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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 29, 2002
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-14864
LINEAR TECHNOLOGY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-2778785
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1630 McCarthy Boulevard
Milpitas, California 95035
(408) 432-1900
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE AND TELEPHONE NUMER)
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 [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [X] No [ ]
There were 312,859,787 shares of the Registrant's Common Stock issued
and outstanding as of January 24, 2003.
1
LINEAR TECHNOLOGY CORPORATION
FORM 10-Q
THREE AND SIX MONTHS ENDED DECEMBER 29, 2002
INDEX
Page
----
Part I: Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Income for the 3
three and six months ended December 29, 2002 and December 30, 2001
Condensed Consolidated Balance Sheets at December 29, 2002 4-5
and June 30, 2002
Condensed Consolidated Statements of Cash Flows for the 6
six months ended December 29, 2002 and December 30, 2001
Notes to Condensed Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Financial 9-11
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
Item 4. Controls and Procedures 12
Part II: Other Information
Item 5. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures: 14
Certification of Chief Executive Officer 15
Certification of Chief Financial Officer 16
2
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
LINEAR TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(unaudited)
Three Months Ended Six Months Ended
-------------------------- --------------------------
December 29, December 30, December 29, December 30,
2002 2001 2002 2001
-------- -------- -------- --------
Net sales $145,045 $121,266 $287,056 $241,370
Cost of sales 38,653 36,133 75,221 73,380
-------- -------- -------- --------
Gross profit 106,392 85,133 211,835 167,990
-------- -------- -------- --------
Expenses:
Research and development 21,331 19,369 44,405 38,191
Selling, general and administrative 16,482 14,147 33,429 30,305
-------- -------- -------- --------
37,813 33,516 77,834 68,496
-------- -------- -------- --------
Operating income 68,579 51,617 134,001 99,494
Interest income 10,524 13,123 20,879 28,837
-------- -------- -------- --------
Income before income taxes 79,103 64,740 154,880 128,331
Provision for income taxes 22,940 18,775 44,915 37,216
-------- -------- -------- --------
Net income $ 56,163 $ 45,965 $109,965 $ 91,115
======== ======== ======== ========
Basic earnings per share $ 0.18 $ 0.15 $ 0.35 $ 0.29
======== ======== ======== ========
Shares used in the calculation
of basic earnings per share 312,581 316,749 313,386 317,470
======== ======== ======== ========
Diluted earnings per share $ 0.18 $ 0.14 $ 0.34 $ 0.28
======== ======== ======== ========
Shares used in the calculation of diluted
earnings per share 320,556 328,318 321,405 329,276
======== ======== ======== ========
Cash dividends per share $ 0.05 $ 0.04 $ 0.10 $ 0.08
======== ======== ======== ========
See accompanying notes
3
LINEAR TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(In thousands)
December 29, June 30,
2002 2002
----------- -----------
(unaudited) (audited)
Current assets:
Cash and cash equivalents $ 197,576 $ 211,706
Short-term investments 1,351,222 1,340,324
Accounts receivable, net of allowance for
doubtful accounts of $1,363 ($1,302 at
June 30, 2002) 91,813 81,447
Inventories:
Raw materials 3,348 2,997
Work-in-process 24,469 22,941
Finished goods 3,135 3,004
----------- -----------
Total inventories 30,952 28,942
Deferred tax assets 43,754 43,754
Prepaid expenses and other current assets 21,116 21,408
----------- -----------
Total current assets 1,736,433 1,727,581
----------- -----------
Property, plant and equipment, at cost:
Land, building and improvements 141,917 140,468
Manufacturing and test equipment 324,937 326,388
Office furniture and equipment 3,399 3,384
----------- -----------
470,253 470,240
Less accumulated depreciation and amortization (228,663) (209,388)
----------- -----------
Net property, plant and equipment 241,590 260,852
----------- -----------
Total assets $ 1,978,023 $ 1,988,433
=========== ===========
See accompanying notes
4
LINEAR TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES & STOCKHOLDERS' EQUITY
(In thousands)
December 29, June 30,
2002 2002
---------- ----------
(unaudited) (audited)
Current liabilities:
Accounts payable $ 6,360 $ 5,098
Accrued payroll and related benefits 33,943 36,517
Deferred income on shipments to distributors 45,799 46,168
Income taxes payable 43,371 63,354
Other accrued liabilities 18,621 17,860
---------- ----------
Total current liabilities 148,094 168,997
---------- ----------
Deferred tax liabilities 43,485 37,982
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value, 2,000 shares
shares authorized; none issued or outstanding -- --
Common stock, $0.001 par value, 2,000,000
shares authorized; 313,408
shares issued and outstanding at
December 29, 2002 (316,150 shares
at June 30, 2002) 313 316
Additional paid-in capital 699,357 672,600
Accumulated other comprehensive income 15,600 --
Retained earnings 1,071,174 1,108,538
---------- ----------
Total stockholders' equity 1,786,444 1,781,454
---------- ----------
Total liabilities and stockholders' equity $1,978,023 $1,988,433
========== ==========
See accompanying notes
5
LINEAR TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(In thousands)
(unaudited)
Six Months Ended
--------------------------------
December 29, December 30,
2002 2001
--------- ---------
Cash flow from operating activities:
Net income $ 109,965 $ 91,115
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 22,415 21,472
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (10,366) 12,321
Decrease (increase) in inventories (2,010) (2,415)
Decrease (increase) in deferred tax assets,
prepaid expenses and other current assets 292 (3,273)
Increase (decrease) in accounts payable,
accrued payroll, income taxes payable and
other accrued liabilities (15,031) (20,495)
Tax benefit from stock option transactions 14,593 18,405
Increase (decrease) in deferred income (369) (4,561)
--------- ---------
Cash provided by operating activities 119,489 112,569
--------- ---------
Cash flow from investing activities:
Purchase of short-term investments (417,486) (590,084)
Proceeds from sales and maturities of short-term
investments 422,188 466,680
Purchase of property, plant and equipment (3,153) (14,078)
--------- ---------
Cash provided by (used in) investing activities 1,549 (137,482)
--------- ---------
Cash flow from financing activities:
Issuance of common stock under employee stock plans 22,690 18,628
Stock repurchase (126,507) (117,780)
Payment of cash dividends (31,351) (25,440)
--------- ---------
Cash (used in) financing activities (135,168) (124,592)
--------- ---------
(Decrease) in cash and cash equivalents (14,130) (149,505)
Cash and cash equivalents, beginning of period 211,706 321,106
--------- ---------
Cash and cash equivalents, end of period $ 197,576 $ 171,601
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes $ 44,709 $ 3,815
========= =========
See accompanying notes
6
LINEAR TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Interim financial statements and information are unaudited; however, in
the opinion of management all adjustments necessary for a fair and
accurate presentation of the interim results have been made. All such
adjustments were of a normal recurring nature. The results for the
three and six months ended December 29, 2002 are not necessarily an
indication of results to be expected for the entire fiscal year. All
information reported in this Form 10-Q should be read in conjunction
with the Company's annual consolidated financial statements for the
fiscal year ended June 30, 2002 included in the Company's Annual Report
to Stockholders. The accompanying balance sheet at June 30, 2002 has
been derived from audited financial statements as of that date. Because
the Company is viewed as a single operating segment for management
purposes, no segment information has been disclosed.
2. The Company operates on a 52/53 week year ending on the Sunday nearest
June 30. Fiscal years 2003 and 2002 are 52-week years.
3. Basic earnings per share is calculated using the weighted average
shares of common stock outstanding during the period. Diluted earnings
per share is calculated using the weighted average shares of common
stock outstanding, plus the dilutive effect of stock options calculated
using the treasury stock method. The following table sets forth the
reconciliation of weighted average common shares outstanding used in
the computation of basic and diluted earnings per share:
Three Months Ended Six Months Ended
--------------------------- ---------------------------
December 29, December 30, December 29, December 30,
2002 2001 2002 2001
-------- -------- -------- --------
Numerator - Net income $ 56,163 $ 45,965 $109,965 $ 91,115
-------- -------- -------- --------
Denominator for basic earnings
per share - weighted average
shares 312,581 316,749 313,386 317,470
Effect of dilutive securities -
employee stock options 7,975 11,569 8,019 11,806
-------- -------- -------- --------
Denominator for diluted
earnings per share 320,556 328,318 321,405 329,276
-------- -------- -------- --------
Basic earnings per share $ 0.18 $ 0.15 $ 0.35 $ 0.29
======== ======== ======== ========
Diluted earnings per share $ 0.18 $ 0.14 $ 0.34 $ 0.28
======== ======== ======== ========
7
4. Accumulated Other Comprehensive Income
Accumulated other comprehensive income consists of unrealized gains on
available-for-sale securities. The Company, in practice, primarily
holds its cash and short-term investments until maturity. The
components of comprehensive income were as follows:
Three Months Ended Six Months Ended
--------------------------- ---------------------------
December 29, December 30, December 29, December 30,
2002 2001 2002 2001
-------- -------- -------- --------
Net income $ 56,163 $ 45,965 $109,965 $ 91,115
Increase in unrealized gains on
available-for-sale securities $ 15,600 -- 15,600 --
-------- -------- -------- --------
Total comprehensive income $ 71,763 $ 45,965 $125,565 $ 91,115
-------- -------- -------- --------
5. Recent Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 142 "Goodwill and Other
Intangible Assets" (SFAS 142.) SFAS 142 requires that goodwill and
indefinite lived intangible assets are no longer amortized but are
reviewed annually (or more frequently if impairment indicators arise)
for impairment. Separable intangible assets that are not deemed to have
an indefinite life will continue to be amortized over their useful
lives. The Company adopted SFAS 142 on July 1, 2002. The adoption of
SFAS 142 did not have any impact on the Company's financial position or
results of operations.
In October 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 143 "Accounting for
Asset Retirement Obligations" (SFAS 143.) SFAS 143 requires that the
fair value of asset retirement obligations be recognized as a liability
when they are incurred and that the associated retirement costs be
capitalized as a long-term asset and expensed over its useful life. The
Company adopted SFAS 143 on July 1, 2002. The adoption of SFAS 143 did
not have any impact on the Company's financial position or results of
operations.
In August 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets" (SFAS 144.) SFAS 144
addresses financial accounting and reporting for the impairment or
disposal of long-lived assets and supersedes FAS No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of, and the accounting and reporting provisions of APB No. 30,
Reporting the Results of Operations for a Disposal of a Segment of a
Business. The Company adopted SFAS 144 on July 1, 2002. The adoption of
SFAS 144 did not have any impact on the Company's financial position or
results of operations.
In June 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 146, "Accounting for
Costs Associated with Exit or Disposal Activities" (SFAS 146.) SFAS 146
addresses financial accounting and reporting for costs associated with
exit or disposal activities and nullifies EITF Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)" and must be applied beginning January 1, 2003. SFAS 146
requires that a liability for a cost associated with an exit or
disposal activity be recognized when the liability is incurred rather
than when the exit or disposal plan is approved. The Company does not
expect that the adoption of SFAS 146 will have a significant effect on
its financial position or results of operations.
8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Critical Accounting Policies
Management believes there have been no significant changes to the
Company's critical accounting policies during the quarter ended December 29,
2002 as compared to the previous disclosures in Management's Discussion and
Analysis of Financial Condition and Results of Operations included in the Annual
Report on Form 10-K for the year ended June 30, 2002.
Results of Operations
The table below states the income statement items for the three and six
months ended December 29, 2002 and December 30, 2001 as a percentage of net
sales and provides the percentage change in absolute dollars of such items
comparing the interim period ended December 29, 2002 to the corresponding period
from the prior fiscal year:
Three Months Ended Six Months Ended
------------------------------------------------ ------------------------------------------
December 29, December 30, Increase/ December 29, December 30, Increase/
2002 2001 (Decrease) 2002 2001 (Decrease)
---- ---- ---------- ---- ---- ----------
Net sales 100.0% 100.0% 19.6% 100.0% 100.0% 18.9%
Cost of sales 26.6 29.8 7.0 26.2 30.4 2.5
---- ---- ---- ----
Gross profit 73.4 70.2 25.0 73.8 69.6 26.1
---- ---- ---- ----
Expenses:
Research and development 14.7 16.0 10.1 15.5 15.8 16.3
Selling, general and
administrative 11.4 11.7 16.5 11.6 12.6 10.3
---- ---- ---- ----
26.1 27.6 12.8 27.1 28.4 13.6
---- ---- ---- ----
Operating income 47.3 42.6 32.9 46.7 41.2 34.7
Interest income 7.3 10.8 (19.8) 7.3 11.9 (27.6)
--- ---- --- ----
Income before income taxes 54.6% 53.4% 22.1 54.0% 53.2% 20.7
==== ==== ==== ====
Effective tax rates 29.0% 29.0% 29.0% 29.0%
==== ==== ==== ====
Net sales for the quarter ended December 29, 2002 were $145.0 million,
an increase of $23.8 million or 19.6% over net sales for the same quarter of the
previous year. The increase in net sales was due to higher unit shipments, which
was offset by a decrease in the average selling price. The decrease in average
selling price is the result of a continuing change in mix to smaller package
products and due to slight price reductions. Sales increased in all major
geographic areas in absolute dollars, led by rest of the world, which is
primarily Asia excluding Japan, followed by Japan, Europe and the United States.
International sales were approximately 68% of net sales for the second quarter
of fiscal 2003 compared to 63% for the second quarter of fiscal 2002.
International geographies as a percent of worldwide net sales were Japan 15%,
Europe 18%, and rest of world 35%. Domestic sales were approximately 32% of net
sales for the second quarter of fiscal 2003 compared to 37% for the second
quarter of fiscal 2002. The Company's major end-market applications are
communications, industrial and computer. Sales increased over the prior year's
quarter in all end-market applications, led by communications.
Net sales for the six months ended December 29, 2002 increased $45.7
million or 18.9% over net sales for the same period of the previous fiscal year.
The increase in net sales was due to higher unit shipments, which was offset by
a decrease in the average selling price. Sales increased in all geographic areas
in absolute dollars, led by rest of the world, followed by Japan, Europe and the
United States. Relative to end-market applications, sales increased over the
prior year's six month in each of the Company's three major end-markets led by
communications.
During the second quarter of fiscal 2003, the Company had two one-week
shutdowns during the holiday weeks of Thanksgiving and Christmas. This resulted
in one less week of shutdown when compared to the second quarter of the previous
fiscal year. For the first six months of fiscal 2003 the Company had four less
one-week shutdowns compared to the
9
same period in the previous fiscal year. Due to having fewer shutdowns during
the second quarter and for the first six-months, the Company had greater
compensation costs throughout the cost of sales and operating expense lines. The
impact of fewer shutdowns was somewhat offset by reductions in workforce
associated with the closing of the Company's oldest wafer fabrication plant in
Milpitas, California in the previous fiscal year.
Gross profit increased $21.3 million or 25% and $43.8 million or 26.1%
for the second quarter and first six months of fiscal 2003, respectively, over
the corresponding periods in fiscal 2002. The increase in gross profit as a
percentage of net sales for both periods was primarily due to the favorable
effect of fixed costs allocated across a higher sales base as well as a
reduction in headcount expenses from the previous fiscal year as discussed in
the previous paragraph. This effect was somewhat offset by reduced inventory
absorption and severance packages caused by modest reductions in workforce at
the Camas, Washington wafer fabrication plant during the second quarter of
fiscal 2003. The decrease in average selling price referred to above did not
have a commensurate effect on gross margin since most of the reduction was due
to a change in product mix as the Company has had increased sales of products
with smaller die and package types, which have a smaller average selling price
but also lower costs.
Research and development ("R&D") expenses increased by $2.0 million or
10.1% and $6.2 million or 16.3% for the second quarter and first six months of
fiscal 2003, respectively, as compared to the same periods in fiscal 2002. The
increase in R&D expenses compared to the prior year periods was mainly due to
increases in labor expenses primarily related to increases in engineering
headcount, profit sharing, and the impact of less shutdowns during the periods
as explained above. The increases in labor costs were offset by a decrease in
mask costs.
Selling, general and administrative expenses ("SG&A") increased by $2.3
million or 16.5% and $3.1 million or 10.3% for the second quarter and first six
months of fiscal 2003, respectively, as compared to the same periods in fiscal
2002. The increase in SG&A expenses compared to the prior year period was due
primarily to labor related expenses for increased profit sharing, increases in
commissions due to higher sales, and the impact of less shutdowns during the
periods as explained above.
Interest income was $10.5 million and $20.9 million for the second
quarter and first six months of fiscal 2003, a decrease of $2.6 million and $8.0
million respectively, from the corresponding periods of fiscal 2002. The
interest income earned on the increase in the Company's cash equivalents and
short-term investment balance was more than offset by a decline in the average
interest rates from period to period. The decrease in the interest rate was the
result of the Federal Funds rate dropping from the 2.0% range in the second
quarter of fiscal 2002 to 1.25% in the second quarter of fiscal 2003.
The Company's effective tax rate for the second quarter and first six
months of fiscal 2003 and 2002 was 29%. The tax rate is impacted by business
activity in foreign jurisdictions with lower tax rates and tax-exempt interest
income.
Factors Affecting Future Operating Results
Except for historical information contained herein, the matters set
forth in this Form 10-Q, including the statements in the following paragraphs,
are forward-looking statements that are dependent on certain risks and
uncertainties including such factors, among others, as the timing, volume and
pricing of new orders received and shipped during the quarter, the timely
introduction of new processes and products, general conditions in the world
economy and financial markets and other factors described below and in our 10-K
for the fiscal year ended June 30, 2002.
The quarter just completed had improved financial results over the
previous quarter and grew notably over the same quarter in the previous fiscal
year. The Company's backlog coming out of the second quarter of fiscal 2003 is
up modestly from the first quarter of fiscal 2003, which is still low by
historic standards, but within a range that the Company has operated under in
the past year. The conditions external to the Company remain unchanged, as
general global economic and political conditions remain causes for concern. The
March quarter is customarily a stronger quarter for the Company then the
December quarter, due to more business days resulting from fewer holidays in
Europe and the USA. For an extended period, the US market has been weak for the
Company, however the Company has begun to see a moderate pick-up in quote and
forecasting activity across all end-markets in the USA. Consequently, although
confidently and accurately forecasting short-term future results is difficult in
this environment, when weighing all the factors, including modestly improving
bookings, good positioning in new programs, responsive lead times, and seasonal
strength in the USA, partially offset by customer conservatism in response to
worldwide economic and political concerns, the Company estimates that sales and
profits in the current quarter will grow in the middle single digits, 3% to 7%
from the December quarter.
10
Estimates of future performance are uncertain, and past performance of
the Company may not be a good indicator of future performance due to factors
affecting the Company, its competitors, the semiconductor industry and the
overall economy. The semiconductor industry is characterized by rapid
technological change, price erosion, cyclical market patterns, periodic
oversupply conditions, occasional shortages of materials, capacity constraints,
variations in manufacturing efficiencies and significant expenditures for
capital equipment and product development. Furthermore, new product
introductions and patent protection of existing products, as well as exposure
related to patent infringement suits brought against the Company are factors
that can influence future sales growth and sustained profitability. The
Company's headquarters and a portion of its manufacturing facilities and
research and development activities and certain other critical business
operations are located near major earthquake fault lines in California,
consequently, the Company could be adversely affected in the event of a major
earthquake.
Although the Company believes that it has the product lines,
manufacturing facilities and technical and financial resources for its current
operations, sales and profitability could be significantly affected by the above
and other factors. Additionally, the Company's common stock could be subject to
significant price volatility should sales and/or earnings fail to meet
expectations of the investment community. Furthermore, stocks of high technology
companies are subject to extreme price and volume fluctuations that are often
unrelated or disproportionate to the operating performance of these companies.
Liquidity and Capital Resources
At December 29, 2002, cash, cash equivalents and short-term investments
totaled $1,548.8 million, and working capital was $1,588.3 million.
Accounts receivable totaled $91.8 million at the end of the second
quarter of fiscal 2003, an increase of $10.4 million from the fourth quarter of
fiscal 2002. The increase is due to higher sales and days sales outstanding
(DSO) increasing from the fourth quarter. Compared with the similar quarter in
the prior fiscal year, DSO in accounts receivable was the same at 58 days.
Income taxes payable totaled $43.4 million at the end of the second
quarter of fiscal 2003 a decrease of $20 million from the fourth quarter of
fiscal 2002. The decrease is the result of federal tax payments made during the
second quarter of fiscal 2003.
During the first six months of fiscal 2003, the Company generated
$119.5 million of cash from operating activities and $22.7 million in proceeds
from common stock issued under employee stock plans. Additionally, net proceeds
from the purchase, sale and maturity of short-term investments totaled $4.7
million.
During the first six months of fiscal 2003, significant cash
expenditures included repurchasing $126.5 million of common stock, paying $31.4
million in cash dividends to stockholders representing $0.05 per share per
quarter, and spending $3.2 million for the purchase of capital assets. The
payment of future dividends will be based on quarterly financial performance.
As of December 29, 2002, the Company had no off-balance sheet financing
arrangements or activities other than minimal levels of operating leases for
facilities and equipment.
Historically, the Company has satisfied its liquidity needs through
cash generated from operations and the placement of equity securities. Given its
strong financial condition and performance, the Company believes that current
capital resources and cash generated from operating activities will be
sufficient to meet its liquidity and capital expenditures requirements for the
foreseeable future.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
For additional quantitative and qualitative disclosures about market
risk affecting the Company, see item 7A of the 10-K for the fiscal year ended
June 30, 2002. There have been no material changes in the market risk affecting
the Company since the filing of the 10-K for fiscal 2002. At December 29, 2002,
the Company's cash and cash equivalents consisted primarily of bank deposits,
commercial paper and money market funds. The Company's short-term investments
consisted of commercial paper, municipal bonds, federal agency and related
securities. The Company did not hold any derivative financial instruments. The
Company's interest income is sensitive to changes in the general level of
interest rates. In this regard, changes in interest rates can affect the
interest earned on cash and cash equivalents and short-term investments.
11
Item 4. Controls and Procedures
(a) Evaluation of disclosure controls and procedures
Within the 90-day period prior to the date of this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's management, including the Company's Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures pursuant to Rule 13a-14 of the
Securities Exchange Act of 1934 (the "Exchange Act"). Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that the Company's disclosure controls and procedures are effective in timely
alerting them to material information relating to the Company (including its
consolidated subsidiaries) required to be included in the Company's Exchange Act
filings.
(b) Changes in internal controls
There have been no significant changes in the Company's internal controls or in
other factors, which could significantly affect internal controls subsequent to
the date the Company carried out its evaluation.
12
PART II. OTHER INFORMATION
Item 5. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders of the Company, held on November
6, 2002, in Milpitas, California, the stockholders elected members of the
Company's Board of Directors, and ratified the Company's proposal to appoint
Ernst & Young LLP as independent auditors.
The vote for nominated directors was as follows:
NOMINEE FOR WITHHELD
- ------- --- --------
Robert H. Swanson, Jr. 251,554,274 31,798,312
David S. Lee 271,528,800 11,827,946
Leo T. McCarthy 271,454,477 11,902,269
Richard M. Moley 271,518,998 11,837,748
Thomas S. Volpe 270,971,068 12,385,678
The vote to ratify the appointment of Ernst & Young LLP as independent auditors
for fiscal 2003 was as follows:
FOR AGAINST ABSTAIN
--- ------- -------
264,871,184 16,973,365 1,512,197
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits:
Exhibit 99.1 Certification of Robert H. Swanson Jr. and Paul
Coghlan Pursuant to 18 U.S.C Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes Oxley Act of
2002.
b) Reports on Form 8-K:
None
13
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.
LINEAR TECHNOLOGY CORPORATION
DATE: January 31, 2003 BY /s/Paul Coghlan
----------------------------
Paul Coghlan
Vice President, Finance &
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
14
CERTIFICATIONS
I, Robert H. Swanson, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Linear Technology
Corporation;
2. Based on my knowledge, this quarterly 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures 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 quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: January 31, 2003
/s/ Robert H. Swanson, Jr.
--------------------------
Robert H. Swanson, Jr.
Chairman of the Board and Chief Executive
Officer (Principal Executive Officer)
15
I, Paul Coghlan, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Linear Technology
Corporation;
2. Based on my knowledge, this quarterly 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures 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 quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: January 31, 2003
/s/ Paul Coghlan
-----------------------------------------
Paul Coghlan
Vice President of Finance and Chief
Financial Officer (Principal Financial
Officer and Principal Accounting Officer)
16