not be brought. If litigation or other legal proceedings are in fact brought against us or our Board, we would defend against it vigorously, but we might not be successful in doing so. An adverse outcome in such matters, as well as the costs and efforts of a defense even if successful, could have a material adverse effect on our business, results of operation or financial condition, including through the possible diversion of our resources or
distraction of key personnel.
Further, one
of the conditions to the completion of the Analog Acquisition is that no injunction by any court or other tribunal of competent jurisdiction
be in effect that temporarily or permanently prohibits, enjoins or makes illegal the consummation of the Analog Acquisition. As such, if any of the plaintiffs are successful in obtaining an injunction prohibiting the consummation of the Analog Acquisition, that injunction may prevent the Analog Acquisition from becoming effective or from becoming effective within the expected timeframe.
Risks Related to Our Business
Fluctuations in consumer and/or corporate spending, including due to uncertainties in the macroeconomic environment, could adversely affect our revenues and profitability.
We depend on demand from the industrial, communication, computer, consumer and
transportation
end-markets we serve. Our revenues and profitability are based on certain levels of consumer and corporate spending. Reductions or other fluctuations in consumer and/or corporate spending, including as a result of uncertain conditions in the macroeconomic environment, such as government economic or fiscal instability, restricted global credit conditions, reduced demand, imbalanced inventory levels, mortgage failures, fluctuations in interest rates, energy prices, currencies, or other conditions, could adversely affect our revenues and profitability. The impact of general economic sluggishness relating to government debt limits, unemployment issues and other causes can cause customers to be cautious, or delay or reduce orders for our products until these economic uncertainties improve.
Sudden adverse shifts in the business cycle could adversely affect our revenues and profitability.
The semiconductor market has historically been cyclical and subject to significant economic downturns at various times. The cyclical nature of the semiconductor industry may cause us to experience substantial period-to-period fluctuations
in our results of operations.
The growth rate of the global economy is one of the factors affecting demand for semiconductor components. Many factors could adversely affect regional or global economic growth including turmoil or depressed conditions in financial or credit markets, depressed business or consumer confidence, inventory excesses, increased unemployment, inflation for goods, services or materials, volatility in oil pricing, fluctuations of the United States dollar, rising interest rates in the United States and the rest of the world, a significant act of terrorism which disrupts global trade or consumer confidence, geopolitical tensions including war and civil unrest, reduced levels of economic activity, or disruptions of international transportation.
Typically, our ability to meet our revenue and profitability goals and projections is dependent to a large extent on the orders we receive from our customers within the period and by our ability to match inventory and current production mix with the product mix required to fulfill orders on hand and orders received within a period for delivery in that period. Because of this complexity in our business, no assurance can be given that we will achieve a match of inventory on hand, production units, and shippable orders sufficient to realize quarterly or annual revenue and net income goals.
Volatility in customer demand in the semiconductor industry could affect future levels of revenue and profitability and limit our ability to predict such levels
.
Historically, we have maintained low lead times, which have enabled customers to place orders close to their true needs for product. In defining our financial goals and projections, we consider inventory on hand, backlog, production cycles and expected order patterns from customers. If our estimates in these areas
are
inaccurate, we may not be able to meet our revenue goals and projections. In addition, some customers require us to manufacture product and have it available for shipment, even though the customer is unwilling to make a binding commitment to purchase all, or even some, of the products. As a result, in any quarterly fiscal period we are subject to the risk of cancellation of orders leading to a fall-off of revenue and backlog. Further, those orders may be for products that meet the c
ustomer’s unique requirements, such
that those cancelled orders would, in addition, result in an inventory of unsalable products, and thus potential inventory write-offs. We routinely estimate inventory reserves required for such products, but actual results may differ from these reserve estimates.
We generate revenue from thousands of customers worldwide and our revenues are diversified by end-market and geographical region. Our results in any period, or sequence of periods, may be positively affected by the fact that a customer has designed one of our products into one of their high selling products. This positive effect may not last, however, as our customers frequently redesign their high selling products, especially to lower their products’ costs. In such redesigns, they may decide to no longer use our product or may seek pricing terms from us that we choose not to accede to, thus resulting in the customer ceasing or significantly decreasing its purchases from us.
In addition, the pendency of
the Analog Acquisition
could cause customers to fear, rightly or wrongly, that the combined company might not continue to offer those of our products that
are designed into their products and thus reduce their purchases of our products or consider redesign of their products, even before the Analog Acquisition is anticipated to close.
The loss of, or a significant reduction in, purchases by a portion of our customer base, for
these
or other reasons, such as changes in purchasing practices, could adversely affect our results of operations. In addition, the timing of customers’ inventory adjustments may adversely affect our results of operations.
We may be unsuccessful in developing and selling new products required to maintain or expand our business.
The markets for our products depend on continued demand for our products in the communications, industrial, computer, high-end consumer and
transportation
end-markets. The semiconductor industry is characterized by rapid technological change, variations in manufacturing efficiencies of new products, and significant expenditures for capital equipment and product development. New product offerings by competitors and customer demands for increasing linear integrated circuit performance or lower prices may render our products less competitive over time, thus necessitating our continual development of new products. New product introductions are thus a critical factor for maintaining or increasing future revenue growth and sustained or increased profitability, but they can present significant business challenges because product development commitments and expenditures must be made well in advance of the related revenues, in some cases years. The success of a new product depends on a variety of factors including accurate forecasts of long-term market demand and future technological developments, accurate anticipation of competitors’ actions and offerings, timely and efficient completion of process design and development, timely and efficient implementation of manufacturing and assembly processes, product performance, quality and reliability of the product, and effective marketing, revenue and service.
Although we believe that the high performance segment of the linear integrated circuit market is generally less affected by price erosion or by significant expenditures for capital equipment and product development than other semiconductor market sectors, future operating results may reflect substantial period-to-period fluctuations due to these or other factors.
In addition, with respect to our acquisition of Dust Networks, we may not achieve benefits we expected to achieve, and we may incur write-downs, impairment charges or unforeseen liabilities that could negatively affect our operating results or financial position or could otherwise harm our business.
Our manufacturing operations may be interrupted or suffer yield problems.
We rely on our internal manufacturing facilities located in California and Washington to fabricate most of our wafers. We depend on outside silicon foundries for a small portion (roughly 5%) of our wafer fabrication. We could be adversely affected in the event of a major earthquake, which could cause temporary loss of capacity, loss of raw materials, and damage to manufacturing equipment. Additionally, we rely on our internal and external assembly and testing facilities located in Singapore and Malaysia. We are subject to economic and political risks inherent to international operations, including changes in local governmental policies, currency fluctuations, transportation delays and the imposition of export controls or import tariffs. We could be adversely affected if any such changes are applicable to our foreign operations.
Our manufacturing yields are a function of product design and process technology, both of which are developed by us. The manufacture and design of integrated circuits is highly complex. We may experience manufacturing problems in achieving acceptable yields or experience product delivery delays in the future as a result of, among other things, capacity constraints, equipment malfunctioning, construction delays, upgrading or expanding existing facilities or changing our process technologies, any of which could result in a loss of future revenues or increases in fixed costs. To the extent we do not achieve acceptable manufacturing yields or there are delays in wafer fabrication, our results of operations could be adversely affected. In addition, operating expenses related to increases in production capacity may adversely affect our operating results if revenues do not increase proportionately.
Our dependence on third-
party foundries and other manufacturing subcontractors may cause delays beyond our control in delivering our products to our customers.
A portion of our wafers (approximately 15%-20%) are processed offshore by independent assembly subcontractors primarily located in Thailand. These subcontractors separate wafers into individual circuits and assemble them into various finished package types. During periods of increasing demand and volatile lead times, sub-contractors can become over committed and therefore unable to meet all of their customer demand requirements thereby causing inconsistencies in availability of supply. In addition, reliability problems experienced by our assemblers could cause problems in delivery and quality, resulting in potential product liability to us. We could also be adversely affected by political disorders, labor disruptions, and natural disasters in these locations.
We are dependent on outside silicon foundries for a small portion (roughly 5%) of our wafer fabrication. As a result, we cannot directly control delivery schedules for these products, which could lead to product shortages, quality assurance problems, increases in the cost of our products and delays in delivering our products to our customers. If these foundries are unable or unwilling to produce adequate supplies of processed wafers conforming to our quality standards, our business and relationships with our customers for the limited quantities of products produced by these foundries could be adversely affected. Finding alternate sources of supply or initiating internal wafer processing for these products may not be economically feasible. In addition, the manufacture of our products is a highly complex and precise process, requiring production in a highly controlled environment. Changes in manufacturing processes or the inadvertent use of defective or co
ntaminated materials by a third-
party foundry could adversely affect the foundry’s ability to achieve acceptable manufacturing yields and product reliability.
We rely on third-
party vendors for materials, supplies, critical manufacturing equipment and freight services that may not have adequate capacity or may be impacted by outside influences such as natural disasters or material sourcing that could impact our product delivery requirements.
The semiconductor industry has experienced a very large expansion of fabrication capacity and production worldwide over time. As a result of increasing demand from semiconductor and other manufacturers, availability of certain basic materials and supplies, such as chemicals, gases, polysilicon, silicon wafers, ultra-pure metals, lead frames and molding compounds, and subcontract services, like epitaxial growth, ion implantation and assembly of integrated circuits into packages, have from time to time, over the past several years, been in short supply and could come into short supply again if overall industry demand continues to increase in the future. In addition, from time to time natural disasters can lead to a shortage of some of the above materials due to disruption of the manufacturer’s production. We do not have long-term agreements providing for all of these equipment, materials, supplies, and services, and shortages could occur as a result of capacity limitations or production constraints on suppliers that could have a materially adverse effect on our ability to achieve our planned production.
A number of our products use components that are purchased from third parties. Supplies of these components may not be sufficient to meet all customer requested delivery dates for products containing these components, which could adversely affect future revenue and earnings. Additionally, significant fluctuations in the purchase price for these components could affect gross margins for the products involved. Suppliers could also discontinue the manufacture of such purchased components or could have quality problems that could affect our ability to meet customer commitments.
Our manufacturing processes rely on critical manufacturing
equipment purchased from third-
party suppliers. During periods of increasing demand we could experience difficulties or delays in obtaining additional critical manufacturing equipment. In addition, suppliers of semiconductor manufacturing equipment are sometimes unable to deliver test and/or fabrication equipment to a schedule or equipment performance specification that meets our requirements. Delays in delivery of equipment needed for growth could adversely affect our ability to achieve our manufacturing and revenue plans in the future.
We rely on third parties including freight forwarders, airlines, and ground transportation companies to deliver our products to customers. Interruptions in the ability of these third parties to deliver our products to customers due to geological events such volcanic eruptions, earthquakes, hurricanes or other such natural disasters may cause a temporary delay in meeting our shipping estimates and schedules.
We are exposed to business, economic, currency, political and other risks through our significant worldwide operations.
During fiscal year
2016
,
72
%
of our revenues were derived from customers in international markets. In addition, we have test and assembly facilities in Singapore and Malaysia. Accordingly, we are subject to the economic and political risks inherent in international revenue and operations and their impact
on the United States economy in general, including the risks associated with ongoing uncertainties and political and economic instability in many countries around the world, economic disruption from financial and economic declines or turmoil, dysfunction in the credit markets, acts of terrorism, natural disasters or the response to any of the foregoing by the United States and other major countries.
Changes in currency exchange rates where the Company conducts business may impact it financially. As mentioned above, the Company’s revenues and billings are transacted in U.S. dollars. Recently, the U.S. dollar has significantly strengthened against other currencies. The strengthening of the U.S. dollar results in the Company’s products being more expensive for certain of its international customers. Accordingly, the Company’s competitive position may be adversely affected if the U.S. dollar continues to strengthen. The adverse effect to revenue may be partially offset in operating expenses since the Company generally incurs its foreign operating expenses, primarily labor, in the corresponding local currency.
We may be unable to adequately protect our proprietary rights, which may impact our ability to compete effectively.
Our success depends in part on our proprietary technology. While we attempt to protect our proprietary technology through patents, copyrights and trade secret protection, we believe that our success also depends on increasing our technological expertise, continuing our development of new products and providing comprehensive support and service to our customers. However, we may be unable to protect our technology in all instances, or our competitors may develop similar or more competitive technology independently. We currently hold a number of United States and foreign patents and pending patent applications. However, other parties may challenge or attempt to invalidate or circumvent any patents the United States or foreign governments issue to us or these governments may fail to issue patents for pending applications. In addition, the rights granted or anticipated under any of these patents or pending patent applications may be narrower than we expect or provide no competitive advantages. Furthermore, effective patent, trademark, copyright, maskwork and trade secret protection may be unavailable, limited or not applied for in certain foreign countries. We may incur significant legal costs to protect our intellectual property.
We also seek to protect our proprietary technology, including technology that may not be patented or patentable, in part by confidentiality agreements and, if applicable, inventors’ rights agreements with our collaborators, advisors, employees and consultants. We cannot assure you that these agreements will always be entered into or will not be breached or that we will have adequate remedies for any breach.
We have received, and may receive in the future, notices of claims of infringement and misappropriation of other parties’ proprietary rights. In the event of an adverse decision in a patent, trademark, copyright, maskwork or trade secret action, we could be required to withdraw the product or products found to be infringing from the market or redesign products offered for sale or under development. Whether or not these infringement claims are successfully asserted, we would likely incur significant costs and diversion of our resources with respect to the defense of these claims. In the event of an adverse outcome in any litigation, we may be required to pay substantial damages, including enhanced damages for willful infringement, and incur significant attorneys’ fees, as well as indemnify customers for damages they might suffer if the products they purchase from us infringe intellectual property rights of others. We could also be required to stop our manufacture, use, sale or importation of infringing products, expend significant resources to develop or acquire non-infringing technology, discontinue the use of some processes, or obtain licenses to intellectual property rights covering products and technology that we may, or have been found to, infringe or misappropriate such intellectual property rights.
Our products may contain defects that could affect our results of operations.
Our products may contain undetected errors or defects. Such problems may cause delays in product introductions and shipments, result in increased costs and diversion of development resources, cause us to incur increased charges due to obsolete
or unusable inventory, require design modifications, or decrease market acceptance or customer satisfaction with these products, which could result in loss of sales or product returns. In addition, we may not find defects or failures in our products until after commencement of commercial shipments, which may result in loss or delay in market acceptance that could significantly harm our operating results. Our current or potential customers also might seek to recover from us any losses resulting from defects or failures in our products; further, such claims might be significantly higher than the revenues and profits we receive from those of our products involved as we are usually a component supplier with limited value content relative to the value of a complete system or sub-system. In most cases we have contractual provisions in our customer contracts that seek to limit our liability to the replacement of the defective parts shipped. Nonetheless, liability claims could require us to spend significant time and money in litigation or to pay significant damages for which we may have insufficient insurance coverage. Any of these claims, whether or not successful, could seriously damage our reputation and business.
If we fail to attract and retain qualified personnel, our business may be harmed.
Our performance is substantially dependent on the performance of our executive officers and key employees. The loss of the services of key officers, technical personnel or other key employees could harm the business. Our success depends on our ability to identify, hire, train, develop and retain highly qualified technical and managerial personnel. Failure to attract and retain the necessary technical and managerial personnel could harm us.
We may not be able to compete successfully in markets within the semiconductor industry in the future.
We compete in the high performance segment of the linear integrated circuit market. Our competitors include am
ong others, Analog Devices
, Intersil
Corporation
, Maxim Integrated Products, Inc. and Texas Instruments, Inc. Competition among manufacturers of linear integrated circuits is intense, and certain of our competitors have significantly greater financial, technical, manufacturing and marketing resources than us. The principal elements of competition include product performance, functional value, quality and reliability, technical service and support, price, diversity of product line and delivery capabilities. We believe we compete favorably with respect to these factors, although we may be at a disadvantage in comparison to larger companies with broader product lines and greater technical service and support capabilities.
Environmental liabilities could force us to expend significant capital and incur substantial costs.
Federal, state and local regulations impose various environmental controls on the storage, use, discharge and disposal of certain chemicals and gases used in semiconductor processing. Our facilities have been designed to comply with these regulations, and we believe that our activities conform to present environmental regulations. Increasing public attention has, however, been focused on the environmental impact of electronics manufacturing operations. While we to date have not experienced any materially adverse business effects from environmental regulations, there can be no assurance that changes in such regulations will not require us to acquire costly remediation equipment or to incur substantial expenses to comply with such regulations. Any failure by us to control the storage, use or disposal of, or adequately restrict the discharge of hazardous substances could subject us to significant liabilities.
Our financial results may be adversely affected by the ongoing drought in California, where we operate one of our wafer fabrication manufacturing facilities.
We rely on our internal manufacturing facilities located in California and Washington to fabricate most of our wafers. California is in its fifth year of drought and
while
the state government
has eased the
mandatory residential reduction in statewide water use in
May 2016, both state and local governmental authorities will continue to enforce water use restrictions or impose new ones should drought conditions persist
. In the future, this drought may impact businesses in the form of rate increases and/or mandatory reductions. Our fabrication process consumes a significant amount of water and we are generally dependent upon water provided by public utilities. We also maintain a well at the California facility; however, we may be restricted on the amount of water we can draw from that well. Restrictions on our access to water could have a significant adverse impact on our business as production at our California facility could be disrupted by the unavailability of water. In addition, we may be charged
more for water or fined for deemed excessive usage which could impact our operating margins if we are not able to pass along price increases to our customers.
We are subject to a variety of domestic and international laws and regulations, including those relating to the use of
“
conflict minerals
”
,
U.S. Customs and Export Regulations and the Foreign Corrupt Practices Act.
As part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the
“Dodd-Frank
Act
”
), the SEC has promulgated disclosure requirements regarding the use of certain minerals (tantalum, tin, tungsten and gold), which are mined from the Democratic Republic of Congo and adjoining countries, known as conflict minerals. Certain of
our
products contain gold, tungsten and tin. As a result of the
Dodd-Frank
Act,
we
must annually publicly disclose whether
we manufacture
(as defined in the
Dodd-Frank
Act) any products that contain conflict minerals. Additionally, customers typically rely on
us
to provide critical data regarding the parts they purchase, including conflict mineral information.
Our
material sourcing is broad-based and multi-tiered, and it is difficult to verify the origins for conflict minerals used in the products
we sell. We have
many suppliers
,
and each may provide conflict mineral information in a different manner, if at all.
Accordingly, because the supply chain is complex,
we
may face reputational challenges from being unable to sufficiently verify the origins of conflict minerals used in
our
products
.
Additionally, customers may demand that the products they purchase be free of conflict minerals.
This may limit the number of suppliers that can provide products in sufficient quantities to meet customer demand or at competitive prices.
Among other laws and regulations,
we are
also subject to U.S. Customs and Export Regulations, including U.S. International Traffic and Arms Regulations and similar laws, which collectively control import, export and sale of technologies by companies and various other aspects of the operation of
our
business, and the Foreign Corrupt Practices Act and similar anti-bribery laws, which prohibit companies from making improper payments to government officials for the purposes of obtaining or retaining business. While
our
policies and procedures mandate compliance with such laws and regulations, there can be no assurance that
our
employees and agents will always act in strict compliance. Failure to comply with such laws and regulations may result in civil and criminal enforcement, including monetary fines and possible injunctions against shipment of product or other activities, which could have a material adverse impact on
our
results of operations and financial condition.
Our financial results may be adversely affected by increased tax rates and exposure to additional tax liabilities.
As a global company, our effective tax rate is highly dependent upon the geographic composition of our worldwide earnings and tax regulations governing each region. We are subject to income taxes in both the United States and various foreign jurisdictions, and significant judgment is required
on our part
to determine
our
worldwide tax liabilities. We have a partial tax holiday through July 2025 in Malaysia and a partial tax holiday in Singapore through August 2019. The ability to extend such tax holidays beyond their date of expiration cannot be assured. Our effective tax rate as well as the actual tax ultimately payable could be adversely affected by changes in the split of earnings between countries with differing statutory tax rates, in the valuation of deferred tax assets, in tax laws or by material audit assessments, which could affect our profitability. In addition, if
we fail
to meet certain conditions
to
the tax
holidays, we may be liable for
additional taxes and penalties. The amount of income taxes we pay is subject to ongoing audits in various jurisdictions, and a material assessment by a governing tax authority could affect our profitability. Jurisdictions could change their tax regulations to include profits that were previously exempt.
We have not provided for U.S. federal and state income taxes on a portion of our undistributed earnings of our non-U.S. subsidiaries that are considered permanently reinvested outside the United States. It is our intent to keep these funds permanently reinvested outside of the United States and current plans do not demonstrate a need to repatriate them to fund our U.S. operations, but
if in the future we decide to repatriate such foreign earnings to fund U.S. operations, we would incur incremental U.S. federal and state income taxes.
Our stock price may be volatile.
The trading price of our common stock may be subject to wide fluctuations. Our stock price may fluctuate in response to a number of events and factors, such as general United States and world economic and financial conditions, our own quarterly variations in operating results, announcements of technological innovations or new products by us or our competitors, changes
in financial estimates and recommendations by securities analysts, the operating and stock price performance of other companies that investors may deem comparable to us, the hedging of our common stock and other derivative transactions by third parties, and new reports relating to trends in our markets or those of our customers. Additionally, lack of positive performance in our stock price may adversely affect our ability to retain key employees.
The stock market in general, and prices for companies in our industry in particular, has experienced extreme volatility that often has been unrelated to the operating performance of a particular company. These broad market and industry fluctuations may adversely affect the price of our common stock, regardless of our operating performance.
Our certificate of incorporation and by-laws include anti-takeover provisions that may enable our management to resist an unwelcome takeover attempt by a third party.
Our organizational documents and Delaware law contain provisions that might discourage, delay or prevent a change in control of our company or a change in our management. Our Board of Directors may also choose to adopt further anti-takeover measures without stockholder approval. The existence and adoption of these provisions could adversely affect the voting power of holders of common stock and limit the price that investors might be willing to pay in the future for shares of our common stock.
A significant disruption in, or breach in security of, our information technology systems could materially and adversely affect our business or reputation.
We rely on information technology systems throughout our organization to process and maintain financial records and employee and customer data, process orders, manage inventory, coordinate shipments to customers, process and maintain personal data and other confidential and proprietary information, assist in semiconductor engineering and other technical activities and operate other critical functions such as internet connectivity, network communications and email. The information technology systems we use in our business may be susceptible to damage, disruptions or shutdowns due to power outages, hardware failures, telecommunication failures, user errors, catastrophes or other unforeseen events. If we were to experience a disruption in the information technology systems that involve our internal communications or our interactions with customers or suppliers, it could result in the loss of sales and customers and significant incremental costs, which could adversely affect our business.
We may also be subject to security breaches or other unauthorized access to, or misuse or acquisition of, personal data or other proprietary or confidential information caused by computer viruses, illegal break-ins or hacking, sabotage, acts of vandalism by third parties, or intentional or inadvertent breaches by our employees or service providers. In addition, we provide our confidential and proprietary information to third-party business partners where necessary to conduct our business. While we employ confidentiality agreements to protect such information, those third parties may also suffer security breaches or otherwise compromise the protection of such information. If any security breaches or unauthorized access to, or use or acquisition of, personal data or other confidential or proprietary information were to occur or believed to have occurred, our relationships with our business partners and customers could be materially damaged, our reputation and brand could be materially harmed, and governmental authorities or affected persons or entities could initiate enforcement actions, investigations, or other legal or regulatory action against us, which could cause us to incur significant fines, expenses and liability or could result in orders, judgments, or consent decrees forcing us to modify our business practices. Any of these events could have a material adverse impact on our business, operating results and financial condition.
ITEM 1B. UNRESOLVED STAFF COMMENTS
N
one
ITEM 2. PROPERTIES
At
July 3, 2016
, the Company owned the major facilities described below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No. of Bldgs
|
|
Location
|
|
Total Sq. Ft
|
|
Use
|
|
6
|
|
Milpitas, California
|
|
430,000
|
|
Executive and administrative offices, wafer fabrication, test and assembly operations, research and development, sales and marketing, and warehousing and distribution
|
|
1
|
|
Camas, Washington
|
|
105,000
|
|
Wafer fabrication
|
|
1
|
|
Chelmsford, Massachusetts
|
|
30,000
|
|
Research and development; sales and administration
|
|
1
|
|
Colorado Springs, Colorado
|
|
20,000
|
|
Research and development
|
|
1
|
|
Auburn, New Hampshire
|
|
20,000
|
|
Research and development
|
|
1
|
|
Raleigh, North Carolina
|
|
20,000
|
|
Research and development; sales and administration
|
|
2
|
|
Singapore (A)
|
|
360,000
|
|
Test and packaging operations, warehousing and distribution, research and development, and sales and administration
|
|
1
|
|
Malaysia (B)
|
|
350,000
|
|
Assembly operations, research and development
|
|
(A) Leases on the land used for this facility expire in 2021 through 2022 with an option to extend the lease for an additional 30 years.
(B) Leases on the land used for this facility expire in 2054 through 2057.
The Company leases additional design facilities located in: Burlington, Vermont; Santa Barbara, California; Grass Valley, California; Phoenix, Arizona; Dallas, Texas; Munich, Germany; and Hangzhou, China. The Company leases sales offices in the United States in the areas of Chicago, Cleveland, Minneapolis, Philadelphia, Sacramento, San Jose, Denver, Portland, Seattle, Austin, Irvine, Los Angeles and San Diego; and internationally in London, Stockholm, Helsinki, Dortmund, Munich, Stuttgart, Paris, Milan, Sydney, Tokyo,
Nagoya, Osaka, Taipei, Singapore, Seoul, Hong Kong, Beijing, Shanghai, Shenzhen, Chengdu, Xian, Wuhan and Bangalore. See Note 11 of Notes to Consolidated Financial Statements contained in this Form 10-K. The Company believes that its existing facilities are su
itable and adequate for its business purposes through fiscal year
2017
.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to various legal proceedings and claims that arise in the ordinary course of business on a wide range of matters, including, among others, patent suits and employment claims. The Company does not believe that any such current suits will have a material impact on its business or financial condition. However, current lawsuits and any future lawsuits will divert resources and could result in the payment of substantial damages.
ITEM 4. MINE SAFETY DISCLOSURES
None