UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD
ENDED SEPTEMBER 30, 2004
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD
FROM
TO
COMMISSION FILE NUMBER 000-26124
IXYS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE | 77-0140882 | |
(State or other jurisdiction
of incorporation or organization) |
(IRS Employer Identification No.) |
3540 BASSETT STREET
SANTA CLARA, CALIFORNIA 95054-2704
(Address of principal executive offices and Zip Code)
(408) 982-0700
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes þ No o
THE NUMBER OF SHARES OF THE REGISTRANTS COMMON STOCK, $0.01 PAR VALUE, OUTSTANDING AS OF OCTOBER 28, 2004 WAS 33,050,716.
IXYS CORPORATION
FORM 10-Q
September 30, 2004
2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
IXYS CORPORATION
The accompanying notes are
an integral part of these unaudited condensed consolidated financial statements.
3
IXYS CORPORATION
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
IXYS CORPORATION
The accompanying notes are
an integral part of these unaudited condensed consolidated financial statements.
5
IXYS CORPORATION
The accompanying notes are
an integral part of these unaudited condensed consolidated financial statements.
6
IXYS CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Unaudited Condensed Consolidated Financial Statements
The accompanying interim unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and footnotes required by accounting principles
generally accepted in the United States of America for complete financial
statements. The condensed consolidated financial statements include the
accounts of IXYS Corporation (IXYS or the Company) and its wholly-owned
subsidiaries. The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and judgments that affect the amounts reported in
the financial statements and accompanying notes. The accounting estimates that
require managements most difficult judgments include: allowance for sales
returns, allowance for doubtful accounts, allowance for ship and debits,
valuation of inventories, valuation of property, plant, equipment and
intangible assets, revenue recognition, legal contingencies, goodwill, income
tax and defined benefit plans. All significant intercompany transactions have
been eliminated in consolidation. All adjustments of a normal recurring nature
that, in the opinion of management, are necessary for a fair statement of the
results for the interim periods have been made. It is recommended that the
interim financial statements be read in conjunction with the Companys audited
consolidated financial statements and notes thereto for the fiscal year ended
March 31, 2004 contained in the Companys Annual Report on Form 10-K. Interim
results are not necessarily indicative of the operating results expected for
later quarters or the full fiscal year. Certain reclassifications have been
made to the prior periods condensed consolidated financial statements to
conform to the current periods presentation. Such reclassifications had no
effect on previously reported net income or retained earnings.
2. Accounting for Stock-Based Compensation
IXYS accounts for stock-based compensation using the intrinsic value
method prescribed in APB Opinion No. 25, Accounting for Stock Issued to
Employees. Under APB No. 25, compensation cost is measured as the excess, if
any, of the quoted market price of IXYSs stock at the date of grant over the
exercise price of the option granted. Compensation cost for stock options, if
any, is recognized ratably over the vesting period. IXYSs policy is to grant
options with an exercise price equal to the quoted market price of IXYSs stock
on the grant date. Accordingly, no compensation has been recognized for its
stock option plans. IXYS provides additional pro forma disclosures as required
under SFAS No. 123, Accounting for Stock-Based Compensation.
Had compensation cost for its stock plans been determined based on the
fair value at the grant date consistent with the provisions of SFAS No. 123,
IXYSs net income (loss) and net income (loss) per share for the
three and six month periods ended September 30,
2004 and 2003 would have changed to
the pro forma amounts indicated
below (in thousands, except per share amounts):
7
SFAS No. 123 requires the use of option pricing models that were not developed
for use in valuing employee stock options. The Black-Scholes option pricing
model was developed for use in estimating the fair value of short-lived
exchange traded options that have no vesting restrictions and are fully
transferable. In addition, option pricing models require the input of highly
subjective assumptions, including the options expected life and the price
volatility of the underlying stock. Because the Companys employee stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can materially
affect the fair value estimate, in the opinion of management, the existing
models do not necessarily provide a reliable single measure of the fair value
of employee stock options.
3. Acquisition of Microwave Technology, Inc.
On September 5, 2003, IXYS completed its acquisition of 100% of the voting
equity interests of Microwave Technology, Inc. (MwT), a manufacturer of
discrete gallium arsenide field effect transistors (FETS) based in the United
States. The acquisition of MwT expanded the Companys line of radio frequency,
or RF, products by adding MwTs gallium arsenide semiconductor products and
increased IXYSs presence in RF power semiconductors. The acquisition was
intended to allow the combined organization to be more competitive and to
achieve greater financial strength, operational efficiencies, access to capital
and growth potential than either company could separately achieve. These
factors contributed to the purchase price in excess of the fair value of MwTs
net tangible and intangible assets acquired, and as a result, IXYS has recorded
goodwill in connection with this transaction. The acquisition was a
stock-for-stock exchange. As such, none of the goodwill is expected to be
deductible for tax purposes. MwT has been included in our statement of
operations since September 5, 2003. In connection with the acquisition,
approximately 767,000 shares of IXYS common stock and options exercisable for
approximately 26,000 shares of IXYS common stock were issued. The total
purchase price is as follows (in thousands):
The fair value of IXYSs common stock issued was determined using an
average of the closing sales prices of a share of our common stock on Nasdaq
National Market for the five trading days before and after the definitive
agreement was signed. The fair value of the options assumed in the transaction
was determined using the Black-Scholes option pricing model using an expected
life of 2-years, risk free rate of 2% and expected volatility of 66% and no
expected dividend rate. IXYS has finalized the fair values of identifiable
intangible assets acquired. IXYS has allocated the purchase price to
identifiable intangible assets, tangible assets, deferred tax assets,
liabilities assumed and goodwill as follows (in thousands):
8
Pro Forma Disclosure (in thousands, except per share data):
The following unaudited pro forma combined amounts give effect to the
acquisition of MwT as if the acquisition had occurred on April 1, 2003. On a
pro forma basis, the results of operations of MwT for the three and six month
period ended September 30, 2003 are consolidated with IXYS results for the
three and six month period ended September 30, 2003. The pro forma amounts do
not purport to be indicative of what would have occurred had the acquisition
been made as of the beginning of the period or of results which may occur in
the future.
4. Inventories
Inventories consist of the following (in thousands):
9
5. Computation of Net Income (Loss) Per Share
Basic earnings per share (EPS) is computed by dividing net income (loss) by
the weighted-average number of shares of common stock outstanding for the
period. Diluted EPS reflects the potential dilution from the exercise of
options into common stock.
Basic and diluted earnings per share are calculated as follows (in thousands,
except per share amounts):
6. Segment Information
IXYS operates in a single industry segment comprised of semiconductor products
used primarily in power-related applications such as controlling energy in
motor drives and power conversion (including uninterruptible power supplies,
switch mode power supplies and medical electronics) and in the wired
telecommunications industry. IXYSs sales by major
geographic area (based on destination) were as follows:
10
The following table sets forth revenues by product group for the three and
six months ended September 30, 2004 and 2003:
7. Commitments and Contingencies
Legal Proceedings
IXYS is currently involved in a variety of legal matters that arise in the
normal course of business. Based on information currently available, management
does not believe that the ultimate resolution of these matters, including the
matters described in the following paragraphs, will have a material adverse
effect on IXYSs financial condition, results of operations or cash flows. Were
an unfavorable ruling to occur, there exists the possibility of a material
adverse impact on the results of operations or cash flows for the period in which the ruling
occurs.
On June 22, 2000, International Rectifier Corporation filed an action for
patent infringement against IXYS in the United States District Court for the
Central District of California, alleging that certain of IXYSs products sold
in the United States infringe U.S. patents owned by International Rectifier.
International Rectifiers complaint against IXYS contended that IXYSs alleged
infringement of International Rectifiers patents has been and continues to be
willful and deliberate. Subsequently, the U.S. District Court decided that
certain of IXYSs power MOSFETs and IGBTs infringe certain claims of each of
three International Rectifier U.S. patents.
In 2002, the U.S. District Court entered a permanent injunction barring
IXYS from making, using, offering to sell or selling in, or importing into, the
United States, MOSFETs (including IGBTs) covered by the subject patents and
ruled that International Rectifier should be awarded damages of $9.1 million
for IXYSs alleged infringement of International Rectifiers patents. In
addition, the U.S. District Court ruled that IXYS had been guilty of willful
infringement. Subsequently, the U.S. District Court increased the damages to a
total of $27.2 million, plus attorney fees.
IXYS appealed and on March 19, 2004 the United States Court of Appeals for
the Federal Circuit reversed or vacated all findings of patent infringement
previously issued against IXYS by the U.S. District Court, and vacated the
permanent injunction. On August 9, 2004, the Federal Circuit vacated the
damages award.
IXYS believes its defenses to the various remaining claims made by
International Rectifier are meritorious. However, there can be no assurance of
a favorable outcome. In the event of an adverse outcome, damages or injunctions
awarded by the U.S. District Court would be materially adverse to IXYSs
financial condition, results of operations and cash flows. Management has not accrued any
amounts for damages in the accompanying balance sheets for the International
Rectifier matter described above.
As of August 11, 2004, IXYS and Advanced Power Technology, Inc. entered
into an agreement and consented to a Stipulated Order of Dismissal regarding
their patent infringement lawsuit in United States District Court in the
Northern District of California. The agreement is a final settlement of all
claims in the lawsuit.
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion contains forward-looking statements, which are subject to
certain risks and uncertainties, including, without limitation, those described
elsewhere in this Item 2. Actual results may differ materially from the results
discussed in the forward-looking statements. All forward-looking statements
included in this document are made as of the date hereof, based on the
information available to us as of the date hereof, and we assume no obligation
to update any forward-looking statement.
Overview
We are a leading company in the design, development, manufacture and
marketing of high power, high performance power semiconductors. Our power
semiconductors improve system efficiency and reliability by converting
electricity at relatively high voltage and current levels into the finely
regulated power required by electronic products. We focus on the market for
power semiconductors that are capable of processing greater than 500 watts of
power.
We design, manufacture and sell integrated circuits for a variety of
applications. Our analog and mixed signal integrated circuits, or ICs, are
principally used in telecommunication applications. Our mixed signal
application specific ICs, or ASICs, address the requirements of the medical
imaging equipment and display markets. Our power management and control ICs are
used in conjunction with our power semiconductors.
Our radio frequency, or RF, power semiconductors enable circuitry that
amplifies or receives radio frequencies in wireless and other microwave
communication applications, medical imaging applications and defense and space
applications.
For the quarter ended September 30, 2004, sales to customers in the United
States represented approximately 29.1% and sales to international customers
represented approximately 70.9% of our net revenues. Of our international
sales, approximately 48.8% were derived from sales in Europe and the Middle
East, approximately 48.2% were derived from sales in Asia and approximately
3.0% were derived from sales in the Americas other than the United States. No
single end customer accounted for more than 10% of our net revenues for the
quarter ended September 30, 2004.
Critical Accounting Policies and Significant Management Estimates
The discussion and analysis of our financial condition and results of
operations are based upon our unaudited, condensed, consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these
financial statements requires management to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses, and
related disclosures of contingent assets and liabilities. On an ongoing basis,
management evaluates the reasonableness of its estimates. Management bases its
estimates on historical experience and on various assumptions that are believed
to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities that
are not readily available from other sources. Actual results may differ from
these estimates under different assumptions or conditions.
We believe the following critical accounting policies affect our more
significant judgments and estimates used in preparing our consolidated
financial statements.
Allowance for sales returns
. We maintain an allowance for sales returns
for estimated product returns by our customers. We estimate our allowance for
sales returns based on our historical return experience, current economic
trends, changes in customer demand, known returns we have not received and
other assumptions. If we make different judgments or utilize different
estimates, the amount and timing of our revenue could be materially different.
Given that our revenues consist of a high volume of relatively similar
products, our actual returns and allowances do not fluctuate significantly
from period to period, and our returns provisions have historically been
reasonably accurate. This allowance is included as part of the accounts
receivable allowance for doubtful accounts on the balance sheet and as a
reduction to gross revenues in the calculation of net revenues on the
statement of operations.
Allowance for doubtful accounts
. We maintain an allowance for doubtful
accounts for estimated losses from the inability of our customers to make
required payments. We evaluate our allowance for doubtful accounts based on
the aging of our accounts receivable, the financial condition of our customers
and their payment history, our historical write-off experience and other
assumptions. If we were to make different judgments of the financial condition
of our customers or the financial condition of our customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required. This allowance is reported on the
balance sheet as part of the accounts receivable allowance for doubtful
accounts and is included on the statement of operations as part of selling,
general and administrative expense.
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Allowance for ship and debits
. Ship and debit is a program designed to
assist distributors in meeting competitive prices in the marketplace on sales
to their end customers. Ship and debit requires a request from the
distributor for a pricing adjustment for a specific part for a customer sale
to be shipped from the distributors stock. Ship and debit authorizations may
cover current and future distributor activity for a specific part for sale to
the distributors customer. In accordance with Staff Accounting Bulletin No.
104 Topic 13, Revenue Recognition, at the time we record sales to the
distributors, we provide an allowance for the estimated future distributor
activity related to such sales since it is probable that such sales to
distributors will result in ship and debit activity. The sales allowance
requirement is based on sales during the period, credits issued to
distributors, distributor inventory levels, historical trends, market
conditions, pricing trends we see in our direct sales activity with original
equipment manufacturers and other customers, and input from sales, marketing
and other key management. These procedures require the exercise of
significant judgments. We believe that they enable us to make reliable
estimates of future credits under the ship and debit program. Our actual
results approximate our estimates. At the time the distributor ships the part
from stock, the distributor debits us for the authorized pricing adjustment.
This allowance is included as part of the accounts receivable allowance for
doubtful accounts on the balance sheet and as a reduction to gross revenues in
the calculation of net revenues on the statement of operations.
Inventories.
Inventories are recorded at the lower of standard cost,
which approximates actual cost on a first-in-first-out basis, or market value.
We typically plan our production and inventory levels based on internal
forecasts of customer demand, which are highly unpredictable and can fluctuate
substantially. The value of our inventories is dependent on our estimate of
future demand as it relates to historical sales. If our projected demand is
over-estimated, we may be required to adjust the valuation of our inventories.
We regularly review inventory quantities on hand and record a provision for
excess inventory based primarily on our historical sales. We perform an
analysis of inventories and compare the sales for the preceding year(s). To
the extent we have inventory in excess of a pre-determined number of years,
generally not more than 2 years, we recognize a write down for excess
inventories. Our provision for excess inventories includes a provision for on
hand finished goods inventories with a date of manufacture of greater than
three years old. Actual demand and market conditions may be different from
those projected by our management. This could have a material effect on our
operating results and financial position. If we make different judgments or
utilize different estimates, the amount and timing of our write-down of
inventories may be materially different.
Valuation of property, plant, equipment, and intangible assets.
We
regularly evaluate the recoverability of our property, plant, equipment and
intangible assets in accordance with Statement of Financial Accounting
Standards No. 144, or SFAS No. 144, Accounting for the Impairment or Disposal
of Long-Lived Assets. The standard retains the previously existing accounting
requirements related to the recognition and measurement of the impairment of
long-lived assets to be held and used while expanding the measurement
requirements of long-lived assets to be disposed of by sale to include
discontinued operations. It also expands on the previously existing reporting
requirements for discontinued operations to include a component of an entity
that either has been disposed of or is classified as held for sale. Actual
useful lives and cash flows could be different from those estimated by our
management. This could have a material effect on our operating results and
financial position. Reviews are regularly performed to determine whether facts
and circumstances exist indicating that the carrying amount of assets may not
be recoverable or that the useful life is shorter than originally estimated. We
assess the recoverability of our assets by comparing the projected undisclosed
net cash flows associated with the related asset or group of assets over their
remaining lives against their respective carrying amounts. Impairment, if any,
is based on the excess of the carrying amount over the fair value of those
assets. If assets are determined to be recoverable, but the useful lives are
shorter than originally estimated, the net book value of the assets is
depreciated over the newly determined remaining useful lives.
Revenue Recognition.
We recognize revenue from product sales upon shipment
provided that we have received an executed purchase order, the price is fixed
and determinable, title has transferred, collection of resulting receivables is
reasonably assured, there are no customer acceptance requirements, and there
are no remaining significant obligations. Reserves for sales returns and
allowances are recorded at the time of shipment. Our management must make
estimates of potential future product returns and so called ship and debit
transactions related to current period product revenue. Our management analyzes
historical returns and ship and debit transactions, current economic trends and
changes in customer demand and acceptance of our products when evaluating the
adequacy of the sales returns and allowances. Significant management judgments
and estimates must be made and used in connection with establishing the sales
returns and allowances in any accounting period. Material differences may
result in the amount and timing of our revenue for any period if management
made different judgments or utilized different estimates.
For our nonrecurring engineering, or NRE, related to engineering work performed
by our Clare Micronix division to design chip prototypes that will later be
used to produce required units, customers enter into arrangements with Clare
Micronix to perform engineering work for a fixed fee. Clare Micronix records
fixed-fee payments during the development phase from customers in accordance
with Emerging Issues Task Force, or EITF, Abstracts 99-5, Accounting for
Pre-Production Costs Related to Long-term Supply Arrangements. Clare Micronix
records research and development costs as expenses are incurred. Clare Micronix
then credits research and development expenses for payments made by the
customer. Up-front payments made by the customer are initially recorded as
customer deposits and are charged to the statement of income as expenses for
the project as costs are incurred.
13
Legal Contingencies.
We are subject to various legal proceedings and
claims, the outcomes of which are subject to significant uncertainty. SFAS No.
5, Accounting for Contingencies, requires that an estimated loss from a loss
contingency should be accrued by a charge to income if it is probable that an
asset has been impaired or a liability has been incurred and the amount of the
loss can be reasonably estimated. Disclosure of a contingency is required if
there is at least a reasonable possibility that a loss has been incurred. We
evaluate, among other factors, the degree of probability of an unfavorable
outcome and the ability to make a reasonable estimate of the amount of loss.
Changes in these factors could materially impact our financial
position,
results of operations or cash flows.
Goodwill.
We regularly evaluate whether events and circumstances have
occurred that indicate a possible impairment of goodwill. In determining
whether there is an impairment of goodwill, we calculate the estimated implied
fair value of our company by comparing the fair value of the reporting unit
with its carrying amount, including goodwill. Then, if the carrying amount of
the reporting unit exceeds its fair value, we perform the second step of the
goodwill impairment test to measure the amount of impairment loss, if any. The
second step of the goodwill impairment test, used to measure the amount of
impairment loss, compares the implied fair value of reporting unit goodwill
with the carrying amount of that goodwill. We determine the implied fair value
of goodwill by allocating the fair value of the reporting unit to all of the
assets and liabilities of that unit (including any unrecognized intangible
assets) as if the reporting unit had been acquired in a business combination
and the fair value of the reporting unit was the price paid to acquire the
reporting unit. The excess of the fair value of a reporting unit over the
amounts assigned to its assets and liabilities is the implied fair value of
goodwill. If the carrying amount of the reporting unit goodwill exceeds the
implied fair value of that goodwill, we report the excess as a impairment loss.
We perform this impairment test annually during our fourth quarter and
whenever facts and circumstances indicate that there is a possible impairment
of goodwill. We believe the methodology we use in testing impairment of
goodwill provides us with a reasonable basis in determining whether an
impairment charge should be taken. To date, our goodwill has not been
considered to be impaired based on the results of our analysis. We have one
reporting unit.
Income Tax.
As part of the process of preparing our consolidated financial
statements, we are required to estimate our income taxes in each of the
jurisdictions in which we operate. A valuation allowance is required to reduce
our deferred tax assets to the amount that is more likely than not to be
realized. In determining the amount of the valuation allowance, we consider
estimated future taxable income as well as feasible tax planning strategies in
each taxing jurisdiction in which we operate. If we determine that we will not
realize all or a portion of our remaining deferred tax assets, we will increase
our valuation allowance with a charge to income tax expense. Conversely, if we
determine that we will ultimately be able to utilize all or a portion of the
deferred tax assets for which a valuation allowance has been provided, the
related portion of the valuation allowance will be released to income as a
credit to income tax expense. Significant management judgment is required in
determining our provision for income taxes, our deferred tax assets and
liabilities and any valuation allowance recorded against our net deferred tax
assets. In the event that actual results differ from these estimates or we
adjust these estimates in future periods, we may need to establish a valuation
allowance which could materially impact our financial position and results of
operations. Our ability to utilize our deferred tax assets and the need for a
related valuation allowance are monitored on an ongoing basis.
Defined Benefit Plans.
We maintain pension plans covering certain of our
employees in foreign locations. For financial reporting purposes, net periodic pension costs are
calculated based upon a number of actuarial assumptions, including a discount
rate for plan obligations, assumed rate of return on pension plan assets and
assumed rate of compensation increase for plan employees. All of these
assumptions are based upon managements judgment, considering all known trends
and uncertainties. Actual results that differ from these assumptions would
impact the future expense recognition and cash funding requirements of our
pension plans.
Recent Accounting Developments
The Financial Accounting Standard Board, or FASB, issued an exposure draft
entitled Share-Based Payment, an Amendment of FASB Statements Nos. 123 and
95. This exposure draft would require stock-based compensation to employees
to be recognized as a cost in the financial statements and that such cost be
measured according to the fair value of the stock options. In the absence of
an observable market price for the stock awards, the fair value of the stock
options would be based upon the valuation methodology that takes into
consideration various factors, including the exercise price of the option, the
expected term of the option, the current price of the underlying shares, the
expected volatility of the underlying share price, the expected dividends on
the underlying shares and the risk-free interest rate. The proposed
requirements in the exposure draft would be effective for the first fiscal year
beginning after June 15, 2005. The FASB intends to issue a final statement in
late 2004. We will continue to monitor communications on this subject from the
FASB in order to determine the impact on our financial statements.
14
Results of Operations
Three and Six Month Periods Ended September 30, 2004 and September 30, 2003
The following table sets forth selected consolidated statements of
operations data for the fiscal periods indicated and the percentage change in
such data from period to period.
The following table sets forth certain financial data as a percentage of
net revenues for the fiscal periods indicated. These historical operating
results may not be indicative of the results for any future period.
Net Revenues.
The increase in net revenues in the quarter ended September 30, 2004 as
compared to the quarter ended September 30, 2003 reflects increased sales
across our product groups. The largest component was a $13.2 million increase
in sales of power semiconductors. The increase in the power semiconductor group
was due, in large part, to an increase of $5.9 million in sales
of semiconductors for
the consumer products market. The principal cause of the $2.6 million
increase in RF power semiconductor and systems sales was the acquisition of
Microwave Technology in September 2003, which accounted for $1.8 million of
such increase.
15
The following table sets forth the units, average selling price,
or ASP, and revenues for each of our product groups in the quarter ended
September 30, 2004 and compares such revenues against those of the quarter
ended September 30, 2003:
The increase in net revenues for the six months ended September 30, 2004
as compared to the six months ended September 30, 2003 reflects increased sales
across our product groups. In comparing the six month periods, the increase in
revenues from the sales of power semiconductors constituted $30.2 million of
the increase. This included a $12.0 million increase in the sale
of semiconductors
for the consumer products market. The $5.7 million increase in RF power
semiconductor and systems revenues was principally related to the Microwave
Technology acquisition, which provided $4.8 million of the increase. The
following table sets forth the units, ASP and revenues for each of our product
groups in six months ended September 30, 2004 and compares such revenues
against those of the six months ended September 30, 2003:
Gross Profit.
The increase in gross profit in terms of dollars in the three and six
months ended September 30, 2004 as compared to the three and six months ended
September 30, 2003 is primarily the result of the related increase in revenues
and the acquisition of Microwave Technology. The acquisition of Microwave
Technology resulted in a $949,000 increase in gross profit in the three months
ended September 30, 2004 as compared to the three months ended September 30,
2003 and a $2.4 million increase in gross profit in the six months ended
September 30, 2004 as compared to the six months ended September 30, 2003.
Gross profit margin increased to 31.8% in the three months ended September 30,
2004 from 26.2% in the three months ended September 30, 2003 principally
because of reductions in the cost to manufacture our products, combined with
the addition for a full quarter of higher margin RF power product lines in the
September 2004 quarter. Gross profit margin increased to 30.2% during the six
months ended September 30, 2004 as compared to 28.4% in the six months ended
September 30, 2003 principally because of the addition for the full period of
higher margin RF power product lines and reductions in the cost to manufacture
our products.
Research, Development and Engineering.
For the three and six months ended September 30, 2004 as compared to the
three and six months ended September 30, 2003, research, development and
engineering expenses increased with the funding of additional development
projects to support our growth in revenues, but declined as a percentage of
revenues due to revenue growth.
16
Selling, General and Administrative.
For the three and six months ended September 30, 2004 as compared to the
three and six months ended September 30, 2003, selling, general and
administrative expenses increased principally due to increased
expenses related to our growth in revenues, such as a general increase in the cost of compliance and sales commissions. Selling, general and
administrative expenses declined as a percentage of revenues in the three and
six months ended September 30, 2004 as compared to the three and six months
ended September 30, 2003, principally as a result of our continuing efforts to
control costs, combined with the impact of our growth in revenues. We have
reclassified all expenses related to patent infringement litigation as SG&A
expense, rather than other expense.
Other Expense, Net.
Other expense, net in the quarter ended September 30, 2004 was $77,000,
as compared to $226,000 in the quarter ended September 30, 2003. Other expense,
net in the six months ended September 30, 2004 was $433,000, as compared to
$200,000 in the six months ended September 30, 2003. Other expense, net
consists principally of gains and losses associated with changes in currency
rates.
Provision For Income Tax.
In the quarter ended September 30, 2004, the provision for income tax
reflected an effective tax rate of 38.8%, as compared to an effective tax rate
of 31.0% in the quarter ended September 30, 2003. In the six months ended
September 30, 2004, the provision for income taxes reflected an effective tax
rate of 38.8%, as compared to an effective tax rate of 36.1% in the six months
ended September 30, 2003. The higher tax rates for the three and six months
ended September 30, 2004 were primarily related to a shift in profitability
into higher tax rate jurisdictions.
Liquidity and Capital Resources
At September 30, 2004, cash and cash
equivalents of $48.8 million were 16.1% greater than the $42.1 million at March
31, 2004.
Net cash provided by operating
activities in the six months ended September 30, 2004 was $11.3 million, as
compared to $2.2 million for the six months ended September 30, 2003. During the six months ended
September 30, 2004, the principal working capital use of cash was to fund the
growth in accounts receivable and inventory. Net accounts receivable rose
$4.6 million, or 13.9%, from March 31, 2004 to September 30, 2004, primarily due to higher
revenues and a higher percentage of Asian customers who typically
have longer payment terms than domestic customers. No one customer accounted for more than 10% of
our revenues during the six months ended September 30, 2004 or 10% of our
receivables at September 30, 2004. Our inventories at September 30, 2004
increased $3.0 million, or 6.2%, from March 31, 2004, principally to support higher
revenues. Accounts payable increased by $2.7 million, or 18.0%, from March 31, 2004 to
September 30, 2004, largely due to timing differences and the increase in
revenues. Accrued expenses and other liabilities increased by
$4.9 million, or 27.1%, from
March 31, 2004 to September 30, 2004, primarily due to an increase in income
tax liabilities.
We
used $3.6 million in net cash for
investing activities during the six months ended September 30, 2004, as
compared to $1.3 million used in investing activities during the six months
ended September 30, 2003. During the six months ended September 30, 2004, we
spent $3.6 million in capital expenditures.
For the six months ended September
30, 2004, net cash used in financing activities was $865,000 as compared to
$1,594,000 in the six months ended September 30, 2003. During the six months
ended September 30, 2004, we used cash principally to pay capital lease
obligations. We also purchased 74,900 shares of our common stock for an
aggregate purchase price of $536,000.
Another potential source of liquidity is borrowings under
existing lines of credit. At September 30, 2004, we had available credit of
$4.4 million. At September 30, 2004, our debt, consisting of capital lease
obligations and notes payable to bank, was $5.9 million, representing 12.1% of
our cash and cash equivalents and 3.9% of our stockholders equity.
We
believe that our cash and cash equivalents together with cash
generated from operations and our line of credit will be sufficient
to meet our anticipated cash requirements for the next
12 months. Our liquidity could be negatively affected by a
decline in demand for our products, the need to invest in new product
development or one or more acquisitions. There can be no assurance
that additional debt or equity financing will be available when
required or, if available, can be secured on terms satisfactory to us.
17
RISK FACTORS
In addition to the other information in this Quarterly Report on Form
10-Q, the following risk factors should be considered carefully in evaluating
us and our business. Additional risks not presently known to us or that we
currently believe are not serious may also impair our business and its
financial condition.
Our operating results fluctuate significantly because of a number of
factors, many of which are beyond our control.
Given the nature of the markets in which we participate, we cannot
reliably predict future revenues and profitability, and unexpected changes may
cause us to adjust our operations. A large portion of our costs are fixed, due
in part to our significant sales, research and development and manufacturing
costs. Thus, small declines in revenues could negatively affect our operating
results in any given quarter. Our operating results may fluctuate
significantly. Some of the factors that may affect our quarterly and annual
results are:
As a result of these factors, many of which are difficult to control or
predict, as well as the other risk factors discussed in this Quarterly Report
on Form 10-Q, we may experience material adverse fluctuations in our future
operating results on a quarterly or annual basis.
The semiconductor industry is cyclical, and an industry downturn could
adversely affect our operating results.
Business conditions in the semiconductor industry may rapidly change from
periods of strong demand. The industry is characterized by:
18
These factors could harm our business and cause our operating results to
suffer.
Our gross margin is dependent on a number of factors, including our level of capacity utilization.
Semiconductor manufacturing requires significant capital investment,
leading to high fixed costs, including depreciation expense. If we are unable
to utilize our manufacturing and testing facilities at a high level, the fixed
costs associated with these facilities will not be fully absorbed, resulting in
higher average unit costs and lower gross margins. We have attempted to match
production with anticipated customer demand. As a percentage of revenues, gross
margin was 23.2% for fiscal 2004, compared to 21.2% for fiscal 2003, and 31.3%
in fiscal 2002. Increased competition and other factors may lead to price
erosion, lower revenues and lower margins for us in the future.
Our disclosure controls and procedures are not effective.
In connection with their audit of our fiscal 2004, our auditors,
PricewaterhouseCoopers LLP, advised us of a material weakness in our internal
control. Our Chief Executive Officer and Chief Financial Officer concluded that, as
of September 30, 2004, our disclosure controls and procedures were not
effective. See Item 4. Controls and Procedures
elsewhere in this Form 10-Q. Existence of this or other material
weaknesses in our internal control could result in a material
misstatement of our financial condition, results of operations or cash
flows.
Investor confidence and share value may be adversely impacted if we or our independent registered public accounting firm are unable to provide adequate
attestation over the adequacy of our internal control over financial reporting as of March 31, 2005, as required by Section 404 of the Sarbanes-Oxley Act of
2002.
The Securities and Exchange Commission, as directed by Section 404 of the
Sarbanes-Oxley Act of 2002, adopted rules requiring public companies to include
a report of management on the companys internal control over financial
reporting in its Annual Report on Form 10-K that contain an assessment by
management of the effectiveness of the companys internal control over
financial reporting. In addition, the companys independent registered public
accounting firm must attest to and report on managements assessment of the
effectiveness of the companys internal control over financial reporting. These
requirements will first apply to our Annual Report on Form 10-K for the fiscal
year ending March 31, 2005. Management may not conclude that our internal
control over financial reporting is effective. Moreover, even if management
does conclude that our internal control over financial reporting is effective,
if our independent registered public accounting firm is not satisfied with our
internal control over financial reporting or the level at which our controls
are documented, designed, operated or reviewed, or if the independent
registered public accounting firm interprets the requirements, rules or
regulations differently from us, then they may decline to attest to
managements assessment or may issue a report that is qualified. Any of these
possible outcomes could result in an adverse reaction in the financial
marketplace due to a loss of investor confidence in the reliability of our
controls over financial reporting, which ultimately could negatively impact the market price
of our shares.
We may not be successful in our acquisitions.
We have in the past made, and may in the future make, acquisitions. These
acquisitions involve numerous risks, including:
19
We cannot assure you that we will be able to successfully acquire other
businesses or product lines or integrate them into our operations without
substantial expense, delay in implementation or other operational or financial
problems.
IXYS could be harmed by litigation involving patents and other intellectual property rights.
As a general matter, the semiconductor industry is characterized by
substantial litigation regarding patent and other intellectual property rights.
We have been sued on occasion for purported patent infringement and are
currently defending against a number of such claims. For example, we have been
sued by International Rectifier for purportedly infringing some of its patents
covering power MOSFETs. After trial, the U.S. District Court awarded damages
to International Rectifier of $27.2 million plus attorney fees and issued a
permanent injunction against IXYS, effectively barring us from selling or
distributing the allegedly infringing products. The United States Court of
Appeals for the Federal Circuit reversed or reversed and remanded all findings
of patent infringement previously issued against us by the U.S. District Court,
and vacated the permanent injunction and the damages and attorneys fees awards.
The litigation is expected to continue at the U.S. District Court and could
result in another damages award, as well as an attorneys fees award and an
injunction. We continue to contest International Rectifiers claims vigorously
but the outcome of this litigation remains uncertain. See Item 1. Legal
Proceedings provided elsewhere in this Quarterly Report on Form 10-Q.
Additionally, in the future, we could be accused of infringing the
intellectual property rights of International Rectifier or other third parties.
We also have certain indemnification obligations to customers with respect to
the infringement of third party intellectual property rights by our products.
No assurance can be provided that any future infringement claims by third
parties or claims for indemnification by customers or end users of our products
resulting from infringement claims will not be asserted or that assertions of
infringement, if proven to be true, will not harm our business.
In the event of any adverse ruling in any intellectual property
litigation, including the pending power MOSFET litigation with International
Rectifier, we could be required to pay substantial damages, cease the
manufacturing, use and sale of infringing products, discontinue the use of
certain processes or obtain a license from the third party claiming
infringement with royalty payment obligations by us. An adverse decision in the
International Rectifier power MOSFET litigation would, and in any other
infringement action could, materially and adversely affect our financial
condition, results of operations and cash flows.
Any litigation relating to the intellectual property rights of third
parties, whether or not determined in our favor or settled by us, is costly and
may divert the efforts and attention of our management and technical personnel.
Our international operations expose us to material risks.
During fiscal 2004, our product sales by region were approximately 36.3%
in North America, approximately 38.0% in Europe and the Middle East and
approximately 25.7% in Asia. We expect revenues from foreign markets to
continue to represent a significant portion of total revenues. IXYS maintains
significant operations in Germany and the United Kingdom and contracts with
suppliers and manufacturers in South Korea, Japan and elsewhere in Europe and
Asia. Some of the risks inherent in doing business internationally are:
20
Our sales of products manufactured in our Lampertheim, Germany facility
and our costs at that facility are denominated in Euros, and sales of products
manufactured in our Chippenham, U.K. facility and our costs at that facility
are primarily denominated in British pounds and Euros. Fluctuations in the
value of the Euro and the British pound against the U.S. dollar could have a
significant impact on our balance sheet and results of operations, including
our net income. We generally do not enter into foreign currency hedging
transactions to control or minimize these risks. Fluctuations in currency
exchange rates could cause our products to become more expensive to customers
in a particular country, leading to a reduction in sales or profitability in
that country. If we expand our international operations or change our pricing
practices to denominate prices in other foreign currencies, we could be exposed
to even greater risks of currency fluctuations.
In addition, the laws of certain foreign countries may not protect our
products or intellectual property rights to the same extent as U.S. laws
regarding the manufacture and sale of our products in the U.S. Therefore, the
risk of piracy of our technology and products may be greater when we
manufacture or sell our products in these foreign countries.
We have experienced
operating losses in the past, and we may experience additional declines in revenues and operating losses in the future.
Our historical financial results have been, and our future financial
results are anticipated to be, subject to substantial fluctuations. We incurred
net losses of $4.4 million and $12.2 million in fiscal 2004 and 2003,
respectively. Reduced end-user demand, continued price declines, excess
inventory, underutilization of our manufacturing capacity and other factors
could adversely affect our business in the near term and we may experience
declines in revenue and operating losses in the future. In order to return to
consistent profitability, we must successfully implement our objectives,
including our cost reduction initiatives. However, we also currently face an
environment of uncertain demand and pricing pressure in the markets our
products address. Although we reported net income for the six months
ended September 30, 2004, we cannot assure you that we will be able to sustain our
profitability.
We depend on external foundries to manufacture many of our products.
Of our revenues in fiscal 2004, 41.4% came from wafers manufactured for us
by external foundries. Our dependence on external foundries may grow. We have
arrangements with eight wafer foundries, three of which produce the wafers for
power semiconductors that we purchase from external foundries. Samsung
Electronicss facility in Kiheung, South Korea is our principal external
foundry.
Our relationships with our external foundries do not guarantee prices,
delivery or lead times, or wafer or product quantities sufficient to satisfy
current or expected demand. These foundries manufacture our products on a
purchase order basis. We provide these foundries with rolling forecasts of our
production requirements; however, the ability of each foundry to provide wafers
to us is limited by the foundrys available capacity. At any given time, these
foundries could choose to prioritize capacity for their own use or other
customers or reduce or eliminate deliveries to us on short notice. If growth in
demand for our products occurs, these foundries may be unable or unwilling to
allocate additional capacity to our needs, thereby limiting our revenue growth.
Accordingly, we cannot be certain that these foundries will allocate sufficient
capacity to satisfy our requirements. In addition, we cannot be certain that we
will continue to do business with these or other foundries on terms as
favorable as our current terms. If we are not able to obtain additional foundry
capacity as required, our relationships with our customers could be harmed and
our revenues could be reduced or their growth limited. Moreover, even if we are
able to secure additional foundry capacity, we may be required, either
contractually or as a practical business matter, to utilize all of that
capacity or incur penalties or an adverse effect on the business relationship.
The costs related to maintaining foundry capacity could be expensive and could
harm our operating results. Other risks associated with our reliance on
external foundries include:
21
Our requirements typically represent a small portion of the total
production of the external foundries that manufacture our wafers and products.
We cannot be certain these external foundries will continue to devote resources
to the production of our wafers and products or continue to advance the process
design technologies on which the manufacturing of our products is based. These
circumstances could harm our ability to deliver our products on time or
increase our costs.
Our success depends on our ability to manufacture our products efficiently.
We manufacture our products in facilities that are owned and operated by
us, as well as in external wafer foundries and independent subcontract assembly
facilities. The fabrication of semiconductors is a highly complex and precise
process, and a substantial percentage of wafers could be rejected or numerous
die on each wafer could be nonfunctional as a result of, among other factors:
For these and other reasons, we could experience a decrease in
manufacturing yields. Additionally, as we increase our manufacturing output, we
may also experience a decrease in manufacturing yields. As a result, we may not
be able to cost effectively expand our production capacity in a timely manner.
We may not be able to protect our intellectual property rights adequately.
Our ability to compete is affected by our ability to protect our
intellectual property rights. We rely on a combination of patents, trademarks,
copyrights, trade secrets, confidentiality procedures and non-disclosure and
licensing arrangements to protect our intellectual property rights. Despite
these efforts, we cannot be certain that the steps we take to protect our
proprietary information will be adequate to prevent misappropriation of our
technology, or that our competitors will not independently develop technology
that is substantially similar or superior to our technology. More specifically,
we cannot assure you that our pending patent applications or any future
applications will be approved, or that any issued patents will provide us with
competitive advantages or will not be challenged by third parties. Nor can we
assure you that, if challenged, our patents will be found to be valid or
enforceable, or that the patents of others will not have an adverse effect on
our ability to do business. Furthermore, others may independently develop
similar products or processes, duplicate our products or processes or design
their products around any patents that may be issued to us.
Our revenues are dependent upon our products being designed into our customers products.
Some of our new products are incorporated into customers products or
systems at the design stage. The value of any design win largely depends upon
the customers decision to manufacture the designed product in production
quantities, the commercial success of the customers product and the extent to
which the design of the customers electronic system also accommodates
incorporation of components manufactured by our competitors. In addition, our
customers could subsequently redesign their products or systems so that they no
longer require our products. We may not achieve design wins or our design wins
may not result in future revenues.
Because our products typically have lengthy sales cycles, we may experience substantial delays between incurring expenses related to research and development and the generation of revenues.
The time from initiation of design to volume production of new
semiconductors often takes 18 months or longer. We first work with customers to
achieve a design win, which may take nine months or longer. Our customers then
complete the design, testing and evaluation process and begin to ramp up
production, a period which may last an additional nine months or longer. As a
result, a significant period of time may elapse between our research and
development efforts and our realization of revenues, if any, from volume
purchasing of our products by our customers.
22
Our backlog may not result in future revenues.
Customer orders typically can be cancelled or rescheduled without penalty
to the customer. As a result, our backlog at any particular date is not
necessarily indicative of actual revenues for any succeeding period. A
reduction of backlog during any particular period, or the failure of our
backlog to result in future revenues, could harm our results of operations.
The markets in which we participate are intensely competitive.
Certain of our target markets are intensely competitive. Our ability to
compete successfully in our target markets depends on the following factors:
In addition, our competitors or customers may offer new products based on
new technologies, industry standards or end user or customer requirements,
including products that have the potential to replace our products or provide
lower cost or higher performance alternatives to our products. The introduction
of new products by our competitors or customers could render our existing and
future products obsolete or unmarketable.
Our primary power semiconductor competitors include Advanced Power
Technology, Fairchild Semiconductor, Fuji, International Rectifier, Infineon,
On Semiconductor, Powerex, Semikron International, STMicroelectronics, Siemens
and Toshiba. Our IC products compete principally with those of Agere,
Legerity,
NEC and Silicon Labs. Our RF power semiconductor competitors include RF Micro
Devices and RF Monolithics. Many of our competitors have greater financial,
technical, marketing and management resources than we have. Some of these
competitors may be able to sell their products at prices below which it would
be profitable for us to sell our products or benefit from established customer
relationships that provide them with a competitive advantage.
We rely on our distributors and sales representatives to sell many of our products.
A substantial majority of our products are sold to distributors and
through sales representatives. Our distributors and sales representatives could
reduce or discontinue sales of our products. They may not devote the resources
necessary to sell our products in the volumes and within the time frames that
we expect. In addition, we depend upon the continued viability and financial
resources of these distributors and sales representatives, some of which are
small organizations with limited working capital. These distributors and sales
representatives, in turn, depend substantially on general economic conditions
and conditions within the semiconductor industry. We believe that our success
will continue to depend upon these distributors and sales representatives.
At September 30, 2004, no distributor accounted for greater than 10% of
our outstanding receivables. If this or any other distributor or sales
representative experiences financial difficulties, or otherwise becomes unable
or unwilling to promote and sell our products, our business could be harmed.
Our future success depends on the continued service of management and key engineering personnel and our ability to identify, hire and retain additional personnel.
Our success depends upon our ability to attract and retain highly-skilled
technical, managerial, marketing and finance personnel, and to a significant
extent, upon the efforts and abilities of Nathan Zommer, Ph.D., our president
and chief executive officer, and other members of senior management. The loss
of the services of one or more of our senior management or other key employees
could adversely affect our business. We do not maintain key person life
insurance on any of our officers, employees or consultants. There is intense
competition for qualified employees in the semiconductor industry, particularly
for highly skilled design, applications and test engineers. Competition is
especially intense in the Silicon Valley, where our U.S. design facilities for
power semiconductors and RF
23
power semiconductors are located. We may not be able to continue to
attract and retain engineers or other qualified personnel necessary for the
development of our business or to replace engineers or other qualified
individuals who could leave us at any time in the future. Our anticipated
growth is expected to place increased demands on our resources, and will likely
require the addition of new management and engineering staff as well as the
development of additional expertise by existing management employees. If we
lose the services of or fail to recruit key engineers or other technical and
management personnel, our business could be harmed.
Periods of rapid growth and expansion could continue to place a significant strain on our resources, including our employee base.
To manage our possible future growth effectively, we will be required to
continue to improve our operational, financial and management systems. In doing
so, we will periodically implement new software and other systems that will
affect our internal operations regionally or globally. The conversion process
from one system to another is complex and requires, among other things, that
data from the existing system be made compatible with the upgraded system.
During any transition, we could experience errors, delays and other
inefficiencies, which could adversely affect our business.
Future growth will also require us to successfully hire, train, motivate
and manage our employees. In addition, our continued growth and the evolution
of our business plan will require significant additional management, technical
and administrative resources. We may not be able to effectively manage the
growth and evolution of our current business.
Our stock price is volatile.
The market price of our common stock has fluctuated significantly to date.
The future market price of our common stock may also fluctuate significantly
in the event of:
In addition, the stock market in recent years has experienced extreme
price and volume fluctuations that have affected the market prices of many high
technology companies, including semiconductor companies. These fluctuations
have often been unrelated or disproportionate to the operating performance of
companies in our industry, and could harm the market price of our common stock.
Our dependence on independent subcontractors to assemble and test our products
subject us to a number of risks, including an inadequate supply of products and
higher materials costs.
We depend on independent subcontractors for the assembly and testing of
our products. During fiscal 2004, the great majority of our products were
assembled by independent subcontractors located outside of the United States.
Our reliance on these subcontractors involves the following significant risks:
24
These risks may lead to delayed product delivery or increased costs, which
would harm our profitability and customer relationships.
In addition, we use a limited number of subcontractors to assemble a
significant portion of our products. If one or more of these subcontractors
experiences financial, operational, production or quality assurance
difficulties, we could experience a reduction or interruption in supply.
Although we believe alternative subcontractors are available, our operating
results could temporarily suffer until we engage one or more of those
alternative subcontractors.
Our markets are subject to technological change and our success depends on our ability to develop and introduce new products.
The markets for our products are characterized by:
To develop new products for our target markets, we must develop, gain
access to and use leading technologies in a cost effective and timely manner
and continue to expand our technical and design expertise. Failure to do so
could cause us to lose our competitive position and seriously impact our future
revenues.
Our operating expenses are relatively fixed, and we may order materials in
advance of anticipated customer demand. Therefore, we have limited ability to
reduce expenses quickly in response to any revenue shortfalls.
Our operating expenses are relatively fixed, and, therefore, we have
limited ability to reduce expenses quickly in response to any revenue
shortfalls. Consequently, our operating results will be harmed if our revenues
do not meet our revenue projections.
We also typically plan our production and inventory levels based on our
own expectations for customer demand. Actual customer demand, however, can be
highly unpredictable and can fluctuate substantially. From time to time, in
response to anticipated long lead times to obtain inventory and materials from
our external suppliers and foundries, we may order materials or production in
advance of anticipated customer demand. This advance ordering may result in
excess inventory levels or unanticipated inventory write downs if expected
orders fail to materialize.
We may not be able to acquire additional production capacity to meet the present and future demand for our products.
The semiconductor industry has been characterized by periodic limitations
on production capacity. Although we may be able to obtain the capacity
necessary to meet present demand, if we are unable to increase our production
capacity to meet possible future demand, some of our customers may seek other
sources of supply or our future growth may be limited.
We depend on a limited number of suppliers for our wafers.
We purchase the bulk of our silicon wafers from three vendors with whom we
do not have long term supply agreements. Any of these suppliers could eliminate
or terminate our supply of wafers at any time. Our reliance on a limited number
of suppliers involves several risks, including potential inability to obtain an
adequate supply of silicon wafers and reduced control over the price, timely
delivery, reliability and quality of the silicon wafers. We cannot assure that
problems will not occur in the future with suppliers.
25
Our ability to access capital markets could be limited.
From time to time we access the capital markets to obtain long-term
financing. Although we believe that we can continue to access the capital
markets on acceptable terms and conditions, our flexibility with regard to
long-term financing activity could be limited by our existing capital
structure, our credit ratings, and the health of the semiconductor industry. In
addition, many of the factors that affect our ability to access the capital
markets, such as the liquidity of the overall capital markets and the current
state of the economy, are outside of our control. There can be no assurances
that we will continue to have access to the capital markets on favorable terms.
Regulations may adversely affect our ability to sell our products.
Semiconductors with operating voltages above 40 volts are subject to
regulations intended to address the safety, reliability and quality of the
products. These regulations relate to processes, design, materials and
assembly. For example, in the United States some high voltage products are
required to pass Underwriters Laboratory recognition for voltage isolation and
fire hazard tests. Sales of semiconductors outside of the United States are
subject to international regulatory requirements that vary from country to
country. The process of obtaining and maintaining required regulatory
clearances can be lengthy, expensive and uncertain. The time required to obtain
approval for sale internationally may be longer than that required for U.S.
approval, and the requirements may differ.
In addition, approximately 14.9% of our revenues in fiscal 2004 were
derived from the sale of products included in medical devices that are subject
to extensive regulation by numerous governmental authorities in the United
States and internationally, including the U.S. Food and Drug Administration, or
FDA. The FDA and certain foreign regulatory authorities impose numerous
requirements for medical device manufacturers to meet, including adherence to
Good Manufacturing Practices, or GMP, regulations and similar regulations in
other countries, which include testing, control and documentation requirements.
Ongoing compliance with GMP and other applicable regulatory requirements is
monitored through periodic inspections by federal and state agencies, including
the FDA, and by comparable agencies in other countries. Our failure to comply
with applicable regulatory requirements could prevent our products from being
included in approved medical devices.
Our business could also be harmed by delays in receiving or the failure to
receive required approvals or clearances, the loss of previously obtained
approvals or clearances or the failure to comply with existing or future
regulatory requirements.
Business interruptions may damage our facilities or those of our suppliers.
Our operations and those of our suppliers are vulnerable to interruption
by fire, earthquake and other natural disasters, as well as power loss,
telecommunications failure and other events beyond our control. We do not have
a detailed disaster recovery plan and do not have backup generators. Our
facilities in California are located near major earthquake fault lines and have
experienced earthquakes in the past. If any of these events occur, our ability
to conduct our operations could be seriously impaired, which could harm our
business, financial condition and results of operations. We cannot be sure that
the insurance we maintain against general business interruptions will be
adequate to cover all our losses.
We may be affected by environmental laws and regulations.
We are subject to a variety of laws, rules and regulations in the United
States, England and Germany related to the use, storage, handling, discharge
and disposal of certain chemicals and gases used in our manufacturing process.
Any of those regulations could require us to acquire expensive equipment or to
incur substantial other expenses to comply with them. If we incur substantial
additional expenses, product costs could significantly increase. Our failure to
comply with present or future environmental laws, rules and regulations could
result in fines, suspension of production or cessation of operations.
We face the risk of financial exposure to product liability claims alleging
that the use of devices that incorporate our products resulted in adverse
effects.
Approximately 14.9% of our net revenues in fiscal 2004 were derived from
sales of products used in medical devices such as defibrillators. Product
liability risks may exist even for those medical devices that have received
regulatory approval for commercial sale. We do not currently carry product
liability insurance, and any defects in our products used in these devices
could result in significant recall or product liability costs to us.
26
Nathan Zommer, Ph.D. owns a significant interest in our common stock.
Nathan Zommer, Ph.D., our president and chief executive officer,
beneficially owns, as of October 28, 2004, approximately 20% of the outstanding
shares of our common stock. As a result, Dr. Zommer could exercise significant
control over all matters requiring stockholder approval, including the election
of the board of directors. His holdings could result in a delay of, or serve as
a deterrent to, possible changes in control of IXYS, which may reduce the
market price of our common stock.
The anti-takeover provisions of our amended and restated certificate of
incorporation and of the Delaware General Corporation Law may delay, defer or
prevent a change of control.
Our board of directors has the authority to issue up to 5,000,000 shares
of preferred stock and to determine the price, rights, preferences and
privileges and restrictions, including voting rights, of those shares without
any further vote or action by our stockholders. The rights of the holders of
common stock will be subject to, and may be harmed by, the rights of the
holders of any shares of preferred stock that may be issued in the future. The
issuance of preferred stock may delay, defer or prevent a change in control
because the terms of any issued preferred stock could potentially prohibit our
consummation of any merger, reorganization, sale of substantially all of our
assets, liquidation or other extraordinary corporate transaction, without the
approval of the holders of the outstanding shares of preferred stock. In
addition, the issuance of preferred stock could have a dilutive effect on our
stockholders.
Our stockholders must give substantial advance notice prior to the
relevant meeting to nominate a candidate for director or present a proposal to
our stockholders at a meeting. These notice requirements could inhibit a
takeover by delaying stockholder action. The Delaware anti-takeover law
restricts business combinations with some stockholders once the stockholder
acquires 15% or more of our common stock. The Delaware statute makes it more
difficult for us to be acquired without the consent of our board of directors
and management.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our market risk has not changed materially from the market risk disclosed
in Item 7A, Quantitative and Qualitative Disclosures About Market Risk, of
our Annual Report on Form 10-K for the fiscal year ended March 31, 2004.
ITEM 4. CONTROLS AND PROCEDURES.
An evaluation was carried out under the supervision and with the
participation of our Chief Executive Officer and our Chief Financial Officer of
the effectiveness of our disclosure controls and procedures (as defined in Rule
13a-15(e) under the Securities Exchange Act of 1934, as amended) as of
September 30, 2004. This evaluation included various processes that were
carried out in an effort to ensure that information required to be disclosed in
our Securities and Exchange Commission, or SEC, reports is recorded, processed,
summarized and reported within the time periods specified by the SEC. This
evaluation also included consideration of certain aspects of our internal
controls and procedures for the preparation of our financial statements.
In evaluating these internal controls we sought to determine whether there
were any control deficiencies, significant deficiencies and, in particular,
whether there were any material weaknesses. Control deficiencies exist
when the design or operation of a control does not allow management or
employees, in the normal course of performing their assigned functions, to
prevent or detect misstatements on a timely basis. Significant deficiencies
and material weaknesses are internal control deficiencies that adversely
affect a companys ability to initiate, authorize, record, process or report
information in its external financial statements in accordance with generally
accepted accounting principles. A significant deficiency is defined as a
single deficiency, or a combination of deficiencies, that results in more than
a remote likelihood that a misstatement of the financial statements that is
more than inconsequential in amount will not be prevented or detected. A
material weakness is defined as a significant deficiency that, by itself, or
in combination with other significant deficiencies, results in more than a
remote likelihood that a material misstatement of the financial statements will
not be prevented or detected.
Our auditors, PricewaterhouseCoopers LLP, or PwC, as a result of their
audit of our financial statements for the year ended March 31, 2004, informed
us of a material weakness. In the planning and performance of the audit, PwC
considered the internal controls in order to complete its audit of the
financial statements and not to provide assurance on internal controls. Had PwC
performed an attestation engagement of the internal controls as of March 31,
2004, other significant deficiencies and/or material weaknesses may have come
to the attention of PwC. The material weakness identified as a result of the
PwC audit procedures related to inventory accounting. Certain of our inventory
processes were not reviewed by a supervisor in sufficient detail, resulting in
the following inaccurate adjustments: standard cost revisions; incomplete
updating of costs included in the standards; journal entries recorded without
the proper supporting documentation; and reconciliation of the general ledger
balance to the perpetual records. PwC also observed a lack of procedures to
track inventory transactions related to cut-off issues.
27
The net effect of the corrections of these errors on our financial
statements for the year ended March 31, 2004 was a reduction in cost of goods
sold on our statement of operations of $823,000, an increase in inventory of
$1,099,000 and an increase in accrued expenses and other liabilities of
$276,000.
We believe that the material weakness relates to events in the fourth
quarter of fiscal 2004 and had no material effect on financial statements for
prior periods.
Our Chief Executive Officer, Chief Financial Officer, and audit committee
are aware of the material weakness. The following factors contributed to the
aforementioned control conditions:
In light of the material weakness and the requirements enacted in the
Sarbanes-Oxley Act of 2002 and the related rules and regulations adopted by the
SEC, our Chief Executive Officer and Chief Financial Officer concluded, as of
September 30, 2004, that our disclosure controls and procedures were not
effective.
We have implemented controls and procedures intended to address the
material weakness. These controls and procedures include supervisory review of
inventory reconciliations, review of standard costs and excess inventory and
improved cycle count procedures. In addition, we have appointed a corporate
controller and intend to employ a cost accountant and a financial analyst. In
the future, we intend to schedule standard cost revisions for times other than
when financial statement closings are occurring. As mitigation until the
material weakness is successfully resolved, we are running additional
procedures and expending additional time on our inventory accounting during the
preparation of each Form 10-Q and Form 10-K.
We are also in the process of formalizing the consolidated enterprises
internal controls and procedures for financial reporting in accordance with the
SECs rules implementing the internal control report requirements included in
Section 404 of the Sarbanes-Oxley Act of 2002, or the 404 rules. Changes have
been made and will be made to our internal controls as a result of these
efforts. We believe that the material weakness and the effectiveness of our
disclosure controls and procedures will be adequately addressed when we have
concluded that our internal controls are effective as part of an annual
attestation report under the 404 rules.
We have committed significant resources to address the internal control
deficiencies identified to date. However, many of the salutary procedures and
actions deemed desirable by management have not been fully implemented to date.
It will take additional time to complete implementation and realize the
benefits of our actions. Management intends to continue to work towards a
resolution of the control deficiencies.
We have no reason to believe that the financial statements included in
this report are not fairly stated in all material respects. However, new
problems could be identified in the future. We expect to continue to improve
our controls in a multi-period effort to achieve disclosure controls and
procedures and internal controls satisfactory for a company of our size in the
semiconductor industry.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We currently are involved in a variety of legal matters that arise in the
normal course of business. Based on information currently available, management
does not believe that the ultimate resolution of these matters, including the
matters described in the following paragraphs, will have a material adverse
effect on our financial condition, results of operations or cash flows. Were an
unfavorable ruling to occur, there exists the possibility of a material adverse
impact on the results of operations of the period in which the ruling occurs.
On June 22, 2000, International Rectifier Corporation filed an action for
patent infringement against us in the United States District Court for the
Central District of California, alleging that certain of our products sold in
the United States infringe U.S. patents owned by International Rectifier.
International Rectifiers complaint against us contended that our alleged
infringement of International Rectifiers patents has been and continues to be
willful and deliberate. Subsequently, the U.S. District Court decided that
certain of our power MOSFETs and IGBTs infringe certain claims of each of three
International Rectifier U.S. patents.
In 2002, the U.S. District Court entered a permanent injunction barring
us from making, using, offering to sell or selling in, or importing into, the
United States, MOSFETs (including IGBTs) covered by the subject patents and
ruled that International Rectifier
28
should be awarded damages of $9.1 million for our alleged infringement of
International Rectifiers patents. In addition, the U.S. District Court ruled
that we had been guilty of willful infringement. Subsequently, the U.S.
District Court increased the damages to a total of $27.2 million, plus attorney
fees. We appealed and on March 19, 2004 the United States Court of Appeals for
the Federal Circuit reversed or vacated all findings of patent infringement
previously issued against us by the U.S. District Court. On August 9, 2004, the
Federal Circuit vacated the damages award.
We believe our defenses to the various remaining claims made by
International Rectifier are meritorious. However, there can be no assurance of
a favorable outcome. In the event of an adverse outcome, damages or injunctions
awarded by the U.S. District Court would be materially adverse to our financial
condition, results of operations and cash flows. Management has not accrued any amounts for
damages in the accompanying balance sheets for the International Rectifier
matter described above.
Information
regarding the patent infringement lawsuit between the Company and
Advanced Power Technology, Inc. is contained in our Quarterly Report
on Form 10-Q for the quarter ended June 30, 2004. As of August 11, 2004, we and Advanced Power Technology, Inc. entered into
an agreement and consented to a Stipulated Order of Dismissal
regarding our patent infringement lawsuit in United States District Court in the Northern
District of California. The agreement is a final settlement of all claims in
the lawsuit.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS
See the Index to Exhibits,
which is incorporated by reference herein.
29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
30
EXHIBIT INDEX
31
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
September 30, 2004
March 31, 2004
$
48,848
$
42,058
811
1,141
37,750
33,131
51,049
48,055
2,763
1,710
8,090
7,769
149,311
133,864
24,668
26,147
7,790
7,565
9,405
9,503
21,190
21,190
$
212,364
$
198,269
$
2,812
$
3,447
700
800
18,022
15,277
22,997
18,094
44,531
37,618
2,423
2,904
157
157
12,553
12,059
59,664
52,738
332
331
151,960
151,074
(6
)
(10
)
(1,128
)
(1,388
)
(5,046
)
(10,750
)
(983
)
(447
)
7,571
6,721
152,700
145,531
$
212,364
$
198,269
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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Ended
Six Months Ended
September 30,
September 30,
2004
2003
2004
2003
$
61,385
$
42,926
$
121,339
$
83,022
41,874
31,689
84,653
59,444
19,511
11,237
36,686
23,578
5,071
3,855
9,623
7,889
8,151
7,447
17,527
15,173
13,222
11,302
27,150
23,062
6,289
(65
)
9,536
516
160
174
394
286
(97
)
(41
)
(178
)
(77
)
(77
)
(226
)
(433
)
(200
)
6,275
(158
)
9,319
525
(2,434
)
49
(3,615
)
(190
)
$
3,841
$
(109
)
$
5,704
$
335
$
0.12
$
(0.00
)
$
0.17
$
0.01
33,007
32,213
32,980
32,051
$
0.11
$
(0.00
)
$
0.16
$
0.01
34,484
32,213
34,773
33,061
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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Three Months Ended
Six Months Ended
September 30,
September 30,
2004
2003
2004
2003
$
3,841
$
(109
)
$
5,704
$
335
1,253
374
850
676
$
5,094
$
265
$
6,554
$
1,011
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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Six Months Ended
September 30,
2004
2003
$
5,704
$
335
5,720
5,390
2,170
1,456
6,497
62
(272
)
(560
)
-
(237
)
119
-
54
-
15
-
330
277
(6,863
)
(5,323
)
(9,579
)
(1,634
)
(828
)
(198
)
(93
)
(429
)
2,826
(578
)
4,962
2,403
538
1,186
11,300
2,150
-
143
(3,599
)
(1,465
)
(3,599
)
(1,322
)
(1,203
)
(2,176
)
-
100
(100
)
-
(536
)
-
436
482
298
-
240
-
(865
)
(1,594
)
(46
)
267
6,790
(499
)
$
42,058
$
40,094
$
48,848
$
39,595
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$
4,189
167
321
$
4,677
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Three Months Ended
Six Months Ended
September 30,
September 30,
2003
2003
$
43,783
$
85,406
$
(2,118
)
$
(2,181
)
$
(0.06
)
$
(0.07
)
32,980
32,818
$
(0.06
)
$
(0.07
)
32,980
32,818
September 30, 2004
March 31, 2004
$
13,245
$
12,117
24,103
26,729
13,701
9,209
$
51,049
$
48,055
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Three Months Ended
Six Months Ended
September 30,
September 30,
2004
% increase from
2003
2004
% increase from
2003
2003 to 2004
2003 to 2004
$
61,385
43.0%
$
42,926
$
121,339
46.2%
$
83,022
41,874
32.1%
31,689
84,653
42.4%
59,444
19,511
73.6%
11,237
36,686
55.6%
23,578
5,071
31.5%
3,855
9,623
22.0%
7,889
8,151
9.5%
7,447
17,527
15.5%
15,173
$
13,222
17.0%
$
11,302
$
27,150
17.7%
$
23,062
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the reduction, rescheduling or cancellation of orders by customers;
fluctuations in timing and amount of customer requests for product shipments;
changes in the mix of products that our customers purchase;
the cyclical nature of the semiconductor industry;
competitive pressures on selling prices;
market acceptance of our products;
fluctuations in our manufacturing yields and significant yield losses;
difficulties in forecasting demand for our products and the planning and managing of inventory levels;
the availability of production capacity;
the amount and timing of investments in research and development;
changes in our product distribution channels and the timeliness of receipt of distributor resale information;
the impact of vacation schedules and holidays, largely during the second and third fiscal quarters of our fiscal year; and
the amount and timing of costs associated with product returns.
periods of overcapacity and production shortages;
cyclical demand for semiconductors;
changes in product mix in response to changes in demand;
significant price erosion;
variations in manufacturing costs and yields;
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rapid technological change and the introduction of new products; and
significant expenditures for capital equipment and product development.
diversion of managements attention during the acquisition process;
disruption of our ongoing business;
the potential strain on our financial and managerial controls and reporting systems and procedures;
unanticipated expenses and potential delays related to integration of an acquired business;
failure to successfully integrate the operations of an acquired company with our own;
the challenges in achieving strategic objectives, cost savings and other benefits from acquisitions;
the risk that our markets do not evolve as anticipated and that the
technologies acquired do not prove to be those needed to be successful
in those markets;
the risk of entering new markets in which we have limited experience;
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difficulties in expanding our information technology systems to accommodate the acquired businesses;
failure to retain key personnel of the acquired businesses;
the challenges inherent in managing an increased number of employees
and facilities and the need to implement appropriate policies, benefits
and compliance programs;
customer dissatisfaction or performance problems with an acquired company;
the cost associated with acquisitions and the integration of acquired operations; and
assumption of known or unknown liabilities or other unanticipated events or circumstances.
foreign currency fluctuations;
changes in the laws, regulations or policies of the countries in which we manufacture or sell our products;
trade restrictions;
longer payment cycles;
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challenges in collecting accounts receivable;
cultural and language differences;
employment regulations;
transportation delays;
work stoppages; and
economic or political instability.
the lack of control over delivery schedules;
the unavailability of, or delays in obtaining access to, key process technologies;
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limited control over quality assurance, manufacturing yields and production costs; and
potential misappropriation of our intellectual property.
contaminants in the manufacturing environment;
defects in the masks used to print circuits on a wafer;
manufacturing equipment failure; or
wafer breakage.
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product quality, reliability and performance;
product features;
price;
timely delivery of products;
breadth of product line;
design and introduction of new products; and
technical support and service.
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variations in our actual or expected quarterly operating results;
announcements or introductions of new products;
technological innovations by our competitors or development setbacks by us;
conditions in the communications and semiconductor markets;
the commencement or adverse outcome of litigation;
changes in analysts estimates of our performance or changes in
analysts forecasts regarding our industry, competitors or customers;
announcements of merger or acquisition transactions or a failure to
achieve the expected benefits of an acquisition as rapidly or to the
extent anticipated by financial analysts;
sales of our common stock by one or more members of
management, including Nathan Zommer, Ph.D., our President and Chief
Executive Officer; or
general economic and market conditions.
reduced control over delivery schedules and quality;
the potential lack of adequate capacity during periods of excess demand;
difficulties selecting and integrating new subcontractors;
limited warranties by subcontractors or other vendors on products supplied to us;
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potential increases in prices due to capacity shortages and other factors;
potential misappropriation of our intellectual property; and
economic or political instability in foreign countries.
changing technologies;
changing customer needs;
frequent new product introductions and enhancements;
increased integration with other functions; and
product obsolescence.
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rapid growth of the company through acquisitions;
turnover of key finance personnel; and,
integration of legacy accounting and information systems.
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(c) Total Number of
Shares (or Units)
(a) Total Number of
(b) Average
Purchased as Part of
(d) Maximum Number (or Approximate Dollar
Shares (or Units)
Price Paid per
Publicity Announced
Value) of Shares (or Units) that May Yet Be
Period
Purchased
Share (or Unit)
Plans or Programs
Purchased Under the Plans or Programs
July 31, 2004
-
(1)
-
985,000
(2)
August 31, 2004
59,900
$6.64
59,900
925,100
September 30, 2004
-
(1)
-
925,100
59,900
59,900
925,100
(1)
Not applicable
(2)
The current program was announced on May 24, 2004 and will expire on June
10, 2005. The purchase of up to 1,000,000 shares of common stock was
approved.
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IXYS CORPORATION
By: /s/ Arnold P. Agbayani
Arnold P. Agbayani, Senior Vice President, Finance and
Chief Financial Officer (Principal Financial Officer)
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Exhibit
No.
Description
Amended and Restated Certificate of Incorporation of the Registrant. (1)
Amended and Restated Bylaws of the Registrant. (2)
Stock Option Agreement of Kenneth D. Wong.
Form of stock option agreement for non-employee directors.
Form of stock option agreement for employees, including executive officers.
Certificate of Chief Executive Officer required under Section 302 of the
Sarbanes-Oxley Act of 2002.
Certificate of Chief Financial Officer required under Section 302 of the
Sarbanes-Oxley Act of 2002.
Certification required under Section 906 of the Sarbanes-Oxley Act of 2002.(3)
(1)
Filed as Exhibit 3.1 to the Annual Report on Form 10-K for the fiscal
year ended March 31, 2001 (000-26124) and incorporated herein by
reference.
(2)
Filed as Exhibit 3.2 to the Quarterly Report on Form 10-Q for the period
ended September 30, 2002 (000-26124) and incorporated herein by reference.
(3)
This exhibit is furnished and shall not be deemed filed
for purposes of
Section 18 of the Securities and Exchange Act of 1933, as amended (the
Exchange Act), or incorporated by reference in any filing under the
Securities and Exchange Act of 1993, as amended, or the Exchange Act,
except as shall be expressly set forth by specific reference in such a
filing.
EXHIBIT 10.1
IXYS CORPORATION
1999 NON-EMPLOYEE DIRECTORS' EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
(NONSTATUTORY STOCK OPTIONS)
Pursuant to your Certificate of Stock Option Grant on the AST Stockplan website ("Certificate") and this Stock Option Agreement, IXYS Corporation (the "Company") has granted you an option under its 1999 Non-Employee Directors' Equity Incentive Plan (the "Plan") to purchase the number of shares of the Company's Common Stock indicated in your Certificate at the exercise price indicated in your Certificate. Defined terms not explicitly defined in this Stock Option Agreement but defined in the Plan shall have the same definitions as in the Plan.
The details of your option are as follows:
1. VESTING. Subject to the limitations contained herein, your option will vest as provided in your Certificate, provided that vesting will cease upon the termination of your Continuous Service.
2. NUMBER OF SHARES AND EXERCISE PRICE. The number of shares of Common Stock subject to your option and your exercise price per share referenced in your Certificate may be adjusted from time to time for Capitalization Adjustments, as provided in the Plan.
3. METHOD OF PAYMENT. Payment of the exercise price is due in full upon exercise of all or any part of your option. You may elect to make payment of the exercise price in cash or by check or in any other manner PERMITTED BY THE COMPANY, which may include one or more of the following:
a. In the Company's sole discretion at the time your option is exercised and provided that at the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal, pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds.
b. Provided that at the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal, by delivery of already-owned shares of Common Stock either that you have held for the period required to avoid a charge to the Company's reported earnings (generally six months) or that you did not acquire, directly or indirectly from the Company, that are owned free and clear of any liens, claims, encumbrances or security interests, and that are valued at Fair Market Value on the date of exercise. "Delivery" for these purposes, in
the sole discretion of the Company at the time you exercise your option, shall include delivery to the Company of your attestation of ownership of such shares of Common Stock in a form approved by the Company. Notwithstanding the foregoing, you may not exercise your option by tender to the Company of Common Stock to the extent such tender would violate the provisions of any law, regulation or agreement restricting the redemption of the Company's stock.
4. WHOLE SHARES. You may exercise your option only for whole shares of Common Stock.
5. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary contained herein, you may not exercise your option unless the shares of Common Stock issuable upon such exercise are then registered under the Securities Act or, if such shares of Common Stock are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of your option must also comply with other applicable laws and regulations governing your option, and you may not exercise your option if the Company determines that such exercise would not be in material compliance with such laws and regulations.
6. TERM. The term of your option commences on the Date of Grant and expires upon the EARLIEST of the following:
a. three (3) months after the termination of your Continuous Service for any reason other than your Disability or death, provided that if during any part of such three- (3-) month period your option is not exercisable solely because of the condition set forth in the preceding paragraph relating to "Securities Law Compliance," your option shall not expire until the earlier of the Expiration Date or until it shall have been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service;
b. twelve (12) months after the termination of your Continuous Service due to your Disability;
c. eighteen (18) months after your death if you die either during your Continuous Service or within three (3) months after your Continuous Service terminates;
d. the Expiration Date indicated in your Certificate; or
e. the tenth (10th) anniversary of the Date of Grant.
7. EXERCISE.
a. You may exercise the vested portion of your option (and the unvested portion of your option if your Certificate so permits) during its term by delivering a Notice of Exercise (in a form designated by the Company) together with the exercise price to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then require.
b. By exercising your option you agree that, as a condition to any exercise of your option, the Company may require you to enter into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (1) the exercise of your option, (2) the lapse of any substantial risk of forfeiture to which the shares of Common Stock are subject at the time of exercise, or (3) the disposition of shares of Common Stock acquired upon such exercise.
8. TRANSFERABILITY. Your option is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, shall thereafter be entitled to exercise your option.
9. OPTION NOT A SERVICE CONTRACT. Your option is not an employment or service contract, and nothing in your option shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or an Affiliate, or of the Company or an Affiliate to continue your employment. In addition, nothing in your option shall obligate the Company or an Affiliate, their respective shareholders, Boards of Directors, Officers or Employees to continue any relationship that you might have as a Director or Consultant for the Company or an Affiliate.
10. WITHHOLDING OBLIGATIONS.
a. At the time you exercise your option, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for (including by means of a "cashless exercise" pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with your option.
b. Upon your request and subject to approval by the
Company, in its sole discretion, and compliance
with any applicable conditions or restrictions of
law, the Company may withhold from fully vested
shares of Common Stock otherwise issuable to you
upon the exercise of your option a number of whole
shares of Common Stock having a Fair Market Value,
determined by the Company as of the date of
exercise, not in excess of the minimum amount of
tax required to be withheld by law. If the date of
determination of any tax withholding obligation is
deferred to a date later than the date of exercise
of your option, share withholding pursuant to the
preceding sentence shall not be permitted unless
you make a proper and timely election under
Section 83(b) of the Code, covering the aggregate
number of shares of Common Stock acquired upon
such exercise with respect to which such
determination is otherwise deferred, to accelerate
the determination of such tax withholding
obligation to the date of exercise of your option.
Notwithstanding the filing of such election,
shares of Common Stock shall be withheld solely
from fully vested shares of Common Stock
determined as of the date of exercise of your
option that are otherwise issuable to you upon
such exercise. Any adverse consequences to you
arising in connection with such share withholding
procedure shall be your sole responsibility.
c. You may not exercise your option unless the tax withholding obligations of the Company and/or any Affiliate are satisfied. Accordingly, you may not be able to exercise your option when desired even though your option is vested, and the Company shall have no obligation to issue a certificate for such shares of Common Stock or release such shares of Common Stock from any escrow provided for herein.
11. NOTICES. Any notices provided for in your option or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.
12. GOVERNING PLAN DOCUMENT. Your option is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your option, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your option and those of the Plan, the provisions of the Plan shall control.
IXYS 1999 NON-EMPLOYEE DIRECTORS' EQUITY INCENTIVE PLAN
CERTIFICATE OF STOCK OPTION GRANT
GRANTED TO: KENNETH D. WONG THIS STOCK OPTION WAS GRANTED TO YOU ON SEPTEMBER 29, 2004 BY IXYS SOCIAL SECURITY NUMBER: CORPORATION. THE STOCK OPTION PRICE IS THE FMV ON THE DATE OF GRANT, WHICH EMPLOYEE ID: WAS $7.20000000. OPTION TO PURCHASE: 30,000 shares Top of Form TYPE OF STOCK OPTION: NQ --------------------------------------- Bottom of Form GRANT NUMBER: GRANT DATE: September 29, 2004 GRANT EXPIRATION DATE: September 28, 2014 |
GRANT PRICE: $7.20000000
VESTING SCHEDULE
VESTING START DATE:
September 29, 2004
SHARES VESTING VESTING IN PERIOD LAST DATE TO DATE OF VEST OVER THE PERIOD OCCURS EXERCISE --------------------------------------------------------------------- Jun-29-2005 750.00 End of Period Sep-28-2014 Sep-29-2008 29250.00 Monthly Sep-28-2014 |
Authorized by:
IXYS CORPORATION
EXHIBIT 10.2
IXYS CORPORATION
1999 NON-EMPLOYEE DIRECTORS' EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
(NONSTATUTORY STOCK OPTIONS)
Pursuant to your Certificate of Stock Option Grant on the AST Stockplan website ("Certificate") and this Stock Option Agreement, IXYS Corporation (the "Company") has granted you an option under its 1999 Non-Employee Directors' Equity Incentive Plan (the "Plan") to purchase the number of shares of the Company's Common Stock indicated in your Certificate at the exercise price indicated in your Certificate. Defined terms not explicitly defined in this Stock Option Agreement but defined in the Plan shall have the same definitions as in the Plan.
The details of your option are as follows:
1. VESTING. Subject to the limitations contained herein, your option will vest as provided in your Certificate, provided that vesting will cease upon the termination of your Continuous Service.
2. NUMBER OF SHARES AND EXERCISE PRICE. The number of shares of Common Stock subject to your option and your exercise price per share referenced in your Certificate may be adjusted from time to time for Capitalization Adjustments, as provided in the Plan.
3. METHOD OF PAYMENT. Payment of the exercise price is due in full upon exercise of all or any part of your option. You may elect to make payment of the exercise price in cash or by check or in any other manner PERMITTED BY THE COMPANY, which may include one or more of the following:
a. In the Company's sole discretion at the time your option is exercised and provided that at the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal, pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds.
b. Provided that at the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal, by delivery of already-owned shares of Common Stock either that you have held for the period required to avoid a charge to the Company's reported earnings (generally six months) or that you did not acquire, directly or indirectly from the Company, that are owned free and clear of any liens, claims, encumbrances or security interests, and that are valued at Fair Market Value on the date of exercise. "Delivery" for these purposes, in the sole discretion of the Company at the time you exercise your option, shall include delivery to the Company of your attestation of ownership of such shares of Common Stock in a form approved by the Company.
Notwithstanding the foregoing, you may not exercise your option by tender to the Company of Common Stock to the extent such tender would violate the provisions of any law, regulation or agreement restricting the redemption of the Company's stock.
4. WHOLE SHARES. You may exercise your option only for whole shares of Common Stock.
5. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary contained herein, you may not exercise your option unless the shares of Common Stock issuable upon such exercise are then registered under the Securities Act or, if such shares of Common Stock are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of your option must also comply with other applicable laws and regulations governing your option, and you may not exercise your option if the Company determines that such exercise would not be in material compliance with such laws and regulations.
6. TERM. The term of your option commences on the Date of Grant and expires upon the EARLIEST of the following:
a. three (3) months after the termination of your Continuous Service for any reason other than your Disability or death, provided that if during any part of such three- (3-) month period your option is not exercisable solely because of the condition set forth in the preceding paragraph relating to "Securities Law Compliance," your option shall not expire until the earlier of the Expiration Date or until it shall have been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service;
b. twelve (12) months after the termination of your Continuous Service due to your Disability;
c. eighteen (18) months after your death if you die either during your Continuous Service or within three (3) months after your Continuous Service terminates;
d. the Expiration Date indicated in your Certificate; or
e. the tenth (10th) anniversary of the Date of Grant.
7. EXERCISE.
a. You may exercise the vested portion of your option (and the unvested portion of your option if your Certificate so permits) during its term by delivering a Notice of Exercise (in a form designated by the Company) together with the exercise price to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then require.
b. By exercising your option you agree that, as a condition to any exercise of your option, the Company may require you to enter into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (1) the exercise of your option, (2) the lapse of any substantial risk of forfeiture to which the shares of Common Stock are subject at the time of exercise, or (3) the disposition of shares of Common Stock acquired upon such exercise.
8. TRANSFERABILITY. Your option is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, shall thereafter be entitled to exercise your option.
9. OPTION NOT A SERVICE CONTRACT. Your option is not an employment or service contract, and nothing in your option shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company
or an Affiliate, or of the Company or an Affiliate to continue your employment. In addition, nothing in your option shall obligate the Company or an Affiliate, their respective shareholders, Boards of Directors, Officers or Employees to continue any relationship that you might have as a Director or Consultant for the Company or an Affiliate.
10. WITHHOLDING OBLIGATIONS.
a. At the time you exercise your option, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for (including by means of a "cashless exercise" pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with your option.
b. Upon your request and subject to approval by the Company, in its sole discretion, and compliance with any applicable conditions or restrictions of law, the Company may withhold from fully vested shares of Common Stock otherwise issuable to you upon the exercise of your option a number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law. If the date of determination of any tax withholding obligation is deferred to a date later than the date of exercise of your option, share withholding pursuant to the preceding sentence shall not be permitted unless you make a proper and timely election under Section 83(b) of the Code, covering the aggregate number of shares of Common Stock acquired upon such exercise with respect to which such determination is otherwise deferred, to accelerate the determination of such tax withholding obligation to the date of exercise of your option. Notwithstanding the filing of such election, shares of Common Stock shall be withheld solely from fully vested shares of Common Stock determined as of the date of exercise of your option that are otherwise issuable to you upon such exercise. Any adverse consequences to you arising in connection with such share withholding procedure shall be your sole responsibility.
c. You may not exercise your option unless the tax withholding obligations of the Company and/or any Affiliate are satisfied. Accordingly, you may not be able to exercise your option when desired even though your option is vested, and the Company shall have no obligation to issue a certificate for such shares of Common Stock or release such shares of Common Stock from any escrow provided for herein.
11. NOTICES. Any notices provided for in your option or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.
12. GOVERNING PLAN DOCUMENT. Your option is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your option, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your option and those of the Plan, the provisions of the Plan shall control.
IXYS 1999 NON-EMPLOYEE DIRECTORS' EQUITY INCENTIVE PLAN
CERTIFICATE OF STOCK OPTION GRANT
GRANTED TO: THIS STOCK OPTION WAS GRANTED TO YOU ON BY IXYS SOCIAL SECURITY CORPORATION. THE STOCK OPTION PRICE IS NUMBER: THE FMV ON THE DATE OF GRANT, WHICH WAS $ . EMPLOYEE ID: Top of Form OPTION TO ------------------------------------------ PURCHASE: Bottom of Form |
TYPE OF STOCK
OPTION:
GRANT NUMBER:
GRANT DATE:
GRANT EXPIRATION
DATE:
GRANT PRICE:
VESTING SCHEDULE
VESTING START DATE:
SHARES VESTING VESTING IN PERIOD DATE OF VEST OVER THE PERIOD OCCURS LAST DATE TO EXERCISE ------------------------------------------------------------------------- |
Authorized by:
IXYS CORPORATION
EXHIBIT 10.3
IXYS CORPORATION
1999 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
(INCENTIVE AND NONSTATUTORY STOCK OPTIONS)
Pursuant to your Certificate of Stock Option Grant on the AST Stockplan website ("Certificate") and this Stock Option Agreement, IXYS Corporation (the "Company") has granted you an option under its 1999 Equity Incentive Plan (the "Plan") to purchase the number of shares of the Company's Common Stock indicated in your Certificate at the exercise price indicated in your Certificate. Defined terms not explicitly defined in this Stock Option Agreement but defined in the Plan shall have the same definitions as in the Plan.
The details of your option are as follows:
1. VESTING. Subject to the limitations contained herein, your option will vest as provided in your Certificate, provided that vesting will cease upon the termination of your Continuous Service.
2. NUMBER OF SHARES AND EXERCISE PRICE. The number of shares of Common Stock subject to your option and your exercise price per share referenced in your Certificate may be adjusted from time to time for Capitalization Adjustments, as provided in the Plan.
3. METHOD OF PAYMENT. Payment of the exercise price is due in full upon exercise of all or any part of your option. You may elect to make payment of the exercise price in cash or by check or in any other manner PERMITTED BY THE COMPANY, which may include one or more of the following:
a. In the Company's sole discretion at the time your option is exercised and provided that at the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal, pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds.
b. Provided that at the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal, by delivery of already-owned shares of Common Stock either that you have held for the period required to avoid a charge to the Company's reported earnings (generally six months) or that you did not acquire, directly or indirectly from the Company, that are owned free and clear of any liens, claims, encumbrances or security interests, and that are valued at Fair Market Value on the date of exercise. "Delivery" for these purposes, in the sole discretion of the Company at the time you exercise your option, shall include delivery to the Company of your attestation of ownership of such shares of Common Stock in a form approved by the Company.
Notwithstanding the foregoing, you may not exercise your option by tender to the Company of Common Stock to the extent such tender would violate the provisions of any law, regulation or agreement restricting the redemption of the Company's stock.
4. WHOLE SHARES. You may exercise your option only for whole shares of Common Stock.
5. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary contained herein, you may not exercise your option unless the shares of Common Stock issuable upon such exercise are then registered under the Securities Act or, if such shares of Common Stock are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of your option must also comply with other applicable laws and regulations governing your option, and you may not exercise your option if the Company determines that such exercise would not be in material compliance with such laws and regulations.
6. TERM. The term of your option commences on the Date of Grant and expires upon the EARLIEST of the following:
a. three (3) months after the termination of your Continuous Service for any reason other than your Disability or death, provided that if during any part of such three- (3-) month period your option is not exercisable solely because of the condition set forth in the preceding paragraph relating to "Securities Law Compliance," your option shall not expire until the earlier of the Expiration Date or until it shall have been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service;
b. twelve (12) months after the termination of your Continuous Service due to your Disability;
c. eighteen (18) months after your death if you die either during your Continuous Service or within three (3) months after your Continuous Service terminates;
d. the Expiration Date indicated in your Certificate; or
e. the tenth (10th) anniversary of the Date of Grant.
If your option is an incentive stock option, note that, to obtain the federal income tax advantages associated with an "incentive stock option," the Code requires that at all times beginning on the date of grant of your option and ending on the day three (3) months before the date of your option's exercise, you must be an employee of the Company or an Affiliate, except in the event of your death or Disability. The Company has provided for extended exercisability of your option under certain circumstances for your benefit but cannot guarantee that your option will necessarily be treated as an "incentive stock option" if you continue to provide services to the Company or an Affiliate as a Consultant or Director after your employment terminates or if you otherwise exercise your option more than three (3) months after the date your employment terminates.
7. EXERCISE.
a. You may exercise the vested portion of your option (and the unvested portion of your option if your Certificate so permits) during its term by delivering a Notice of Exercise (in a form designated by the Company) together with the exercise price to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then require.
b. By exercising your option you agree that, as a condition to any exercise of your option, the Company may require you to enter into an
arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (1) the exercise of your option, (2) the lapse of any substantial risk of forfeiture to which the shares of Common Stock are subject at the time of exercise, or (3) the disposition of shares of Common Stock acquired upon such exercise.
c. If your option is an incentive stock option, by exercising your option you agree that you will notify the Company in writing within fifteen (15) days after the date of any disposition of any of the shares of the Common Stock issued upon exercise of your option that occurs within two (2) years after the date of your option grant or within one (1) year after such shares of Common Stock are transferred upon exercise of your option.
8. TRANSFERABILITY. Your option is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, shall thereafter be entitled to exercise your option.
9. RIGHT OF REPURCHASE. To the extent provided in the Company's bylaws as amended from time to time, the Company shall have the right to repurchase all or any part of the shares of Common Stock you acquire pursuant to the exercise of your option.
10. OPTION NOT A SERVICE CONTRACT. Your option is not an employment or service contract, and nothing in your option shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or an Affiliate, or of the Company or an Affiliate to continue your employment. In addition, nothing in your option shall obligate the Company or an Affiliate, their respective shareholders, Boards of Directors, Officers or Employees to continue any relationship that you might have as a Director or Consultant for the Company or an Affiliate.
11. WITHHOLDING OBLIGATIONS.
a. At the time you exercise your option, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for (including by means of a "cashless exercise" pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with your option.
b. Upon your request and subject to approval by the
Company, in its sole discretion, and compliance
with any applicable conditions or restrictions of
law, the Company may withhold from fully vested
shares of Common Stock otherwise issuable to you
upon the exercise of your option a number of whole
shares of Common Stock having a Fair Market Value,
determined by the Company as of the date of
exercise, not in excess of the minimum amount of
tax required to be withheld by law. If the date of
determination of any tax withholding obligation is
deferred to a date later than the date of exercise
of your option, share withholding pursuant to the
preceding sentence shall not be permitted unless
you make a proper and timely election under
Section 83(b) of the Code, covering the aggregate
number of shares of Common Stock acquired upon
such exercise with respect to which such
determination is otherwise deferred, to accelerate
the determination of such tax withholding
obligation to the date of exercise of your option.
Notwithstanding the filing of such election,
shares of Common Stock shall be withheld solely
from fully vested shares of Common Stock
determined as of the date of exercise of
your option that are otherwise issuable to you upon such exercise. Any adverse consequences to you arising in connection with such share withholding procedure shall be your sole responsibility.
c. You may not exercise your option unless the tax withholding obligations of the Company and/or any Affiliate are satisfied. Accordingly, you may not be able to exercise your option when desired even though your option is vested, and the Company shall have no obligation to issue a certificate for such shares of Common Stock or release such shares of Common Stock from any escrow provided for herein.
12. NOTICES. Any notices provided for in your option or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.
13. GOVERNING PLAN DOCUMENT. Your option is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your option, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your option and those of the Plan, the provisions of the Plan shall control.
IXYS 1999 EQUITY INCENTIVE PLAN
CERTIFICATE OF STOCK OPTION GRANT
GRANTED TO: THIS STOCK OPTION WAS GRANTED TO YOU ON BY IXYS SOCIAL SECURITY CORPORATION. THE STOCK OPTION PRICE NUMBER: IS THE FMV ON THE DATE OF GRANT, WHICH WAS $ . EMPLOYEE ID: OPTION TO PURCHASE: Top of Form ---------------------------------------- TYPE OF STOCK OPTION: Bottom of Form |
GRANT NUMBER:
GRANT DATE:
GRANT EXPIRATION DATE:
GRANT PRICE:
VESTING SCHEDULE
VESTING START DATE:
SHARES VESTING VESTING IN PERIOD LAST DATE TO DATE OF VEST OVER THE PERIOD OCCURS EXERCISE ----------------------------------------------------------------------- |
Authorized by:
IXYS CORPORATION
EXHIBIT 31.1
CERTIFICATION
I, Nathan Zommer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of IXYS Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: November 9, 2004 /s/ Nathan Zommer ----------------------------- Nathan Zommer President, Chief Executive Officer and Chairman (Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION
I, Arnold P. Agbayani, certify that:
1. I have reviewed this quarterly report on Form 10-Q of IXYS Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: November 9, 2004 /s/ Arnold P. Agbayani ----------------------------- Arnold P. Agbayani Senior Vice President, Finance and Administration and Chief Financial Officer (Principal Financial Officer) |
EXHIBIT 32.1
CERTIFICATION
Pursuant to Section 906 of the Public Company Accounting Reform and Investor Protection Act of 2002 (18 U.S.C. Section 1350, as adopted) (the Sarbanes-Oxley Act of 2002), Nathan Zommer, the Chief Executive Officer of IXYS Corporation (the "Company"), and Arnold P. Agbayani, the Chief Financial Officer of the Company, each hereby certifies that, to his knowledge:
1. The Company's Quarterly Report on Form 10-Q for the period ended September 30, 2004, to which this Certification is attached as Exhibit 32.1 (the "Periodic Report"), fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition of the Company at the end of the periods covered by the Periodic Report and results of operations of the Company for the periods covered by the Periodic Report.
Dated: November 9, 2004 /s/ Nathan Zommer ----------------------------- Nathan Zommer Chief Executive Officer /s/ Arnold P. Agbayani ----------------------------- Arnold P. Agbayani Chief Financial Officer |