SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 29, 2003
[_] 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
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1630 McCarthy Boulevard, Milpitas, California 95035 (408) 432-1900
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE
AND TELEPHONE NUMBER)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 Par Value
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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of
the Registrant was approximately $10,138,000,000.00 as of September 8, 2003,
based upon the closing sale price on the Nasdaq National Market System reported
for such date. Shares of common stock held by each officer and director and by
each person who owns 5% or more of the outstanding common stock have been
excluded in that such persons may be deemed to be affiliates. This determination
of affiliate status is not necessarily a conclusive determination for other
purposes.
There were 314,164,301 shares of the Registrant's common stock issued
and outstanding as of September 8, 2003.
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).
Yes [X] No [ ]
DOCUMENTS INCORPORATED BY REFERENCE:
(1) Items 10, 11 and 12 of Part III incorporate information by reference
from the definitive proxy statement (the "2003 Proxy Statement") for
the Annual Meeting of Stockholders to be held on November 5, 2003.
PART I
Item 1. Business
Except for historical information contained in this Form 10-K, certain
statements set forth herein, including statements regarding future revenues and
profits; future conditions in the Company's markets; availability of resources
and manufacturing capacity; and the anticipated impact of current and future
lawsuits are forward-looking statements that are dependent on certain risks and
uncertainties including such factors, among others, as the timing, volume and
pricing of new orders for the Company's products, timely ramp-up of new
facilities, the timely introduction of new processes and products, general
conditions in the world economy and financial markets and other factors
described below. Therefore, actual outcomes and results may differ materially
from what is expressed or forecast in such forward-looking statements. Words
such as "expect," "anticipate," "intend," "plan," "believe," "seek," "estimate,"
and variations of such words and similar expressions are intended to identify
such forward-looking statements. See "Risks and Competition" in the "Business"
section of this Annual Report on Form 10-K for a more thorough list of potential
risks and uncertainties.
General
Linear Technology Corporation (together with its consolidated
subsidiaries, "Linear Technology" or the "Company") designs, manufactures and
markets a broad line of standard high performance linear integrated circuits.
Applications for the Company's products include telecommunications, cellular
telephones, networking products, notebook and desktop computers, computer
peripherals, video/multimedia, industrial instrumentation, security monitoring
devices, high-end consumer products such as digital cameras and MP3 players,
complex medical devices, automotive electronics, factory automation, process
control, and military and space systems. The Company was organized and
incorporated in 1981 by a management team with significant experience in the
design, manufacture and marketing of linear circuits. During fiscal year 2001,
the Company reincorporated from California to Delaware. The Company competes
primarily on the basis of performance, functional value, quality, reliability
and service.
Available Information
We make available free of charge through our website, www.Linear.com,
our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, current reports
on Form 8-K, proxy statements and all amendments to those reports as soon as
reasonably practicable after such materials are electronically filed with the
Securities and Exchange Commission ("SEC"). These reports may also be requested
by contacting Paul Coghlan, 1630 McCarthy Blvd., Milpitas, CA 95035. Our
Internet website and the information contained therein or incorporated therein
are not intended to be incorporated into this Annual Report on Form 10-K. In
addition, the public may read and copy any materials we file with the SEC at the
SEC's Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549 or may
obtain information by calling the SEC at 1-800-SEC-0330. Moreover, the SEC
maintains an Internet site that contains reports, proxy and information
statements, and other information regarding reports that we file electronically
with them at http://www.sec.gov.
The linear circuit industry
Semiconductor components are the electronic building blocks used in
electronic systems and equipment. These components are classified as either
discrete devices (such as individual transistors) or integrated circuits (in
which a number of transistors and other elements are combined to form a more
complicated electronic circuit). Integrated circuits ("ICs") may be divided into
two general categories, digital and linear (or analog). Digital circuits, such
as memory devices and microprocessors, generally process on-off electrical
signals, represented by binary digits, "1" and "0." In contrast, linear circuits
monitor, condition, amplify or transform continuous analog signals associated
with physical properties, such as temperature, pressure, weight, light, sound or
speed, and play an important role in bridging between real world phenomena and a
variety of electronic systems. Linear circuits also provide voltage regulation
and power control to electronic systems, especially in hand-held battery powered
systems.
The Company believes that several factors generally distinguish the
linear integrated circuit business from the digital circuit business, including:
Importance of Individual Design Contribution. The Company believes that
the creativity of individual design engineers is of particular
importance in the linear circuit industry. The design of a linear
integrated
1
circuit generally involves a greater variety and less repetition of
circuit elements than digital design. In addition, the interaction of
linear circuit elements is complex, and the exact placement of these
elements in the circuit is critical to the circuit's precision and
performance. Computer-aided engineering and design tools for linear
circuits are not as accurate in modeling circuits as those tools used
for designing digital circuits. As a result, the contributions of a
relatively small number of individual design engineers are generally of
greater importance in the design of linear circuits than in the design
of digital circuits.
Smaller Capital Requirements. Digital circuit design attempts to
minimize device size and maximize speed by increasing circuit
densities. The process technology necessary for increased density
requires very expensive wafer fabrication equipment. In contrast,
linear circuit design focuses on precise matching and placement of
circuit elements, and linear circuits often require large feature sizes
to achieve precision and high voltage operation. Accordingly, the
linear circuit manufacturing process generally requires smaller initial
capital expenditures, particularly for photomasking equipment and clean
room facilities, and less frequent replacement of manufacturing
equipment because the equipment has, to date, been less vulnerable to
technological obsolescence.
Market Diversity; Relative Pricing Stability. Because of the varied
applications for linear circuits, manufacturers typically offer a
greater variety of device types to a more diverse group of customers,
who typically have smaller volume requirements per device. As a result,
linear circuit manufacturers are often less dependent upon particular
products or customers; linear circuit markets are generally more
fragmented; and competition within those markets tends to be more
diffused.
The Company believes that competition in the linear circuit market is
particularly dependent upon performance, functional value, quality,
reliability and service. As a result, linear circuit pricing has
generally been more stable than most digital circuit pricing. In the
past year the average selling price of the Company's products in total
has declined. This is primarily a result of an increase in mix to
smaller package products, which have a commensurate lower manufacturing
cost.
Less Japanese And Other Asian Competition. To date, Japanese and other
Asian firms have concentrated their efforts on the high volume digital
and consumer linear markets, as opposed to the high performance end of
the linear circuit market served by the Company.
Products and markets
Linear Technology produces a wide range of products for a variety of
customers and markets. The Company emphasizes standard products to address
larger markets and to reduce the risk of dependency upon a single customer's
requirements. The Company targets the high performance segment of the linear
circuit market. "High performance" is characterized by higher precision, both
high power and micropower, higher speed, more subsystem integration on a single
chip and many other special features. The Company focuses virtually all of its
design efforts on proprietary products, which at the time of introduction, are
original designs by the Company offering unique characteristics differentiating
them from those offered by competitors.
Although the types and mix of linear products vary by application, the
principal product categories are as follows:
Amplifiers - These circuits amplify the voltage or output current of a
device. The amplification represents the ratio of the output voltage or current
to the input voltage or current. The most widely used device is the operational
amplifier due to its versatility and precision.
High Speed Amplifiers - These amplifiers are used to amplify signals
above 5MHz for applications such as video, fast data acquisition and data
communication.
Voltage Regulators - Voltage regulators control the voltage of a device
or circuit at a specified level. This category of product consists primarily of
two types, the linear regulator and the switch mode regulator. Switch mode
regulators are also used to convert voltage up or down within an electronic
system for power management and battery charging.
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Voltage References - These circuits serve as electronic benchmarks
providing a constant voltage for system usage. Precision references have a
constant output independent of input, temperature changes or time.
Interface - Interface circuits act as an intermediary to transfer
digital signals between or within electronic systems. These circuits are used in
computers, modems, instruments and remote data acquisition systems.
Data Converters - These circuits change linear (analog) signals into
digital signals, or vice versa, and are often referred to as data acquisition
subsystems, A/D converters and D/A converters. The accuracy and speed with which
the analog signal is converted to its digital counterpart is considered a key
characteristic for these devices.
Radio Frequency Circuits - These circuits include mixers, modulators,
demodulators, amplifiers, drivers, and power detectors and controllers. They are
used in wireless and cable infrastructure, cellphones, and wireless data
communications.
Other - Other linear circuits include buffers, battery monitors, motor
controllers, hot swap circuits, comparators, sample-and-hold devices,
modulators/demodulators, drivers and filters, both switched capacitor and
continuous time, which are used to limit and/or manipulate signals in such
applications as cellular telephones, base stations, navigation system
instrumentation and detection circuitry.
Linear circuits are used in various applications including
telecommunications, cellular telephones, networking products such as optical
switches, notebook and desktop computers, computer peripherals,
video/multimedia, industrial instrumentation, security monitoring devices,
high-end consumer products such as digital cameras and MP3 players, complex
medical devices, automotive electronics, factory automation, process control,
and military and space systems. The Company focuses its product development and
marketing efforts on high performance applications where the Company believes it
can position itself competitively with respect to product performance and
functional value.
The following table sets forth examples of product families by end-market
application and end-market:
Market End Applications/Products Example Product Families
- ------ ------------------------- ------------------------
--
Industrial Flow or rate metering |
Position/pressure/ |
temperature sensing and controls |
Robotics |
Energy management |
Process control data communication |
Network and factory automation |
Security and surveillance systems |
Curve tracers | Data acquisition products
Logic analyzers | High performance operational
Multimeters | amplifiers
Oscilloscopes | Interface (RS 485/232) products
Test equipment | Instrumentation amplifiers
Voltmeters | Line drivers
Network analyzers | Line receivers
Scales | Precision comparators
Analytic instruments | Precision voltage references
Gas chromatic graphs | Monolithic filters
EKG, CAT scanners | Switching voltage regulators
DNA analysis | Voltage references
Blood analyzers | Hot swap circuits
| DC-DC converters
Automotive and Communications |
Space/Military Satellites |
Guidance and navigation systems |
Displays |
Firing controls |
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Ground support equipment |
Radar systems |
Sonar systems |
Surveillance equipment |
GPS |
Entertainment |
Safety systems |
Collision avoidance __|
Communications Cellular phones (CDMA/WCDMA/GPRS/3G) | DC - DC converters
Cellular basestations | V.35 transceivers
Pagers | High-speed amplifiers
Modems/fax machines | Line drivers
PBX switches | Line receivers
GPS systems | Low noise operational amplifiers
Optical networking | Micropower products
ADSL modems | Power management products
Channel service unit/data service units | Switched capacitor filters
Cable modems | Voltage references
Internet appliances | Voltage regulators
Servers | Data acquisition products
Routers | Hot Swap controllers
Switches | Multi-protocol circuits
| Thermal electric coolers
| Power amplifier controllers
| Modulators/Demodulators
| Battery chargers
__| Multi-Phase switching regulators
Computer/High- Communications/interface modems | Battery chargers
End Consumer Disk drives | DC - DC converters
Notebook computers | Data acquisition products
Desktop computers | Hot Swap controllers
Workstations | Line drivers
LCD monitors | Line receivers
Plotters/printers | Low drop out linear regulators
Digital still cameras | Micropower products
Power supplies | Multi-Phase switching regulators
Handheld PCs | PCMCIA power switching
Battery chargers | Power management
Table computers | Power sequencing/monitoring
Video/multimedia |
MP3 players |
USB power management |
Digital video recorders |
Set top boxes |
Plasma display TVs |
PDAs |
Pet robots __|
Marketing and customers
The Company markets its products worldwide, through a direct sales
staff, electronics distributors and a small network of independent sales
representatives, to a broad range of customers in diverse industries. The
Company sells to over 15,000 Original Equipment Manufacturer (OEM) customers
directly and/or through the sales distributor channel. Distributor and direct
customers generally buy on an individual purchase order basis, rather than
pursuant to long-term agreements. The Company's primary domestic distributor,
Arrow Electronics, accounted for 15% of net
4
sales during fiscal 2003 and 18% of accounts receivable as of fiscal 2003
year-end; 16% of net sales for fiscal 2002 and 17% of accounts receivable as of
fiscal 2002 year-end; and 12% of net sales for fiscal 2001 and 13% of accounts
receivable as of fiscal 2001 year-end. Distributors are not end customers, but
rather serve as a channel of sale to many end users of the Company's products.
No other distributor or customer accounted for 10% or more of net sales for
fiscal 2003, 2002 or 2001.
The Company's sales organization is divided into domestic and
international regions. The Company's sales offices located in the United States
are in the following metropolitan areas: Seattle, Baltimore, Denver,
Philadelphia, Raleigh, Chicago, Dallas, Austin, Houston, San Jose, Los Angeles,
Irvine, San Diego, Huntsville, Minneapolis, Cleveland and Portland.
Internationally, the Company has sales offices in: London, Stockholm, Helsinki,
Dusseldorf, Munich, Stuttgart, Paris, Lyon, Milan, Tokyo, Osaka, Taipei,
Singapore, Seoul, Hong Kong, Bejing and Shanghai. The Company's products
typically require a sophisticated technical sales effort.
The Company has agreements with 4 independent sales representatives in
the United States and 2 in Canada. Commissions are paid to sales representatives
upon shipments either directly from the Company or through distributors. The
Company has agreements with 3 independent distributors in North America, 5 in
Europe, 2 each in China, Japan and Taiwan, and 1 each in Korea, Singapore,
Malaysia, Thailand, South Africa, Philippines, India, Israel, Australia, and New
Zealand. The Company's distributors purchase the Company's products for resale
to customers. Additionally, domestic distributors often sell competitors'
products. Under certain agreements, the Company's domestic distributors are
entitled to price protection on inventory if the Company lowers the prices of
its products. The agreements also generally permit distributors to exchange up
to 3% of purchases on a semi-annual basis.
The Company's sales to international distributors are made under
agreements which permit limited stock return privileges but not sales price
rebates. The agreements generally permit distributors to exchange up to 5% of
purchases on a semi-annual basis. See Critical Accounting Policies and Note 1 of
Notes to Consolidated Financial Statements of this Annual Report on Form 10-K,
which contains information regarding the Company's revenue recognition policy.
During fiscal 2003, 2002 and 2001, export sales which were primarily to
Europe, Japan and Asia (excluding Japan) represented approximately 68%, 64% and
54% of net sales, respectively. Because most of the Company's export sales are
billed and payable in United States dollars, export sales are generally not
directly subject to fluctuating currency exchange rates. Although export sales
are subject to certain control restrictions, including approval by the Office of
Export Administration of the United States Department of Commerce, the Company
has not experienced any material difficulties relating to such restrictions.
The Company's backlog of released and firm orders was approximately
$57.2 million at June 29, 2003 as compared with $46.1 million at June 30, 2002.
In addition to its backlog, the Company had $30.5 million of products sold to
and held by domestic distributors at June 29, 2003 as compared to $28.8 million
at June 30, 2002. Generally, shipments to domestic distributors are not
recognized as sales until the distributor has sold the products to its
customers. The Company defines backlog as consisting of distributor stocking
orders and OEM orders for which a delivery schedule has been specified by the
OEM customer for product shipment within six months. Although the Company
receives volume purchase orders, most of these purchase orders are cancelable,
generally outside of thirty days of delivery, by the customer without
significant penalty. Lead-time for the release of purchase orders depends upon
the scheduling practices of the individual customer and the availability of
individual products, so the rate of booking new orders varies from month to
month. The ordering practices of many semiconductor customers has shifted from a
practice of placing orders with delivery dates extending over several months to
the practice of placing orders with shorter delivery dates in concert with the
Company's lead times. Also, the Company's agreements with certain distributors
provide for price protection. Consequently, the Company does not believe that
its backlog at any time is necessarily representative of actual sales for any
succeeding period.
In the operating history of the Company, seasonality of business has
not been a material factor, although the results of operations for the first
fiscal quarter of each year are impacted slightly by customary summer holidays,
particularly in Europe.
The Company warrants that its products, until they are incorporated in
other products, are free from defects in workmanship and materials and conform
to the Company's published specifications. Warranty expense has been nominal to
date.
5
Manufacturing
The Company's wafer fabrication and manufacturing facilities are
located in Camas, Washington ("Camas") and Milpitas, California ("Hillview").
Each facility was built to Company specifications to support a number of
sophisticated process technologies and to satisfy rigorous quality assurance and
reliability requirements of United States military specifications and major
worldwide OEM customers. All of the Company's manufacturing facilities have
received ISO 9001/ISO 9002 and QS9000 certifications. The Company's Singapore
and Milpitas manufacturing facilities have been ISO 14001 certified. In
addition, the Company's Milpitas manufacturing facility is also certified to TS
16949.
The Company's wafer fabrication facility located in Camas, Washington
commenced manufacturing operations in the second half of fiscal 1997. The
facility is used to produce six-inch diameter wafers for use in the production
of the Company's devices. In fiscal 1999, the Company added 40,000 square feet
to the Camas facility, and during fiscal 2001 the Company purchased an
additional 16.5 acres adjacent to its Camas facility for future expansion. The
Company's Hillview facility located in Milpitas, California was completed in
fiscal 2001. Production at the Hillview six-inch wafer fabrication plant
commenced in the third quarter of fiscal 2001. The Company currently uses
similar manufacturing processes in both its Hillview and Camas facilities.
During fiscal 2002, the Company discontinued production in its oldest four-inch
wafer fabrication plant located at its Milpitas, California headquarters.
The Company's basic process technologies include high-speed bipolar,
high gain low noise bipolar, radio frequency bipolar, silicon gate complementary
metal-oxide semiconductor ("CMOS") and BiCMOS processes. The Company also has
two proprietary complementary bipolar processes. The Company's bipolar processes
are typically used in linear circuits where high voltages, high power, high
frequency, low noise or effective component matching is necessary. The Company's
proprietary silicon gate CMOS processes provide switch characteristics required
for many linear circuit functions, as well as an efficient mechanism for
combining linear and digital circuits on the same chip. The Company's CMOS
processes were developed to address the specific requirements of linear circuit
functions. The complementary bipolar processes were developed to address higher
speed analog functions. The Company's basic processes can be combined with a
number of adjunct processes to create a diversity of IC components. A minor
portion of the Company's wafer manufacturing, particularly very small feature
size CMOS products, is done at an independent foundry. The accompanying chart
provides a brief overview of the Company's IC process capabilities:
Process Families Benefit/Market Advantage Product Application
- ---------------- ------------------------ -------------------
P-Well SiGate CMOS General purpose, stability Switches, filters, data conversion,
chopper amplifiers
N-Well SiGate CMOS Speed, density, stability Switches, data conversion
BiCMOS Speed, density, stability, flexibility Data conversion
High Power Bipolar Power (100 watts), high current Linear and smart power products,
(10 amps) switching regulators
Low Noise Bipolar Precision, low current, low noise, Op amps, voltage references
high gain
High Speed Bipolar Fast, wideband, video high data Op amps, video, comparators,
rate switching regulators
JFETS Speed, precision, low current Op amps, switches, sample and
hold
Rad - Hard Total dose radiation hardened All space products
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Complementary Bipolar Speed, low distortion, precision Op amps, video amps, converters
CMOS/ Thin Films Stability, precision Filters, data conversion
High Voltage CMOS High voltage general-purpose, Switches, chopper amplifiers
compatible with Bipolar
Bipolar/Thin Films Precision, stability, matching Converters, amplifiers
RF Bipolar High speed, low power RF wireless, high speed data communications
The Company emphasizes quality and reliability from initial product
design through manufacturing, packaging and testing. The Company's design team
focuses on fault tolerant design and optimum location of circuit elements to
enhance reliability. Linear Technology's wafer fabrication facilities have been
designed to minimize wafer handling and the impact of operator error through the
use of microprocessor-controlled equipment. The Company has obtained Defense
Supply Center, Columbus (DSCC) qualification to participate in high reliability
JAN38510 (class B) military business. The Company has also received Jan Class S
Microcircuit Certification, which enables the Company to manufacture products
intended for use in space or for critical applications where replacement is
extremely difficult or impossible and where reliability is imperative. The
Company has also received MIL-PRF-38535 Qualified Manufacturers Listing (QML)
certification for military products from DSCC.
Processed wafers are sent to either the Company's assembly facility in
Penang, Malaysia or to offshore independent assembly contractors where the
wafers are separated into individual circuits and packaged. The Penang facility
opened in October 1994 and services approximately 60% to 90% of the Company's
assembly requirements for plastic packages. The Company completed an extension
of approximately 75,000 square feet to the Penang facility in late fiscal 2000.
The Company's primary subcontractors are Carsem Sdn, located in Malaysia; Mitsui
located in Japan; and NSE located in Thailand. The Company also maintains
domestic assembly operations to satisfy particular customer requirements,
especially those for military applications, and to provide rapid turnaround for
new product development.
After assembly, most products are sent to the Company's Singapore
facility for final testing, inspection and packaging as required. In addition,
the Company's Singapore facility serves as a major warehouse and distribution
center with the bulk of the Company's shipments to end customers originating
from this facility. Some products are returned to Milpitas for the same back-end
processing.
Linear Technology from time to time has experienced competition for
assembly services from other manufacturers seeking assembly of circuits by
independent contractors. The Company currently believes that alternative foreign
assembly sources could be obtained without significant interruption. Foreign
assembly is subject to risks normally associated with foreign operations,
including changes in local governmental policies, currency fluctuations,
transportation delays and the imposition of export controls or increased import
tariffs.
From time to time certain materials, including silicon wafers and
plastic molding compounds, have been in short supply. To date the Company has
experienced no delays in obtaining raw materials which could have adversely
affected production. As is typical in the industry, the Company must allow for
significant lead times in delivery of its materials.
Manufacturing of individual products, from wafer fabrication through
final testing, may take from ten to sixteen weeks. Since the Company sells a
wide variety of device types, and customers typically expect delivery of
products within a short period of time following order, the Company maintains a
substantial work-in-process and finished goods inventory.
Based on its anticipated production requirements, the Company believes
it will have sufficient available resources and manufacturing capacity for
fiscal 2004.
7
Patents, licenses and trademarks
The Company has been awarded 240 United States and International
patents and has filed 95 additional patent applications. Although the Company
believes that these patents and patent applications may have value, the
Company's future success will depend primarily upon the technical abilities and
creative skills of its personnel, rather than on its patents.
As is common in the semiconductor industry, the Company has at times
been notified of claims that it may be infringing patents issued to others. If
it appears necessary or desirable, the Company may seek licenses under such
patents, although there can be no assurance that all necessary licenses can be
obtained by the Company on acceptable terms.
In addition, from time to time the Company may negotiate with other
companies to license patents, products or process technology for use in its
business. On March 7, 2003 the Company entered into a ten-year patent portfolio
cross license agreement with Texas Instruments, Inc.
Research and development
The Company's ability to compete depends in part upon its continued
introduction of technologically innovative products on a timely basis. To
facilitate this need, the Company has organized its product development efforts
into four groups: power management, signal conditioning, mixed signal and high
frequency. Linear Technology's product development strategy emphasizes a broad
line of standard products to address a diversity of customer applications. The
Company's research and development efforts are directed primarily at designing
and introducing new products and to a lesser extent, developing new processes
and advanced packaging.
As of June 29, 2003, the Company had 689 employees involved in
research, development and engineering related functions of which 344 employees
are engaged in new product design. The Company had 217 employees engaged in new
product design at its Milpitas headquarters as well as 14 employees at its
Singapore design center, 50 employees at its Boston design center, 23 employees
at its Colorado design center, 14 employees at its New Hampshire design center,
8 employees at its Raleigh design center, 8 employees at its Santa Barbara
design center and 10 at its Burlington design center which opened in fiscal
2002. At the beginning of fiscal 2004, the Company opened a design center in
Grass Valley, California.
For the fiscal years 2003, 2002, and 2001, the Company spent
approximately $91.4 million, $79.8 million and $102.5 million, respectively, on
research and development. The increase in research and development expenses in
2003 over 2002 was primarily due to an increase in labor expenses caused by
increases to profit sharing, fewer shutdowns and an increase in headcount.
Headcount in R&D personnel increased to 689 in fiscal 2003 from 681 in fiscal
2002.
Government sales
The Company currently has no material U.S. Government contracts.
Risks and Competition
In addition to the risks discussed below and elsewhere in this
"Business" section, see "Factors Affecting Future Operating Results" included in
"Management's Discussion and Analysis" for further discussion of other risks and
uncertainties that may affect the Company.
Semiconductor Industry. The semiconductor market has historically been cyclical
and subject to significant economic downturns at various times, including the
recent decline in demand experienced during fiscal 2002 and 2003. The cyclical
nature of the semiconductor industry may cause the Company to experience
substantial period-to-period fluctuations in its results of operations.
Typically, the Company's ability to meet its revenue goals and
projections is dependent to a large extent on the orders it receives from its
customers within the period. Historically, the Company has maintained low lead
times, which have enabled customers to place orders close to their true needs
for product. In defining its financial goals and projections the Company
considers inventory on hand, backlog, production cycles and expected order
patterns from customers. If the Company's estimates in these areas become
inaccurate, it may not be able to meet its revenue goals and projections. In
addition, some customers require the Company to manufacture product and have it
available for
8
shipment, even though the customer is unwilling to make a binding commitment to
purchase all, or even some, of the product.
The semiconductor industry is characterized by rapid technological
change, price erosion, occasional shortages of materials, capacity constraints,
variations in manufacturing efficiencies, and significant expenditures for
capital equipment and product development. New product introductions are a
critical factor for future sales growth and sustained profitability. Although
the Company believes that the high performance segment of the linear circuit
market is generally less affected by price erosion or by significant
expenditures for capital equipment and product development than other
semiconductor market sectors, future operating results may reflect substantial
period to period fluctuations due to these or other factors.
Manufacturing. The Company relies on its internal manufacturing facilities
located in California and Washington to fabricate most of its wafers; however,
the Company is dependent on outside silicon foundries for a small portion of its
wafer fabrication. The Company could be adversely affected in the event of a
major earthquake, which could cause temporary loss of capacity, loss of raw
materials, and damage to manufacturing equipment. Additionally, the Company
relies on its internal and external assembly and testing facilities located in
Singapore and Malaysia. The Company is subject to economic and political risks
inherent to international operations, including changes in local governmental
policies, currency fluctuations, transportation delays and the imposition of
export controls or increased import tariffs. The Company could be adversely
affected if any such changes are applicable to the Company's foreign operations.
The Company's manufacturing yields are a function of product design and
process technology, both of which are developed by the Company. The manufacture
and design of integrated circuits is highly complex. To the extent the Company
does not achieve acceptable manufacturing yields or there are delays in wafer
fabrication, its results of operations could be adversely affected.
Litigation. The Company is subject to various legal proceedings arising out of a
wide range of matters, including, among others, patent suits and employment
claims. From time to time, as is typical in the semiconductor industry, the
Company receives notice from third parties alleging that the Company's products
or processes infringe the third parties' intellectual property rights. If the
Company is unable to obtain a necessary license, and one or more of its products
or processes is determined to infringe intellectual property rights of others, a
court might enjoin the Company from further manufacture and/or sale of the
affected products. In that case, the Company would need to re-engineer the
affected products or processes in such a way as to avoid the alleged
infringement, which may or may not be possible. An adverse result in litigation
arising from such a claim could involve an injunction to prevent the sales of a
portion of the Company's products, a reduction or the elimination of the value
of related inventories, and/or the assessment of a substantial monetary award
for damages related to past sales. The Company does not believe that the current
lawsuits will have a material impact on its business or financial condition.
However, current lawsuits and any future lawsuits will divert resources and
could result in the payment of substantial damages.
Key Personnel. The Company's performance is substantially dependent on the
performance of its executive officers and key employees. The loss of the
services of key officers, technical personnel or other key employees could harm
the business. The success of the Company depends on its ability to identify,
hire, train, develop and retain highly qualified technical and managerial
personnel. Failure to attract and retain the necessary technical and managerial
personnel could harm the Company.
Competition. Linear Technology competes in the high performance segment of the
linear market. The Company's competitors include among others, Analog Devices,
Inc., Maxim Integrated Products, Inc., Motorola, Inc., Micrel Inc., National
Semiconductor Corporation and Texas Instruments, Inc. Competition among
manufacturers of linear integrated circuits is intense, and certain of the
Company's competitors may have significantly greater financial, technical,
manufacturing and marketing resources than the Company. The principal elements
of competition include product performance, functional value, quality and
reliability, technical service and support, price, diversity of product line and
delivery capabilities. The Company believes it competes favorably with respect
to these factors, although it may be at a disadvantage in comparison to larger
companies with broader product lines and greater technical service and support
capabilities.
Although the Company believes that it has the product lines,
manufacturing facilities and technical and financial resources for its current
operations; sales and profitability can be significantly affected by the above
and other factors. Additionally, the Company's common stock could be subject to
significant price volatility should sales
9
and/or earnings fail to meet the 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.
Environmental regulations. Federal, state and local regulations impose various
environmental controls on the storage, use, discharge and disposal of certain
chemicals and gases used in semiconductor processing. The Company's facilities
have been designed to comply with these regulations, and the Company believes
that its activities conform to present environmental regulations. Increasing
public attention has, however, been focused on the environmental impact of
electronics manufacturing operations. While the Company to date has not
experienced any materially adverse business effects from environmental
regulations, there can be no assurance that changes in such regulations will not
require the Company to acquire costly remediation equipment or to incur
substantial expenses to comply with such regulations. Any failure by the Company
to control the storage, use or disposal of, or adequately restrict the discharge
of hazardous substances could subject it to significant liabilities.
Employees
As of June 29, 2003, the Company had 2,613 employees, including 257 in
marketing and sales, 689 in research, development and engineering related
functions, 1,582 in manufacturing and production, and 85 in management,
administration and finance. The Company has never had a work stoppage, no
employees are represented by a labor organization, and the Company considers its
employee relations to be good.
Executive Officers of the Registrant
The executive officers of the Company, and their ages as of September
8, 2003, are as follows:
Name Age Position
- ---- --- --------
Robert H. Swanson, Jr...........65 Chairman and Chief Executive Officer
David B. Bell...................47 President
Paul Chantalat..................53 Vice President Quality and Reliability
Paul Coghlan....................58 Vice President of Finance and Chief Financial Officer
Robert C. Dobkin................59 Vice President of Engineering and Chief Technical Officer
Lothar Maier....................48 Vice President and Chief Operating Officer
Richard Nickson.................53 Vice President of North American Sales
David A. Quarles................37 Vice President of International Sales
Don Paulus......................46 Vice President and General Manager, Power Products
William Gross...................54 Vice President and General Manager, Signal Conditioning Products
Robert Reay.....................42 Vice President and General Manager, Mixed Signal Products
Arthur F. Schneiderman..........61 Secretary
Mr. Swanson, a founder of the Company, has served as Chairman of the
Board of Directors and Chief Executive Officer since April 1999, and prior to
that time as President, Chief Executive Officer and a director of the Company
since its incorporation in September 1981. From August 1968 to July 1981, he was
employed in various positions at National Semiconductor Corporation
("National"), a manufacturer of integrated circuits, including Vice President
and General Manager of the Linear Integrated Circuit Operation and Managing
Director in Europe. Mr. Swanson has a BS degree in Industrial Engineering from
Northeastern University.
Mr. Bell has served as President since June 2003. Prior to becoming
President, Mr. Bell served as Vice President and General Manager of Power
Products from January 2002 to June 2003 and as General Manager of Power Products
from February 1999. From June 1994 to January 1999, he held the position of
Manager of Strategic Product Development. From July 1991 to May 1994, he was
employed as Director of Electrical Engineering at IDEO Product Development.
Prior to July 1991, Mr. Bell was employed in various management and engineering
positions at Bell Associates, Inc., Sydis, Inc., and Hewlett Packard, Inc. Mr.
Bell has a BS degree in Electrical Engineering from the Massachusetts Institute
of Technology.
Mr. Chantalat has served as Vice President of Quality and Reliability
since July 1991. From January 1989 to July 1991, he held the position of
Director of Quality and Reliability. From July 1983 to January 1989 he held the
position of Manager of Quality and Reliability. From February 1976 to July 1983,
he was employed in various
10
positions at National, where his most recent position was Group Manager of
Manufacturing Quality Engineering. Mr. Chantalat received a BS and an MS in
Electrical Engineering from Stanford University in 1970 and 1972, respectively.
Mr. Coghlan has served as Vice President of Finance and Chief Financial
Officer of the Company since December 1986. From October 1981 until joining the
Company, he was employed in various positions at GenRad, Inc., a manufacturer of
automated test equipment, including Corporate Controller, Vice President of
Corporate Quality and most recently Vice President and General Manager of the
Structural Test Products Division. Before joining GenRad, Inc., Mr. Coghlan was
associated with Price Waterhouse & Company in the United States and Paris,
France for twelve years. Mr. Coghlan received a BA from Boston College in 1966
and an MBA from Babson College in 1968.
Mr. Dobkin, a founder of the Company, has served as Vice President of
Engineering and Chief Technical Officer since April 1999, and as Vice President
of Engineering from September 1981 to April 1999. From January 1969 to July
1981, he was employed in various positions at National, where his most recent
position was Director of Advanced Circuit Development. Mr. Dobkin has extensive
experience in linear circuit design. Mr. Dobkin attended the Massachusetts
Institute of Technology.
Mr. Maier joined the Company as Chief Operating Officer in April 1999.
From 1983 to 1999, he was employed at Cypress Semiconductor Corporation in
various management positions, mostly recently as Senior Vice President and
Executive Vice President of Worldwide Operations. Mr. Maier received a BS in
Chemical Engineering in 1978 from the University of California at Berkeley.
Mr. Nickson has served as Vice President of North American Sales since
October 2001. From July 2001 until October 2001 he was Director of USA Sales.
From February 1998 until July 2001, he was European Sales Director. From August
1993 until January 1998, he held the position of Northwest Area Sales Manager.
From April 1991 to August 1993, he was President and Co-founder of Focus
Technical Sales. From August 1983 to April 1991, he served with National in
various positions where his most recent position was Vice President of North
American Sales. Mr. Nickson was Founder and President of Micro-Tex, Inc. from
June 1980 to August 1983. Prior to 1980, Mr. Nickson spent seven years in
semiconductor sales, including four years with Texas Instruments. He received a
B.S. in Mathematics from Illinois Institute of Technology in 1971.
Mr. Quarles has served as Vice President of International Sales since
August 2001. From October 2000 to August 2001 he held the position of Director
of Marketing. From July 1996 to September 2000 he held the position of Director
of Asia-Pacific Sales stationed in Singapore. From June 1991 to July 1996 he
worked as a Sales Engineer and later as District Sales Manager for the Bay Area
sales team. Prior to Linear, Mr. Quarles worked two years as a Sales Engineer at
National. Mr. Quarles received a BS in Electrical Engineering in 1988 from
Cornell University.
Mr. Paulus has served as Vice President and General Manager of Power
Products since June 2003. He joined the Company in October 2001 as Director,
Satellite Design Centers. Prior to joining the Company, he was a founder of
Integrated Sensor Solutions, Inc. (ISS) serving as Vice President of Engineering
and Chief Operating Officer from 1990 to 1999. ISS was acquired by Texas
Instruments, Inc. (TI) in 1999, and Mr. Paulus served as TI's General Manager,
Automotive Sensors and Controls in San Jose until October 2001. Prior to ISS,
Mr. Paulus served in various engineering and management positions with Sierra
Semiconductor (1989-1991), Honeywell Signal Processing Technologies (SPT)
(1984-1989) and Bell Laboratories (1979-1984). Mr. Paulus received a B.S. in
Electrical Engineering from Lehigh University, an M.S. in Electrical Engineering
from Stanford University and an MBA from the University of Colorado.
Mr. Gross has served as Vice President and General Manager of Signal
Conditioning Products since January 2002 and as General Manager of Signal
Conditioning Products since February 1999. He held the position of Design
Manager from July 1989 to February 1999, responsible for amplifiers, comparators
and voltage references. Previously, he was Design Manager at Elantec from
January 1984 to June 1989. From January 1973 to December 1983 he held several
positions at National, including Design Engineer and Design Manager of the Japan
Design Center. Mr. Gross received a BS in electronics engineering from
California Polytechnic University in 1971 and a MS in electrical engineering
from University of Arizona in 1973.
Mr. Reay has served as Vice President and General Manager of Mixed
Signal Products since January 2002 and as General Manager of Mixed Signal
Products since November 2000. From January 1992 to October 2000 he
11
was the Design Engineering Manager responsible for a variety of product families
including interface, supervisors, battery chargers and hot swap controllers. Mr.
Reay joined Linear Technology in April 1988 as a design engineer after spending
four years at GE Intersil. Mr. Reay received a B.S. and M.S. in electrical
engineering from Stanford University in 1984.
Mr. Schneiderman has served as Secretary of the Company since September
1981. He is an attorney and a member of the law firm of Wilson, Sonsini,
Goodrich & Rosati, Professional Corporation, general counsel to the Company.
Item 2. Properties
At the Company's headquarter campus in Milpitas, California, the
Company owns land and 3 buildings of approximately 41,000, 42,000 and 70,000
square feet. These buildings are used for support engineering services,
prototype testing of new products and worldwide headquarters. Additionally, in
the same campus the Company leases 165,000 square feet of buildings used
primarily for circuit design activities and future expansion. During fiscal
1999, the Company purchased a 96,000 square foot building near its headquarter
campus in Milpitas, California. This building was converted to a new six-inch
wafer fabrication plant completed during the first half of fiscal 2001, with
production commencing during the third quarter of fiscal 2001.
The Company occupies a 72,000 square foot manufacturing facility in
Singapore. Test and packaging operations are performed at this facility along
with certain design and major warehousing and distribution activity. The Company
has a 30-year lease on the land where the plant is located that commenced in
1994, with an option to extend for an additional 30 years. During fiscal 2001,
the Company leased 6 acres of land adjacent to its Singapore facility.
In 1994, the Company opened a 55,000 square foot assembly plant in
Penang, Malaysia. The Company has a 60-year lease on the land where the plant
was constructed. In fiscal 1999, the Company purchased a 23,400 square foot
building adjacent to its existing facility. The Company demolished the acquired
building, and built a 75,000 square foot extension to its existing facility on
the site.
During fiscal 1996, the Company completed construction of a 60,000
square foot facility on land it owns in Camas, Washington. This facility is used
to fabricate six-inch wafers. Manufacturing operations commenced at this
facility in the second half of fiscal 1997. In fiscal 1999, the Company added
40,000 square feet to this facility for future expansion. During fiscal 2001,
the Company purchased 16.5 acres of land adjacent to its Camas facility.
The Company leases design facilities located in: Bedford, New
Hampshire; Raleigh, North Carolina; Burlington, Vermont; Santa Barbara,
California; and Grass Valley, California. In fiscal 2002, the Company purchased
land in Colorado Springs, Colorado and constructed a new 20,000 square foot
design center. In fiscal 1999, the Company purchased land in the Boston
metropolitan area and constructed a new 20,000 square foot design and sales
office. In fiscal 2002, the Company added 10,000 square feet to this facility.
The Company leases sales offices in the United States in the areas of Bellevue,
Baltimore, Denver, Milpitas, Philadelphia, Raleigh, Chicago, Dallas, Austin,
Houston, Los Angeles, Irvine, San Diego, Huntsville, Minneapolis, Cleveland and
Portland; and internationally in London, Stockholm, Helsinki, Dusseldorf,
Munich, Stuttgart, Paris, Lyon, Milan, Tokyo, Osaka, Taipei, Singapore, Seoul,
Hong Kong, Bejing and Shanghai. See Note 3 of Notes to Consolidated Financial
Statements on this Annual Report on Form 10-K.
Item 3. Legal Proceedings
The Company is subject to various legal proceedings and claims that
arise in the ordinary course of business which consist of a wide range of
matters, including, among others, patent suits and employment claims. The
Company does not believe that any of the current suits will have a material
impact on its business or financial condition. However, current lawsuits and any
future lawsuits will divert resources and could result in the payment of
substantial damages.
Item 4. Submission of Matter to a Vote of Security Holders
Not applicable.
12
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The information regarding market, market price range and dividend information
may be found in Note 6. "Quarterly Information (Unaudited)" of this Annual
Report on Form 10-K.
The information required by this item regarding equity compensation plans is
incorporated by reference to the information set forth in Item 12 of this Annual
Report on Form 10-K.
Item 6. Selected Financial Data
FIVE FISCAL YEARS ENDED JUNE 29, 2003 2003 2002 2001 2000 1999
- ------------------------------------------------ ------------ ------------ ------------ ------------ ------------
In thousands, except per share amounts
Income statement information
Net sales $ 606,573 $ 512,282 $ 972,625 $ 705,917 $ 506,669
Net income 236,591 197,629 427,456 287,906 194,293
Basic earnings per share 0.76 0.62 1.35 0.93 0.64
Diluted earnings per share 0.74 0.60 1.29 0.88 0.61
Weighted average shares outstanding - Basic 313,115 317,215 316,924 310,953 304,040
Weighted average shares outstanding - Diluted 321,375 328,538 332,527 328,002 317,888
Balance sheet information
Cash, cash equivalents and short-term
investments $1,593,567 $1,552,030 $1,549,002 $1,175,558 $ 786,707
Total assets 2,056,879 1,988,433 2,017,074 1,507,256 1,046,914
Long-term debt -- -- -- -- --
Cash dividends per share $ 0.21 $ 0.17 $ 0.13 $ 0.09 $ 0.0725
- ------------------------------------------------ ------------ ------------ ------------ ------------ ------------
All share and per share amounts reflect the Company's two-for-one stock split
effective in February 2000.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Critical Accounting Policies
The Company's financial statements have been prepared in accordance with
accounting principles generally accepted in the United States, which require it
to make estimates and judgments that significantly affect the reported amounts
of assets, liabilities, revenues and expenses and related disclosure of
contingent assets and liabilities. The Company regularly evaluates these
estimates, including those related to inventory valuation and revenue
recognition. These estimates are based on historical experience and on
assumptions that are believed by management to be reasonable under the
circumstances. Actual results may differ from these estimates, which may impact
the carrying values of assets and liabilities.
The Company believes the following critical accounting policies affect the more
significant judgments and estimates used in the preparation of consolidated
financial statements.
Inventory Valuation
The Company values inventories at the lower of cost or market. The Company
records charges to write down inventories for unsalable, excess or obsolete raw
materials, work-in-process and finished goods. Newly introduced parts are
generally not valued until success in the market place has been determined by a
consistent pattern of sales and backlog among other factors. In addition to
writedowns based on newly introduced parts, statistical and judgmental
assessments are calculated for the remaining inventory based on salability and
obsolescence.
13
Revenue Recognition
Revenue from product sales made directly to customers is recognized upon the
transfer of title, which generally occurs at the time of shipment. Revenue from
the Company's sales to domestic distributors is recognized under agreements
which provide for certain sales price rebates and limited product return
privileges. As a result, the Company defers recognition of such sales until the
domestic distributors sell the merchandise. The Company relieves inventory and
records a receivable on the initial sale to the distributor as title has passed
to the distributor and payment is collected on the receivable within normal
trade terms. The income to be derived from distributor sales is recorded under
current liabilities on the balance sheet as "Deferred income on shipments to
distributors" until such time as the distributor confirms a final sale to its
end customer.
The Company's sales to international distributors are made under agreements
which permit limited stock return privileges but not sales price rebates.
Revenue on these sales is recognized upon shipment at which time title passes.
The Company estimates international distributor returns based on historical data
and current business expectations and defers a portion of international
distributor sales and profits based on these estimated returns. Such amounts are
classified in "Deferred income on shipments to distributors" on the accompanying
balance sheet.
Results of Operations
The table below states the income statement items as a percentage of net sales
and provides the percentage change of such items compared to the prior fiscal
year amount.
Fiscal Year Ended Percentage Change
------------------------------------------- ------------------------------
June 29, June 30, July 1, 2003 Over 2002 Over
2003 2002 2001 2002 2001
----------- ----------- ------------ -------------- ------------
Net sales 100.0% 100.0% 100.0% 18% (47%)
Cost of sales 25.6 28.2 23.8 7 (37)
---- ---- ----
Gross profit 74.4 71.8 76.2 23 (50)
---- ---- ----
Expenses:
Research & development 15.1 15.6 10.5 14 (22)
Selling, general &
administrative 10.8 12.2 9.5 5 (32)
---- ---- ---
25.9 27.8 20.0 10 (27)
---- ---- ----
Operating income 48.5 44.0 56.2 31 (59)
Interest income-net 6.4 10.3 6.6 (27) (17)
---- ---- ----
Income before income taxes 54.9% 54.3% 62.8% 20 (54)
==== ==== ====
Effective tax rates 29.0% 29.0% 30.0%
==== ==== ====
Net sales for the year ended June 29, 2003 were $606.6 million, an increase of
$94.3 million or 18% over net sales of $512.3 million in fiscal 2002. The
increase in net sales was primarily due to an increase in unit shipments, which
was partially 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 when compared to the
previous fiscal year. Geographically, international sales represented 68% of net
sales, 4% higher than fiscal 2002. Internationally, sales to Rest of the World
(ROW), which is primarily Asia excluding Japan, represented 34% of net sales,
while sales to Europe and Japan were 18% and 16% of net sales, respectively.
Domestic sales were approximately 32% of net sales for fiscal 2003 compared to
36% for fiscal 2002. Sales increased year over year by 63% in Japan, 25% in the
ROW, 9% in Europe and 4% in the United States. The Company's major end-markets
are communications, industrial and computer. Sales rose in all major end-markets
led by communications.
Net sales for the year ended June 30, 2002 were $512.3 million, a decrease of
$460.3 million or 47% from net sales of $972.6 million in fiscal 2001. The
decrease in net sales was primarily due to a decrease in unit shipments, and
marginally due to a decrease in the average selling price. Geographically,
international sales represented 64% of net sales, 10% higher than fiscal 2001.
Internationally, sales to Rest of the World (ROW), which is primarily Asia
excluding Japan, represented 32% of net sales, while sales to Europe and Japan
were 20% and 12% of net sales, respectively. Sales decreased 58% year over year
in the United States, decreased by 56% in Japan, decreased by
14
49% in Europe, and decreased 13% in ROW. The Company's major end-markets are
communications, industrial and computer. Sales fell in all major end-markets led
by communications.
To partially offset the impact of reduced sales on net profits during fiscal
2003 and 2002 the Company reduced its variable expenses primarily in the area of
compensation. The Company achieved this by reducing profit sharing and by having
plant shutdowns during fiscal 2003 and 2002. During fiscal 2003 the entire
Company had five fewer one-week shutdowns when compared to the same period in
the previous fiscal year. Additionally, during fiscal 2003 the Company raised
the profit sharing payout when compared to fiscal 2002, which was reduced
substantially from fiscal 2001. Due to having fewer shutdowns during the year
and increased profit sharing the Company had greater compensation costs
throughout the cost of sales and operating expense lines when compared to the
previous fiscal year.
Gross profit for the year ended June 29, 2003 was $451.5 million, an increase of
$83.9 million or 23% over gross profit of $367.6 million in fiscal 2002. Gross
profit was 74.4% of net sales in fiscal 2003 as compared to 71.8% in fiscal
2002. The increase in gross profit as a percentage of sales was due primarily to
the favorable effect of fixed costs allocated across a higher sales base. This
effect was partially offset by the reduction in shutdowns referred to above and
increased profit sharing. 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 lower average
selling price but also lower costs.
Gross profit for the year ended June 30, 2002 was $367.6 million, a decrease of
$373.9 million or 50% from gross profit of $741.5 million in the corresponding
period in fiscal 2001. Gross profit was 71.8% of net sales in fiscal 2002 as
compared to 76.2% in fiscal 2001. The decrease in gross profit as a percentage
of net sales was due primarily to the unfavorable effect of fixed costs
allocated across a lower sales base. This effect was partially offset by the
reduction in compensation costs and secondarily to the closure of the Company's
4-inch wafer fabrication plant.
Research and development ("R&D") expenses were $91.4 million, $79.8 million and
$102.5 million in fiscal 2003, 2002 and 2001, respectively, or 15.1%, 15.6% and
10.5% of net sales, respectively. The dollar increase in R&D expenses in fiscal
2003 as compared to fiscal 2002 was due to increases in compensation costs
caused by fewer plant shutdowns referred to above, higher profit sharing and
increased headcount. These increases were offset by lower mask costs. The
decrease in R&D expenses in fiscal 2002 as compared to fiscal 2001 was due to
lower profit sharing and the Company shutdowns; this effect was somewhat offset
by increases in staffing levels for design engineers.
Selling, general and administrative ("SG&A") expenses were $65.6 million, $62.6
million and $92.7 million in fiscal 2003, 2002 and 2001, respectively, or 10.8%,
12.2% and 9.5% of net sales, respectively. The dollar increase in SG&A expenses
from fiscal 2002 to fiscal 2003 was due to increases in compensation costs
caused by higher profit sharing and by fewer plant shutdowns while headcount
remained relatively unchanged. These increases were partially offset by lower
legal expenses. The dollar decrease in SG&A expenses from fiscal 2002 to fiscal
2001 was due to lower compensation costs caused by lower profit sharing and by
plant shutdowns of one week per month for the first three quarters in fiscal
2002.
Interest income decreased 27% in fiscal 2003 to $38.7 million and decreased 17%
in fiscal 2002 to $53.3 million from $64.4 million in fiscal 2001. The Company's
cash, cash equivalent and short-term investment balance increased $41.5 million
during fiscal 2003 after spending $230.0 million on repurchasing 8.4 million
shares of the Company's common stock. Interest income fell in fiscal 2003 when
compared to fiscal 2002 due to the decline in average interest rates earned on
the Company's cash investments which was partially offset by the interest earned
on the $41.5 million increase in cash, cash equivalent and short-term investment
balance. Also contributing to the decline in interest income was the addition of
interest expense in fiscal 2003 relating to a royalty agreement. Interest
expense is netted against interest income in the Consolidated Statement of
Income. The decrease in interest income in fiscal 2002 as compared to 2001 was
due to the decline in average interest rates earned on the Company's cash
equivalent and short-term investment balance which was partially offset by the
interest earned on the $3.0 million dollar increase in the Company's cash, cash
equivalent and short-term investment balance.
The Company's effective tax rate was 29%, 29%, and 30% in fiscal 2003, 2002 and
2001, respectively. The lower tax rates in fiscal 2003 and 2002 were primarily
due to increased business activity in foreign jurisdictions with lower tax rates
and an increase in tax-exempt interest income as a percentage of total interest
income. The Internal Revenue Service (IRS) completed its examination of the five
fiscal years beginning July 1, 1996 and ending July 1, 2001 with
15
the exception of the foreign sales corporation (FSC) benefits. As a result of
the completed portion of the examination, earnings of certain foreign
subsidiaries were adjusted with the primary effect being an increase in domestic
taxes paid and a decrease in the deferred tax liability account. The IRS results
are included in fiscal 2003 financial statements and did not have a material
impact upon them. Although the outcome of the tax audits is always uncertain,
management believes that an adequate amount of taxes and related interest and
penalty, if any, have been provided for any additional adjustment that may
result from these years.
Factors Affecting Future Operating Results
Except for historical information contained herein, the matters set forth in
this Annual Report on Form 10-K, 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, timely
ramp-up of new facilities, the timely introduction of new processes and
products, general conditions in the world economy and financial markets and
other factors described below and in "Risks and Competition" located in the
"Business" section of this Annual Report on Form 10-K.
Fiscal 2003 was better than the previous fiscal year, as the Company reported
solid growth over the previous fiscal year. Although the Company has seen
improvements across all of its major end-markets during fiscal 2003, its backlog
of $57.2 million as compared to $46.1 million at the end of the previous fiscal
year, while improving within fiscal 2003, is still low by historic standards.
Overall demand for the Company's products is improving; however, the Company's
customers continue to be cautious in their ordering patterns. The conditions
external to the Company remain largely unchanged, as general global economic and
political conditions remain causes for concern. Consequently, although
confidently and accurately forecasting short-term results is difficult, when
weighing all factors, including improving bookings, good positioning in diverse
applications across many end-markets, responsive lead times and good inventory
mix positioning, and partially offsetting these positive factors with customer
conservatism in response to sluggish economic news and geo-political concerns,
and some summer seasonal slowness, the Company expects low single digit growth
in sales and profits in the September quarter, which is in line with the
Company's normal summer quarter patterns.
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 critical
factors influencing 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 June 29, 2003, cash, cash equivalents and short-term investments totaled $1.6
billion and working capital was also $1.6 billion. During fiscal 2003 the
Company repurchased 8.4 million shares of its common stock for $230.0 million.
After taking into consideration the cash used for these purchases, the Company
generated additional cash and short-term investments of $41.5 million.
During fiscal 2003, the Company generated $284.2 million of cash from operating
activities. Additionally, the Company generated $48.4 million in proceeds from
common stock issued under employee stock option and stock purchase plans.
During fiscal 2003, significant cash expenditures included net purchases of
short-term investments of $105.7 million and $6.6 million for the purchase of
capital assets. The Company also paid $230.0 million to repurchase 8.4 million
16
shares of its common stock. The Company paid $65.8 million in cash dividends to
stockholders representing $0.21 per share per year compared to $0.17 per share
in fiscal 2002. In April 2003, the Company's Board of Directors declared an
increase in the quarterly cash dividend to $0.06 per share. The payment of
future dividends will be based on quarterly financial performance.
As of June 29, 2003, the Company had no off-balance sheet financing arrangements
or activities.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The Company's cash equivalents and short-term investments are subject to market
risk, primarily interest rate and credit risk. The Company's investments are
managed by outside professional managers within investment guidelines set by the
Company. Such guidelines include security type, credit quality and maturity and
are intended to limit market risk by restricting the Company's investments to
high quality debt instruments with relatively short-term maturities. The Company
does not use derivative financial instruments in its investment portfolio. Based
upon the weighted average duration of the Company's investments at June 29,
2003, a hypothetical 100 basis point increase in short-term interest rates would
result in an unrealized loss in market value of the Company's investments
totaling approximately $13.6 million. However, because the Company's debt
securities are classified as available-for-sale, no gains or losses are
recognized by the Company due to changes in interest rates unless such
securities are sold prior to maturity. These investments are reported at fair
value with the related unrealized gains being included in accumulated other
comprehensive income, a component of stockholders' equity. The Company generally
holds securities until maturity and carries the securities at fair market value.
The Company has no debt and has historically satisfied its liquidity needs
through cash generated from operations and the initial 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.
17
Item 8. Financial Statements and Supplementary Data
LINEAR TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
THREE YEARS ENDED JUNE 29, 2003 2003 2002 2001
- ---------------------------------------------- --------------- ---------------- ---------------
Net sales $606,573 $512,282 $972,625
Cost of sales 155,066 144,719 231,122
- ---------------------------------------------- --------------- ---------------- ---------------
Gross profit 451,507 367,563 741,503
- ---------------------------------------------- --------------- ---------------- ---------------
Expenses:
Research and development 91,410 79,839 102,487
Selling, general and administrative 65,586 62,625 92,731
- ---------------------------------------------- --------------- ---------------- ---------------
156,996 142,464 195,218
- ---------------------------------------------- --------------- ---------------- ---------------
Operating income 294,511 225,099 546,285
- ---------------------------------------------- --------------- ---------------- ---------------
Interest income, net 38,715 53,251 64,366
- ---------------------------------------------- --------------- ---------------- ---------------
Income before income taxes 333,226 278,350 610,651
- ---------------------------------------------- --------------- ---------------- ---------------
Provision for income taxes 96,635 80,721 183,195
- ---------------------------------------------- --------------- ---------------- ---------------
Net income $236,591 $197,629 $427,456
- ---------------------------------------------- --------------- ---------------- ---------------
- ---------------------------------------------- --------------- ---------------- ---------------
Earnings per share:
- ---------------------------------------------- --------------- ---------------- ---------------
Basic $ 0.76 $ 0.62 $ 1.35
- ---------------------------------------------- --------------- ---------------- ---------------
Diluted $ 0.74 $ 0.60 $ 1.29
- ---------------------------------------------- --------------- ---------------- ---------------
Weighted average shares outstanding:
Basic 313,115 317,215 316,924
Diluted 321,375 328,538 332,527
Cash dividends per share $ 0.21 $ 0.17 $ 0.13
- ---------------------------------------------- --------------- ---------------- ---------------
See accompanying notes.
18
LINEAR TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
JUNE 29, 2003 AND JUNE 30, 2002 2003 2002
----------- -----------
Assets
Current assets:
Cash and cash equivalents $ 136,276 $ 211,706
Short-term investments 1,457,291 1,340,324
Accounts receivable, net of allowance for
doubtful accounts of $1,762 ($1,302 in 2002) 80,094 81,447
Inventories:
Raw materials 3,196 2,997
Work-in-process 25,471 22,941
Finished goods 3,427 3,004
----------- -----------
Total inventories 32,094 28,942
Deferred tax assets 51,181 43,754
Prepaid expenses and other current assets 19,064 21,408
----------- -----------
Total current assets 1,776,000 1,727,581
----------- -----------
Property, plant and equipment, at cost:
Land, buildings and improvements 142,361 140,468
Manufacturing and test equipment 324,314 326,388
Office furniture and equipment 3,399 3,384
----------- -----------
470,074 470,240
Accumulated depreciation and amortization (246,630) (209,388)
----------- -----------
Net property, plant and equipment 223,444 260,852
----------- -----------
Other non current assets 57,435 --
----------- -----------
Total assets $ 2,056,879 $ 1,988,433
=========== ===========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 7,480 $ 5,098
Accrued payroll and related benefits 39,471 36,517
Deferred income on shipments to distributors 44,678 46,168
Income taxes payable 53,279 63,354
Other accrued liabilities 17,121 17,860
----------- -----------
Total current liabilities 162,029 168,997
----------- -----------
Deferred tax and other long-term liabilities 79,921 37,982
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value, 2,000 shares
authorized; none issued or outstanding -- --
Common stock, $0.001 par value, 2,000,000
shares authorized; 312,706 shares issued and
outstanding at June 29, 2003 (316,150 shares
at June 30, 2002) 313 316
Additional paid-in capital 740,084 672,600
Accumulated other comprehensive income, net 6,950 --
Retained earnings 1,067,582 1,108,538
----------- -----------
Total stockholders' equity 1,814,929 1,781,454
----------- -----------
Total liabilities and stockholders' equity $ 2,056,879 $ 1,988,433
=========== ===========
See accompanying notes.
19
LINEAR TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
THREE YEARS ENDED JUNE 29, 2003 2003 2002 2001
----------- ----------- -----------
Cash flow from operating activities:
Net income $ 236,591 $ 197,629 $ 427,456
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 45,903 46,261 35,788
Tax benefit from stock option transactions 37,321 38,091 90,563
Change in operating assets and liabilities:
Decrease (increase) in accounts receivable 1,353 8,389 (20,511)
Decrease (increase) in inventories (3,152) (3,350) (3,680)
Decrease (increase) in deferred tax assets (7,427) (272) (11,236)
Decrease (increase) in prepaid expenses
and other current assets 1,344 (1,472) (8,874)
Decrease (increase) in long-term assets (1,750) -- --
Increase (decrease) in accounts payable,
accrued payroll and other accrued
liabilities (52) (46,933) 4,135
Increase (decrease) in deferred income
on shipments to distributors (1,490) 1,687 9,993
Increase (decrease) in income taxes payable (10,075) 12,019 19,419
Increase (decrease) in deferred tax liabilities (14,333) 5,089 16,511
----------- ----------- -----------
Cash provided by operating activities 284,233 257,138 559,564
----------- ----------- -----------
Cash flow from investing activities:
Purchase of short-term investments (881,284) (961,041) (1,722,358)
Proceeds from sales and maturities of short-term
investments 775,617 848,613 1,439,565
Purchase of property, plant and equipment (6,609) (17,887) (127,861)
----------- ----------- -----------
Cash used in investing activities (112,276) (130,315) (410,654)
----------- ----------- -----------
Cash flow from financing activities:
Issuance of common shares under employee stock plans 48,422 39,333 52,704
Purchase of common stock (230,005) (221,551) (69,799)
Payment of cash dividends (65,804) (54,005) (41,164)
----------- ----------- -----------
Cash used in financing activities (247,387) (236,223) (58,259)
----------- ----------- -----------
Increase (decrease) in cash and cash equivalents (75,430) (109,400) 90,651
Cash and cash equivalents, beginning of period 211,706 321,106 230,455
----------- ----------- -----------
Cash and cash equivalents, end of period $ 136,276 $ 211,706 $ 321,106
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the fiscal year for income taxes $ 90,637 $ 25,483 $ 67,656
=========== =========== ===========
See accompanying notes.
20
LINEAR TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except per share amounts)
THREE YEARS ENDED JUNE 29, 2003 Accumulated
Common Stock Additional Other Total
-------------------------- Paid-In Comprehensive Retained Stockholders'
Shares Amount Capital Income Earnings Equity
----------- ----------- ----------- ----------- ----------- -----------
Balance at July 2, 2000 315,167 $ 467,474 -- -- $ 854,723 $ 1,322,197
Issuance of common stock for cash
under employee stock option and
stock purchase plans 5,291 52,704 -- -- -- 52,704
Tax benefit from stock option transactions -- 90,563 -- -- -- 90,563
Purchase and retirement of common stock (1,550) (2,539) -- -- (67,260) (69,799)
Reincorporation in Delaware -- (607,883) $ 607,883 -- -- --
Cash dividends - $0.13 per share -- -- -- -- (41,164) (41,164)
Net income -- -- -- -- 427,456 427,456
----------- ----------- ----------- ----------- ----------- -----------
Balance at July 1, 2001 318,908 319 607,883 -- 1,173,755 1,781,957
Issuance of common stock for cash under
employee stock option and stock purchase
plans 3,681 3 39,330 -- -- 39,333
Tax benefit from stock option transactions -- -- 38,091 -- -- 38,091
Purchase and retirement of common stock (6,439) (6) (12,704) -- (208,841) (221,551)
Cash dividends - $0.17 per share -- -- -- -- (54,005) (54,005)
Net income -- -- -- -- 197,629 197,629
----------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 2002 316,150 316 672,600 -- 1,108,538 1,781,454
Issuance of common stock for cash under
employee stock option and stock purchase
plans 4,946 5 48,417 -- -- 48,422
Tax benefit from stock option transactions -- -- 37,321 -- -- 37,321
Purchase and retirement of common stock (8,390) (8) (18,254) -- (211,743) (230,005)
Cash dividends - $0.21 per share -- -- -- -- (65,804) (65,804)
Comprehensive income:
Unrealized gain on available for sale
investments, net -- -- -- $ 6,950 -- 6,950
Net income -- -- -- -- 236,591 236,591
-----------
Comprehensive income -- -- -- -- -- 243,541
----------- ----------- ----------- ----------- ----------- -----------
Balance at June 29, 2003 312,706 $ 313 $ 740,084 $ 6,950 $ 1,067,582 $ 1,814,929
=========== =========== =========== =========== =========== ===========
See accompanying notes.
21
LINEAR TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business and Significant Accounting Policies
Description of Business and Export Sales
Linear Technology Corporation (together with its consolidated subsidiaries,
"Linear Technology" or the "Company") designs, manufactures and markets a broad
line of standard high performance linear integrated circuits. Applications for
the Company's products include telecommunications, cellular telephones,
networking products, notebook and desktop computers, computer peripherals,
video/multimedia, industrial instrumentation, security monitoring devices,
high-end consumer products such as digital cameras and MP3 players, complex
medical devices, automotive electronics, factory automation, process control,
and military and space systems. The Company was organized and incorporated in
1981 by a management team with significant experience in the design, manufacture
and marketing of linear circuits. During fiscal year 2001, the Company
reincorporated from California to Delaware. The Company competes primarily on
the basis of performance, functional value, quality, reliability and service.
Export sales by geographic area were as follows:
In thousands 2003 2002 2001
-------- -------- --------
Europe $111,149 $102,413 $202,193
Japan 98,785 60,759 137,352
Rest of the World 203,484 163,019 188,129
-------- -------- --------
Total export sales $413,418 $326,191 $527,674
======== ======== ========
Basis of Presentation
The Company's fiscal year ends on the Sunday nearest June 30. Fiscal 2003, 2002
and 2001 were 52 week periods. The accompanying consolidated financial
statements include the accounts of the Company and its wholly-owned subsidiaries
after elimination of all significant inter-company accounts and transactions.
Accounts denominated in foreign currencies have been translated using the U.S.
dollar as the functional currency.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash Equivalents and Short-term Investments
Cash equivalents are highly liquid investments with original maturities of three
months or less. Investments with maturities over three months at the time of
purchase are classified as short-term investments.
At June 29, 2003 and June 30, 2002, all of the Company's investments in debt
securities were classified as available-for-sale, which means that, although the
Company principally holds securities until maturity, they may be sold under
certain circumstances. The debt securities are carried at fair market value,
determined using quoted market prices for these securities. Realized gains and
losses from short-term investments were not material at any time during fiscal
2003,2002 and 2001.
Concentrations of Credit Risk, Off Balance Sheet Risk and Contingencies
The Company's investment policy restricts investments to high credit quality
investments with maturities of three years or less and limits the amount
invested with any one issuer. Concentrations of credit risk with respect to
accounts receivable are generally not significant due to the diversity of the
Company's customers and geographic sales areas. The Company performs ongoing
credit evaluations of its customers' financial condition and requires
collateral, primarily letters of credit, as deemed necessary.
No single end customer has accounted for 10% or more of the Company's net sales.
The Company's primary domestic distributor, Arrow Electronics, accounted for 15%
of net sales during fiscal 2003 and 18% of accounts receivable as of fiscal 2003
year-end; 16% of net sales for fiscal 2002 and 17% of accounts receivable as of
fiscal
22
2002 year-end; and 12% of net sales for fiscal 2001 and 13% of accounts
receivable as of fiscal 2001 year-end. Distributors are not end customers, but
rather serve as a channel of sale to many end users of the Company's products.
No other distributor or customer accounted for 10% or more of net sales for
fiscal 2003, 2002 and 2001.
The Company's assets, liabilities and cash flows are predominantly U.S. dollar
denominated, including those of its foreign operations. However, the Company's
foreign subsidiaries have certain assets, liabilities and cash flows that are
subject to foreign currency risk. The Company considers this risk to be minor
and, for the three years ended June 29, 2003, had not utilized derivative
instruments to hedge foreign currency risk or for any other purpose. Gains and
losses resulting from foreign currency fluctuations are recognized in income
currently and were not material for all periods presented.
The Company is subject to contingencies, including legal proceedings arising out
of a wide range of matters, including, among others, patent suits and employment
claims. While it is impossible to ascertain the ultimate legal and financial
liability with respect to these lawsuits, the Company believes that the
aggregate amount of such liabilities, if any, will not have a material adverse
effect on the consolidated financial position or results of operation of the
Company.
Inventories
The Company values inventories at the lower of cost or market. The Company
records charges to write down inventories for unsalable, excess or obsolete raw
materials, work-in-process and finished goods. Newly introduced parts are
generally not valued until success in the market place has been determined by a
consistent pattern of sales and backlog among other factors. In addition to
writedowns based on newly introduced parts, statistical and judgmental
assessments are calculated for the remaining inventory based on salability and
obsolescence.
Property, Plant and Equipment and Other Non Current Assets
Net property, plant and equipment at June 29, 2003 was geographically
distributed as follows: United States - $182,206,000; Malaysia - $22,276,000;
Singapore - $18,944,000; and other - $18,000. Depreciation and amortization are
provided using the straight-line method over the estimated useful lives of the
assets (3-7 years for equipment and 10-30 years for buildings and building
improvements). Leasehold improvements are amortized over the shorter of the
asset's useful life or the expected term of the lease.
Other assets principally relate to technology agreements that are generally
amortized over their contractual periods, primarily ten years using the
straight-line method of amortization. The related liability for the technology
agreement is recorded as a long-term liability.
Revenue Recognition
Revenue from product sales made directly to customers is recognized upon the
transfer of title, which generally occurs at the time of shipment. Revenue from
the Company's sales to domestic distributors is recognized under agreements
which provide for certain sales price rebates and limited product return
privileges. As a result, the Company defers recognition of such sales until the
domestic distributors sell the merchandise. The Company relieves inventory and
records a receivable on the initial sale to the distributor as title has passed
to the distributor and payment is collected on the receivable within normal
trade terms. The income to be derived from distributor sales is recorded under
current liabilities on the balance sheet as "Deferred income on shipments to
distributors" until such time as the distributor confirms a final sale to its
end customer.
The Company's sales to international distributors are made under agreements
which permit limited stock return privileges but not sales price rebates.
Revenue on these sales is recognized upon shipment at which time title passes.
The Company estimates international distributor returns based on historical data
and current business expectations and defers a portion of international
distributor sales and profits based on these estimated returns. Such amounts are
classified in "Deferred income on shipments to distributors" on the accompanying
balance sheet.
The Company's warranty policy provides for replacement of defective parts.
Warranty expense historically has been negligible.
23
Stock Based Compensation
The Company has adopted the disclosure requirements of Statement of Financial
Accounting Standards No. 148 (SFAS 148,) "Accounting for Stock-Based
Compensation - Transition and Disclosure" in this Annual Report on Form 10-K.
SFAS 148 amends Statement of Financial Accounting Standards No. 123 (SFAS 123),
"Accounting for Stock-Based Compensation," to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based compensation and also amends the disclosure requirements of SFAS
123 to require prominent disclosures in both annual and interim financial
statements about the methods of accounting for stock-based employee compensation
and the effect of the method used on reported results. As permitted by SFAS 148
and SFAS 123, the Company continues to apply the accounting provisions of APB
25, and related interpretations, with regard to the measurement of compensation
cost for options granted under the Company's equity compensation plans. No
employee compensation expense has been recorded as all options granted had an
exercise price equal to the market value of the underlying common stock on the
date of grant. Had expense been recognized using the fair value method described
in SFAS 123, using the Black-Scholes option-pricing model, the Company would
have reported the following results of operations:
Twelve Months Ended
------------------------------------------
In thousands June 29, June 30, July 1,
2003 2002 2001
----------- -------------- -----------
Net income, as reported $ 236,591 $ 197,629 $ 427,456
Deduct: total stock-based
compensation expense determined
under the fair value method,
net of tax (75,867) (65,693) (61,393)
----------- -------------- -----------
Pro forma net income $ 160,724 $ 131,936 $ 366,063
=========== ============== ===========
Earning per share:
Basic-as reported $ 0.76 $ 0.62 $ 1.35
=========== ============== ===========
Basic-pro forma $ 0.51 $ 0.42 $ 1.16
=========== ============== ===========
Diluted-as reported $ 0.74 $ 0.60 $ 1.29
=========== ============== ===========
Diluted-pro forma $ 0.50 $ 0.40 $ 1.10
=========== ============== ===========
See Note 4 for a discussion on the assumptions used in the option-pricing model
and estimated fair value of employee stock options.
Earnings Per Share
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 dilutive effect of stock options was 8,260,000, 11,323,000, and
15,603,000 shares for fiscal 2003, 2002, and 2001 respectively. The weighted
average diluted common shares outstanding for fiscal 2003, 2002, and 2001
excludes the dilutive effect of approximately 14,434,000, 16,433,000, and
19,842,000 options, respectively, since such options have an exercise price in
excess of the average market value of the Company's common stock during the
fiscal year.
Comprehensive Income
Accumulated other comprehensive income consists entirely of unrealized gains on
available-for-sale securities. The Company, in practice, primarily holds its
cash and short-term investments until maturity.
Segment Reporting
The Company competes in a single operating segment, and as a result, no segment
information has been disclosed. Disclosures about products and services,
geographical areas, and major customers are included above in Note 1 to the
consolidated financial statements.
Recent Pronouncements
In January 2003, the Financial Accounting Standards Board issued Interpretation
No. 46 (FIN 46), "Consolidation of Variable Interest Entities." FIN 46 requires
an investor with a majority of the variable interests (primary beneficiary)
24
in a variable interest entity (VIE) to consolidate the entity and also requires
majority and significant variable interest investors to provide certain
disclosures. A VIE is an entity in which the voting equity investors do not have
a controlling interest, or the equity investment at risk is insufficient to
finance the entity's activities without receiving additional subordinated
financial support from other parties. FIN 46 clarifies the application of
Accounting Research Bulletin No. 51 and applies immediately to any variable
interest entities created after January 31, 2003 and to variable interest
entities in which an interest is obtained after that date. For variable interest
entities created or acquired prior to February 1, 2003, the provisions of FIN 46
must be applied for the first interim or annual period beginning after June 15,
2003. The Company believes the adoption of FIN 46 will not have an impact on its
results of operations or financial position.
2. Short-term Investments
The Company accounts for its investment securities in accordance with SFAS No.
115, "Accounting for Certain Investments in Debt and Equity Securities." All of
the Company's cash equivalents and short-term investments are treated as
"available-for-sale" under SFAS No. 115. The securities are reported at fair
value with the related unrealized gains included in accumulated other
comprehensive income, a component of stockholder equity, net of tax.
Available-for-sale short-term investment at June 29, 2003 and June 30, 2002 were
as follows:
In thousands June 29, 2003 June 30, 2002
------------------------------------------ ------------------------------------------
Amortized Unrealized Estimated Amortized Unrealized Estimated
Cost Gain Fair Value Cost Gain Fair Value
---------- ---------- ---------- ---------- ---------- ----------
Municipal bonds $ 697,184 $ 5,560 $ 702,744 $ 727,884 $ -- $ 727,884
U.S. Treasury securities
and obligations of U.S.
government agencies 475,339 4,979 480,318 409,116 -- 409,116
Corporate debt securities
and other 273,468 761 274,229 203,324 -- 203,324
---------- ---------- ---------- ---------- ---------- ----------
$1,445,991 $ 11,300 $1,457,291 $1,340,324 $ -- $1,340,324
========== ========== ========== ========== ========== ==========
At June 30, 2002 the debt securities are carried at amortized cost, which
approximates fair market value, determined using quoted market prices for these
securities.
The contractual maturities of short-term investments at June 29, 2003 were as
follows: one year or less at the estimated fair value- $714,118; one year to
three years at the estimated fair value- $743,173. The contractual maturities of
short-term investments at June 30, 2002 were as follows: one year or less at the
estimated fair value- $290,017; one year to three years at the estimated fair
value- $1,050,307. Expected maturities may differ from contractual maturities
because the issuers of the securities may have the right to repay obligations
without prepayment penalties.
3. Lease Commitments
The Company leases certain of its facilities under operating leases, some of
which have options to extend the lease period. In addition, the Company has
entered into long-term land leases for the sites of its Singapore and Malaysia
manufacturing facilities.
At June 29, 2003, future minimum lease payments under non-cancelable operating
leases having an initial term in excess of one year were as follows: fiscal
2004: $4,183,000; fiscal 2005: $3,842,000; fiscal 2006: $3,436,000; fiscal 2007:
$2,864,000; fiscal 2008: $2,687,000; and thereafter: $7,423,000.
Total rent expense was $4,044,000, $3,418,000, and $2,252,000 in fiscal 2003,
2002 and 2001, respectively.
4. Employee Benefit Plans
Stock Option Plans
The Company has stock option plans under which options to purchase shares of the
Company's common stock may be granted to employees and directors at a price no
less than the fair market value on the date of the grant. At June 29, 2003, the
total authorized number of shares under all plans was 184,000,000. At June 29,
2003, 26,537,086 shares
25
were available for grant under all plans. Options become exercisable over a
five-year period (generally 10% every six months.) All options expire ten years
after the date of the grant.
26
Stock option transactions during the three years ended June 29, 2003 are
summarized as follows:
Stock Weighted-
Options Average
Outstanding Exercise Price
----------- --------------
Outstanding options, July 2, 2000 39,888,920 $ 14.70
----------
Granted 7,835,650 46.61
Forfeited (764,780) 22.55
Exercised (5,164,470) 9.14
----------
Outstanding options, July 1, 2001 41,795,320 21.21
----------
Granted 1,838,000 38.96
Forfeited (1,220,650) 33.19
Exercised (3,519,710) 9.69
----------
Outstanding options, June 30, 2002 38,892,960 22.72
----------
Granted 8,075,530 25.68
Forfeited (736,546) 34.85
Exercised (4,710,476) 9.06
----------
Outstanding options, June 29, 2003 41,521,468 $ 24.58
==========
The following table sets forth certain information with respect to employee
stock options outstanding and exercisable at June 29, 2003:
Option Outstanding Option Exercisable
------------------------------------------ ----------------------
Weighted
Weighted Average Weighted
Average Remaining Stock Average
Range of Exercise Stock Options Exercise Contractual Options Exercise
Prices Outstanding Price Life (Years) Exercisable Price
- ------ ----------- ----- ------------ ----------- -----
$ 4.34 - $ 12.97 13,337,100 $ 9.43 3.53 13,240,100 $ 9.42
$12.98 - $ 25.05 11,904,778 21.47 7.27 5,676,071 18.03
$25.06 - $ 40.90 10,667,990 33.33 7.17 5,596,530 31.88
$40.91 - $ 55.88 5,611,600 50.55 7.09 2,961,725 50.28
----------- -----------
$ 4.34 - $ 55.88 41,521,468 $24.58 6.02 27,474,426 $ 20.17
=========== ===========
Stock Purchase Plan
The Company's stock purchase plan ("ESPP") permits eligible employees to
purchase common stock through payroll deductions at the lower of 85% of the fair
market value of common stock at the beginning or end of each six month offering
period. The offering periods commence on approximately May 1 and November 1 of
each year. At June 29, 2003, the shares reserved for issuance under this plan
totaled 8,400,000 and 7,514,520 shares had been issued under this plan. During
fiscal 2003, 235,844 shares were issued at a weighted-average price of $23.81
per share pursuant to this plan.
FAS 123 Assumptions
Pro forma information regarding net income is required by SFAS 123, which also
requires that the information be determined as if the Company had accounted for
grants subsequent to December 31, 1994 under a method specified by SFAS 123.
Options granted were estimated using the Black-Scholes valuation model. The
following assumptions were used for 2003, 2002 and 2001:
2003 2002 2001
---- ---- ----
Expected lives 6.4 6.1 6.5
Expected volatility 66.0% 69.0% 65.8%
Dividend yields 0.7% 0.5% 0.2%
Risk free interest rates 3.1% 4.4% 5.0%
27
The Black-Scholes option valuation model was developed for use in estimating the
fair value of publicly traded options, which have no vesting restrictions and
are fully transferable. In addition, option valuation models require the input
of highly subjective assumptions including expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of publicly traded options, and because changes in these
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not provide a reliable single
measure of the fair value of its stock options.
Using the Black-Scholes option pricing model, the weighted average estimated
fair value of employee stock options granted in fiscal 2003, 2002 and 2001 was
$16.35, $25.59 and $31.64 per share, respectively. For the purposes of the pro
forma information, the estimated fair values of the employee stock options are
amortized to expense using the straight-line method over the vesting period.
Retirement Plan
The Company has established a 401(k) retirement plan for its qualified U.S.
employees. Profit sharing contributions made by the Company to this plan were
approximately $5,718,000, $8,873,000 and $11,857,000 in fiscal 2003, 2002 and
2001, respectively.
5. Income Taxes
The components of income before income taxes are as follows:
In thousands 2003 2002 2001
-------- -------- --------
United States operations $299,828 $245,830 $541,112
Foreign operations 33,398 32,520 69,539
-------- -------- --------
$333,226 $278,350 $610,651
======== ======== ========
The provision for income taxes consists of the following:
In thousands 2003 2002 2001
--------- --------- ---------
United States federal:
Current $ 105,972 $ 66,465 $ 155,390
Deferred (15,347) 4,751 4,747
--------- --------- ---------
90,625 71,216 160,137
--------- --------- ---------
State:
Current 6,493 5,923 14,229
Deferred (2,960) 66 528
--------- --------- ---------
3,533 5,989 14,757
--------- --------- ---------
Foreign:
Current 1,580 3,516 8,301
Deferred 897 -- --
--------- --------- ---------
2,477 3,516 8,301
--------- --------- ---------
$ 96,635 $ 80,721 $ 183,195
========= ========= =========
Actual current federal and state tax liabilities are lower than the amounts
reflected above by the tax benefit from stock option activity of approximately
$37,321,000, $38,091,000, and $90,563,000, for fiscal 2003, 2002 and 2001,
respectively. The tax benefit from stock option activity is recorded as a
reduction in current income taxes payable and an increase in common stock.
The provision for income taxes reconciles to the amount computed by applying the
statutory U.S. Federal rate at 35% to income before income taxes as follows:
In thousands 2003 2002 2001
--------- --------- ---------
Tax at U.S. statutory rate $ 116,629 $ 97,423 $ 213,728
State income taxes, net of federal benefit 2,296 3,894 9,592
Earnings of foreign subsidiaries subject to lower rates (5,007) (5,069) (10,230)
Tax-exempt interest income (8,142) (10,850) (11,908)
Export sales benefit (6,825) (3,640) (13,224)
Other (2,316) (1,037) (4,763)
--------- --------- ---------
$ 96,635 $ 80,721 $ 183,195
========= ========= =========
28
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities recorded in the balance sheet
as of June 29, 2003 and June 30, 2002 are as follows:
In thousands 2003 2002
------- -------
Deferred tax assets:
Inventory valuation $19,174 $17,680
Deferred income on shipments to distributors 16,485 17,236
State income taxes 1,237 2,098
Non-deductible accrued benefits 1,992 1,954
Taxes of foreign subsidiaries 6,165 --
Tax credit carryforward 3,063 --
Other 3,065 4,786
------- -------
Total deferred tax assets $51,181 $43,754
======= =======
Deferred tax liabilities:
Depreciation and amortization $11,792 $11,642
Unremitted earnings of subsidiaries 5,692 26,340
Interest income of subsidiaries 6,165 --
Unrealized gain on investments 4,350 --
------- -------
Total deferred tax liabilities 27,999 37,982
------- -------
Net deferred tax assets $23,182 $ 5,772
------- -------
The Company has a tax holiday in Singapore which is effective through September
2004. The Company's Malaysia tax holiday is effective through July 2005.
The impact of the Singapore and Malaysia tax holidays was to increase net income
by approximately $3,439,000 ($0.01 per diluted share) in fiscal 2003, $4,328,000
($0.01 per diluted share) in fiscal 2002, and $11,669,000 ($0.04 per diluted
share) in fiscal 2001. The Company does not provide a residual U.S. tax on a
portion of the undistributed earnings of its Singapore and Malaysia
subsidiaries, as it is the Company's intention to permanently invest these
earnings overseas. Should these earnings be remitted to the U.S. parent,
additional U.S. taxable income would be approximately $193,274,000.
The Internal Revenue Service (IRS) completed its examination of the five fiscal
years beginning July 1, 1996 and ending July 1, 2001 with the exception of the
foreign sales corporation (FSC) benefits. As a result of the completed portion
of the examination, earnings of certain foreign subsidiaries were adjusted with
the primary effect being an increase in domestic taxes paid and a decrease in
the deferred tax liability account. The IRS results are included in fiscal 2003
financial statements and did not have a material impact upon them. Although the
outcome of the tax audits is always uncertain, management believes that an
adequate amount of taxes and related interest and penalty, if any, have been
provided for any additional adjustment that may result from these years.
The Company has state tax credit carryforwards of $4.7 million, which do not
expire.
6. Quarterly Information (Unaudited)
In thousands, except per share amounts
Quarter Ended Fiscal 2003 June 29, 2003 March 30, 2003 Dec. 29, 2002 Sept. 29, 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Net sales $ 165,767 $ 153,750 $ 145,045 $ 142,011
Gross profit 125,312 114,360 106,392 105,443
Net income 66,004 60,622 56,163 53,802
Basic earnings per share 0.21 0.19 0.18 0.17
Diluted earnings per share 0.21 0.19 0.18 0.17
Cash dividends per share 0.06 0.05 0.05 0.05
Stock price range per share:
High 36.77 34.91 34.96 33.10
Low 30.48 25.72 19.61 20.10
29
In thousands, except per share amounts
Quarter Ended Fiscal 2002 June 30, 2002 March 31, 2002 Dec. 30, 2001 Sept. 30, 2001
- ------------------------------------------------------------------------------------------------------------------------------------
Net sales $ 140,757 $ 130,155 $ 121,266 $ 120,104
Gross profit 103,936 95,637 85,133 82,857
Net income 55,034 51,480 45,965 45,150
Basic earnings per share 0.17 0.16 0.15 0.14
Diluted earnings per share 0.17 0.16 0.14 0.14
Cash dividends per share 0.05 0.04 0.04 0.04
Stock price range per share:
High 45.87 46.72 44.52 48.08
Low 28.58 36.24 30.00 31.29
The stock activity in the above table is based on the high and low closing
prices. These prices represent quotations between dealers without adjustment for
retail markups, markdowns or commissions, and may not represent actual
transactions. The Company's common stock is traded on the NASDAQ National Market
System under the symbol LLTC.
At June 29, 2003, there were approximately 1,655 stockholders of record.
30
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders of Linear Technology Corporation
We have audited the accompanying consolidated balance sheets of Linear
Technology Corporation as of June 29, 2003 and June 30, 2002, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended June 29, 2003. Our audits also included
the financial statement schedule listed in Item 15(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Linear
Technology Corporation at June 29, 2003 and June 30, 2002, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended June 29, 2003, in conformity with accounting principles generally
accepted in the United States. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
/s/ Ernst & Young LLP
San Jose, California
July 18, 2003
31
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
Item 9a. Controls and Procedures
(a) Evaluation of disclosure controls and procedures
The Company's management evaluated, with the participation of our Chief
Executive Officer and our Chief Financial Officer, the effectiveness of our
disclosure controls and procedures as of the end of the period covered by this
Annual Report on Form 10-K. Based on this evaluation, our Chief Executive
Officer and our Chief Financial Officer have concluded that our disclosure
controls and procedures are effective to ensure that information we are required
to disclose in reports that we file or submit under the Securities Exchange Act
of 1934 is recorded, processed, summarized and reported within the time periods
specified in Securities and Exchange Commission rules and forms.
(b) Changes in internal controls over financial reporting
There was no change in the Company's internal control over financial reporting
that occurred during the fourth quarter of fiscal 2003 that has materially
affected, or is reasonably likely to materially affect, its internal control
over financial reporting.
32
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this item for the Company's directors is
incorporated herein by reference to the 2003 Proxy Statement, under the caption
"Proposal One - Election of Directors," and for the executive officers of the
Company, the information is included in Part I hereof under the caption
"Executive Officers of the Registrant." The information required by this item
with respect to compliance with Section 16(a) of the Securities Exchange Act of
1934 is incorporated by reference to the 2003 Proxy Statement under the caption
"Section 16(a) Beneficial Ownership Reporting Compliance."
Item 11. Executive Compensation
Incorporated by reference to the 2003 Proxy Statement, under the
section titled "Executive Officer Compensation."
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
Incorporated by reference to the 2003 Proxy Statement, under the
section titled "Beneficial Security Ownership of Directors, Executive Officers
and Certain Other Beneficial Owners" and "Securities Authorized for Issuance
Under Equity Compensation Plans."
Item 13. Certain Relationships and Related Transactions
Not applicable.
Item 14.
Pursuant to SEC Release No. 33-8183 (as corrected by Release No.
33-8183A), the disclosure requirements of this Item are not effective until the
Annual Report on Form 10-K for the Company's first fiscal year ending after
December 15, 2003.
33
PART IV
Item 15. Exhibits, Financial Statements, Schedules, and Reports on Form 8-K
(a) 1. Financial Statements
The following consolidated financial statements are included in Item 8:
Consolidated Statements of Income for each of the three years
in the period ended June 29, 2003
Consolidated Balance Sheets as of June 29, 2003 and 2002
Consolidated Statements of Cash Flows for each of the three
years in the period ended June 29, 2003
Consolidated Statements of Stockholders' Equity as of June 29,
2003, 2002 and 2001
Report of Independent Auditors
2. Schedules
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
Additions
Balance at Charged to Balance at
Beginning Costs and End of
of Period Expenses Deductions(1) Period
--------- -------- ------------- ------
Allowance for doubtful accounts:
Year ended July 1, 2001 .......................... $ 803 $ -- $ -- $ 803
====== ======== ====== ======
Year ended June 30, 2002 ......................... $ 803 $ 800 $ 301 $1,302
====== ======== ====== ======
Year ended June 29, 2003 ......................... $1,302 $ 1,000 $ 540 $1,762
====== ======== ====== ======
(1) Write-offs of doubtful accounts.
Schedules other than the schedule listed above have been omitted since
they are either not required or the information is included elsewhere.
3. Exhibits
The Exhibits which are filed with this report or which are incorporated
by reference herein are set forth in the Exhibit Index.
(b) Reports on Form 8-K.
During the quarter ended June 29, 2003, the Company filed one report on
Form 8-K as follows:
A report on Form 8-K was filed April 15, 2003, furnishing to the
Securities and Exchange Commission a press release announcing the
Company's third quarter financial results.
(c) Exhibit Index
3.1 Certificate of Incorporation of Registrant. (9)
3.3 Bylaws of Registrant. (9)
34
10.1 1981 Incentive Stock Option Plan, as amended, and form of Stock Option
Agreements, as amended (including Restricted Stock Purchase
Agreement).(*)(3)
10.11 Agreement to Build and Lease dated January 8, 1986 between
Callahan-Pentz Properties, McCarthy Six and the Registrant.(1)
10.25 1986 Employee Stock Purchase Plan, as amended, and form of Subscription
Agreement.(*)(2)
10.35 1988 Stock Option Plan, as amended, form of Incentive Stock Option
Agreement, as amended, and form of Non-statutory Stock Option
Agreement, as amended.(*)(6)
10.36 Form of Indemnification Agreement. (9)
10.45 Land lease dated March 30, 1993 between the Registrant and the
Singapore Housing and Development Board.(4)
10.46 Land lease dated November 20, 1993 between the Registrant and the
Penang Development Corporation. (5)
10.47 1996 Incentive Stock Option Plan, form of Incentive Stock Option
Agreement and form of Nonstatutory Stock Option Agreement.(*) (7)
10.48 1996 Senior Executive Bonus Plan, as amended July 25, 2000.(*) (8)
10.49 2001 Nonstatutory Stock Option Plan, as amended July 23, 2002, and form
of Stock Option Agreement.(*)(11)
10.50 Employment Agreement dated January 15, 2002 between the Registrant and
Robert H. Swanson, Jr. (*) (10)
10.51 Employment Agreement dated January 15, 2002 between the Registrant and
Clive B. Davies. (*) (10)
10.52 Employment Agreement dated January 15, 2002 between the Registrant and
Paul Coghlan. (*) (10)
10.53 Employment Agreement dated January 15, 2002 between the Registrant and
Robert C. Dobkin. (*) (10)
11.1 Computation of earnings per share. (see Consolidated Statements of
Income in Item 8).
21.1 Subsidiaries of Registrant.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
24.1 Power of Attorney. (see page 36)
31.1 Certification of Chief Executive Officer.
31.2 Certification of Chief Financial Officer.
32.1 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.
(*) The item listed is a compensatory plan of the Company.
(1) Incorporated by reference to identically numbered exhibits filed in
response to Item 16(a), "Exhibits," of the Registrant's Registration
Statement on Form S-1 and Amendment No. 1 and Amendment No. 2 thereto
(File No. 33-4766), which became effective on May 28, 1986.
(2) Incorporated by reference to identically numbered exhibit filed in
response to Item 6, "Exhibits and Reports on Form 8-K," of the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
December 28, 1997.
35
(3) Incorporated by reference to identically numbered exhibit filed in
response to Item 6, "Exhibits and Reports on Form 8-K," of the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
December 30, 1990.
(4) Incorporated by reference to identically numbered exhibit filed in
response to Item 14(a)(3) "Exhibits," of the Registrant's Annual Report
on Form 10-K for the fiscal year ended June 27, 1993.
(5) Incorporated by reference to identically numbered exhibit filed in
response to Item 14(a)(3) "Exhibits," of the Registrant's Annual Report
on Form 10-K for the fiscal year ended July 3, 1994.
(6) Incorporated by reference to identically numbered exhibit filed in
response to Item 6, "Exhibits and Reports on Form 8-K," of the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
October 2, 1994.
(7) Incorporated by reference to Exhibits 4.1 and 4.2 of the Registrant's
Registration Statement on Form S-8 filed with the Commission on July
30, 1999.
(8) Incorporated by reference to identically numbered exhibit filed in
response to Item 14(a)(3) "Exhibits," of the Registrant's Annual Report
on Form 10-K for the fiscal year ended July 2, 2000.
(9) Incorporated by reference to identically numbered exhibit filed in
response to Item 14(a)(3) "Exhibits," of the Registrant's Annual Report
on Form 10-K for the fiscal year ended July 1, 2001.
(10) Incorporated by reference to identically numbered exhibit filed in
response to Item 6 "Exhibits and reports on Form 8-K," of the
Registrant's Quarterly Report on Form 10-Q for the quarter ended March
31, 2002.
(11) Incorporate by reference to identically numbered exhibit filed in
response to Item 14(a)(3) "Exhibits," of the Registrants's Annual
Report on Form 10-K for the fiscal year ended June 30, 2002.
36
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Annual Report on Form
10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
LINEAR TECHNOLOGY CORPORATION
-----------------------------
(Registrant)
By: /s/ Robert H. Swanson, Jr.
--------------------------
Robert H. Swanson, Jr.
Chairman of the Board and
Chief Executive Officer
September 12, 2003
POWER OF ATTORNEY
Know all persons by these presents, that each person whose signature
appears below constitutes and appoints Robert H. Swanson, Jr. and Paul Coghlan,
jointly and severally, his attorneys-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any amendments to this
Annual Report on Form 10-K, and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Robert H. Swanson, Jr. /s/ Paul Coghlan
- -------------------------- ----------------
Robert H. Swanson, Jr. Paul Coghlan
Chairman of the Board and Vice President of Finance and Chief
Chief Executive Officer Financial Officer (Principal Financial
(Principal Executive Officer) Officer and Principal Accounting Officer)
September 12, 2003 September 12, 2003
/s/ David S. Lee /s/ Thomas S. Volpe
- ---------------- -------------------
David S. Lee Thomas S. Volpe
Director Director
September 12, 2003 September 12, 2003
/s/ Leo T. McCarthy /s/ Richard M. Moley
- ------------------- --------------------
Leo T. McCarthy Richard M. Moley
Director Director
September 12, 2003 September 12, 2003
37