SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Check One) (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended April 3, 1994 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) Commission File No. 0-12695 INTEGRATED DEVICE TECHNOLOGY, INC. (Exact name of registrant as specified in its charter) Delaware 94-2669985 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 2975 Stender Way, Santa Clara, California 95054 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (408) 727-6116 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.001 par value (Title of class) 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 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 the registrant's Common Stock held by non-affiliates of the registrant was approximately $1,008,443,000 as of April 29, 1994, based upon the closing sale price on the NASDAQ National Market System for that date. Shares of Common Stock held by each executive 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 affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. There were 33,475,296 shares of the Registrant's Common Stock issued and outstanding as of April 29, 1994. DOCUMENTS INCORPORATED BY REFERENCE
Items 10, 11, 12, and 13 of Part III incorporate information by reference from the 1994 Proxy Statement for the Annual Meeting of Shareholders to be held on August 25, 1994.
ITEM 1. BUSINESS General Integrated Device Technology, Inc. was incorporated in California in 1980 and reincorporated in Delaware in 1987. The terms the "Company" and "IDT" refer to Integrated Device Technology, Inc. and its consolidated subsidiaries, unless the context indicates otherwise. IDT designs, develops, manufactures and markets high-performance integrated circuits and subsystems using advanced CMOS (Complimentary Metal Oxide Silicon) and BiCMOS (a combination of bipolar and CMOS) process technologies. The Company's strategy is to offer proprietary and enhanced industry-standard products that improve the performance of systems incorporating high-performance microprocessors. IDT markets its products for use in workstation/server, personal computer, telecommunications, office automation, and military applications. The Company offers products in four areas: SRAM (Static Random Access Memory) components and modules, specialty memory products, logic circuits and RISC (Reduced Instruction Set Computers) microprocessors and subsystems. IDT's products are essentially all catalog items as opposed to custom circuits designed for a single customer application. The Company attempts to differentiate itself from competitors through unique architecture, enhanced system cost/performance, and packaging options. Products and Markets IDT offers over 3,000 product configurations in four families: SRAM components and modules, specialty memory products, logic circuits, and RISC microprocessors and subsystems. During fiscal 1994, these product families accounted for 33%, 29%, 21% and 17%, respectively, of total revenues. The Company markets its products primarily to OEMs in the workstation/server, personal computer, telecommunications, office automation and military markets. IDT's product design efforts are focused on developing proprietary components and integrating its components into single devices, modules or subsystems to meet the needs of customers. SRAMs SRAMs are memory circuits used for storage and retrieval of data during a computer system's operation. SRAMs do not require electrical refreshment of the memory contents to ensure data integrity, allowing them to operate at high speeds. SRAMs are delineated by density (number of bits of data stored) and organization (number of bits of data available in one access, i.e. width). SRAMs incorporate substantially more circuitry than DRAMs, resulting in higher production costs for a given amount of memory, and generally command higher selling prices than the equivalent sized DRAM. The SRAM market is fragmented by differing speed, power, density, organization and packaging demands. As a result, there exist a number of niche markets for SRAMs. In order to meet varying customer needs, the Company uses both CMOS and BiCMOS process technologies and markets 16K (Kilobyte), 64K, 256K, and 1 Meg (Megabyte) SRAMs in a number of speed, power, organization and packaging configurations. IDT's SRAMs are used in products in all markets served by the Company. IDT is a leader in cache SRAM memories, which increase microprocessor efficiency by temporarily storing the most frequently used instructions and data. IDT cache SRAMs are optimized to enhance the performance of Intel 486-based systems, as well as the Intel Pentium and the PowerPC microprocessors. IDT markets a family of cache-memory modules to several large personal computer OEMs, incorporating IDT's 71589 (32K X 9) and 71B74 (8K X 8) static memories in particular. Specialty Memory Products The Company's proprietary specialty memory products include FIFOs and multi-port memory products that offer high-performance features which allow communications and computer systems to operate more efficiently. FIFOs are used as rate buffers to transfer large amounts of data at high speeds between separate devices or pieces of equipment operating at different speeds within a system. IDT's FIFOs are manufactured using primarily CMOS process technology. FIFOs are used in all markets served by the Company. Synchronous memories use clock edges to trigger read and write signals. By transferring data on clock edges, a system's timing can be more easily designed. The Company is a leading supplier of both synchronous and asynchronous high-performance FIFOs and has increasingly focused its resources on the design of synchronous FIFOs which are faster and provide an easier user interface. Multi-port memory products are used to speed data transfers and act as the link between multiple processors or between microprocessors and peripherals when the order of data to be transferred needs to be controlled. IDT's multi-port memory products are available with arbitration logic functions built in which resolve conflicts between devices seeking to access the same data. IDT's multi-port memory products are used in peripheral interface, communications and networking products, including hubs, routers and bridges. IDT's family of multi-port memory products is comprised of synchronous and asynchronous dual-port, and asynchronous four-port devices. The Company also offers a new device, known as a SARAM, which combines the flexibility of a multi-port product with the ease of a FIFO. Logic Circuits Logic circuits control data communications between various elements of electronic systems, such as between a microprocessor and a memory circuit. IDT offers high-speed byte-wide and double density CMOS logic circuits which support bus and backplane interfaces, memory interfaces and other logic support applications where high-speed, low power and high-output drive are critical. IDT's 16-bit family of logic products has gained market acceptance and is available in small packages which enable board area to be significantly reduced. IDT also supplies a series of 8-bit and 16-bit 3.3 volt logic products and a 3.3 volt to 5 volt translator circuit directed at the growing notebook and laptop computer markets. The Company also markets a family of clock drivers and clock generators. These devices, placed at critical positions in a circuit, correct the degradation of timing that occurs the further the impulse travels from the main system clock. IDT's logic circuits are used in all markets served by the Company. RISC Microprocessor Components and Subsystems Microprocessors act as the CPU (central processing unit) of computer systems. In January 1988, IDT became a licensed manufacturer of MIPS RISC microprocessors. RISC processors utilize a smaller instruction set, containing only the most frequently used instructions, than traditional CISC (Complex Instruction Set Computers) processors. This simplified instruction set executes an instruction in a single cycle and is therefore much faster than CISC processors which require multiple cycles. The Company's RISC microprocessor components are used in the office automation, telecommunications, server/workstation and personal computer markets. IDT manufactures MIPS 32-bit and 64-bit standard microprocessors. The Company also sells several proprietary 32-bit derivative products for the embedded controller market, including its R3051 with on-circuit memory and its R3081 with floating point functions and on-circuit memory. IDT has licensed Siemens to manufacture and market R3051 products worldwide. The Company has also entered into a license agreement with Toshiba, pursuant to which Toshiba can manufacture and market R3081 products and, in the future, R3051 products, and an OEM private labeling agreement with respect to the Company's R3051 and R3081 products. In addition, IDT entered into an agreement with Adobe Systems to define, develop and manufacture a variety of products that allow OEMs to evaluate laser printer feature/price/ performance combinations using Adobe software and IDT's embedded controllers. The Company recently announced and is shipping its newest RISC microprocessor based on the MIPS architecture, the R4600 Orion*. The R4600 is a full 64-bit MIPS instruction set architecture microprocessor targeted at the desktop PC and high-end embedded control markets. The R4600 is the first microprocessor designed for IDT by Quantum Effect Design (QED), a consolidated subsidiary, initially to address applications arising from Microsoft's porting of its WindowsNT operating system to the MIPS RISC architecture platform. The Orion has also proved attractive to customers in embedded control applications. RISC subsystems are board level products that contain MIPS RISC microprocessors, cache SRAMs, logic circuits and supporting software. These products are used in development systems for the evaluation and design of hardware and software or are integrated into customers' end-user systems, thereby reducing design cycle time. IDT also markets RISC subsystems used by several OEMs that provide performance enhancements to standard products. IDT believes that there are significant opportunities in the development of custom solutions for computer and peripherals companies based upon IDT's MIPS architecture expertise, its expertise in laser printer controls and its several alliances with software developers. There can be no assurance that MIPS RISC technology will continue to be successful or that other technologies will not become more accepted. * R4600 and Orion are trademarks of Integrated Device Technology, Inc. Manufacturing Wafer fabrication involves a highly sophisticated, complex process that is extremely sensitive to contamination. Integrated circuit manufacturing costs are primarily determined by circuit size because the "yield" of good circuits per wafer generally increases as a function of smaller die. Other factors affecting costs include wafer size, number of process steps, costs and sophistication of manufacturing equipment, packaging type, process complexity and cleanliness. IDT's manufacturing process is complex, involving a number of steps including wafer fabrication, plastic or ceramic packaging, burn-in and final test. From time to time the Company has experienced manufacturing problems which have caused delays in shipments or increased costs. There can be no assurance that IDT will not experience manufacturing problems in the future. The Company utilizes proprietary CMOS and BiCMOS process technologies. The Company's current CMOS and BiCMOS technologies permit sub-micron geometries. BiCMOS, a more costly process, is used for applications requiring higher speeds. The Company anticipates that it will use its BiCMOS technologies for those applications requiring highest speed. Because BiCMOS is a more costly manufacturing process, these devices must sell for substantial premiums to compensate for their higher costs. The Company currently operates two submicron wafer fabrication facilities in San Jose and Salinas, California. The Salinas facility, first placed in production in 1985, has a 20,000 square foot class 3 five-inch wafer fabrication line. The Company plans to expand production capacity by converting this facility to six-inch wafer manufacturing. The San Jose facility has a 25,000 square foot class 1 (less than one particle 0.5 micron or greater in size per cubic foot) six-inch wafer fabrication line which was first placed in production in March 1991. The San Jose facility currently operates at approximately 70% of its ultimate capacity, whereas the Salinas facility runs at approximately 95% of capacity. IDT has attempted to procure some of its older designed die through outside foundries. However, the Company has experienced difficulty in procuring the state-of-the-art wafers required by its products. IDT is actively investigating increasing its wafer fabrication capacity through increasing equipped production capacity at its San Jose and Salinas facilities, acquiring existing facilities or construction of a new factory, which might involve one or more strategic partners. In addition, IDT operates a 100,000 square foot component assembly and test facility in Penang, Malaysia. The Company has announced plans to construct an additional 40,000 square foot building on its vacant land in Penang to further expand its test and assembly operations there. More than 85% of IDT's products are tested in its Malaysian facility. IDT also uses subcontractors, principally in Korea and the Philippines, to perform some assembly operations. If IDT were unable to assemble or test products offshore, or if air transportation to these locations were curtailed, the Company's operations could be materially adversely affected. Additionally, foreign manufacture exposes IDT to political and economic risks, including expropriation, foreign government regulations, currency controls, exchange rate fluctuations and changes in tax and freight rates and exemptions for taxes and tariffs. IDT is insured for certain of these risks. In addition to this offshore assembly and test capability, the Company has capacity for low-volume, quick turn assembly in Santa Clara as well as limited test capability in Santa Clara, San Jose and Salinas. Assembly and test of memory modules and RISC subsystems takes place at subcontractors and in the Company's facilities in both San Jose and Santa Clara. Raw Material Availability Generally the Company has been able to arrange for multiple sources of supply, but the number of vendors capable of delivering certain raw materials, such as silicon wafers, ultra-pure metals, chemicals and gases is very limited. Some of the Company's packages, while not unique, have very long lead times and are available from only a few suppliers. While IDT has not experienced any difficulties recently, from time to time vendors have extended lead times or limited supply to the Company due to capacity constraints. These circumstances could reoccur and could adversely affect IDT. Environmental Compliance IDT's manufacturing sites are subject to numerous environmental laws and regulations, particularly with respect to industrial waste and emissions. Compliance with these laws and regulations has not had a material impact on the Company's capital expenditures, earnings or competitive position. There can be no assurance that changes in such laws and regulations or problems at the Company's facilities would not have adverse effects in the future. Marketing and Customers IDT markets and sells its products primarily to original equipment manufacturers (OEMs) through a variety of channels, including a direct sales force, distributors and independent sales representatives. The Company's direct sales personnel are located at the Company's headquarters and in 17 sales offices in key domestic geographic areas and are primarily responsible for marketing and sales in those areas. Distributors typically maintain an inventory of IDT products and often handle small or rush orders. Pursuant to distribution agreements, the Company grants distributors the right to return slow moving products for credit against other products and offers protection to the distributors against inventory obsolescence or price reductions. IDT utilizes two national and four regional distributors in the United States. Subsequent to the close of fiscal 1994, the Company announced that it had franchised a third national distributor for IDT's products. These distributors generally carry a wide variety of products, including products offered by IDT's competitors. Independent sales representatives generally take orders on an agency basis and the Company ships directly to the customer. The representatives receive commissions on all products shipped to customers in their geographic area. International sales are controlled by IDT's subsidiaries located in France, Germany, Hong Kong, Italy, Japan, Sweden and the United Kingdom. The majority of export sales is through international distributors, which tend not to carry inventory or carry significantly smaller levels compared to domestic distributors. During fiscal 1994, 1993 and 1992, export sales accounted for 32%, 36% and 30% of total revenues, respectively. See Note 12 "Industry Segment, Foreign Operations" of Notes to the Consolidated Financial Statements. Sales outside the United States are typically denominated in local currencies, except for those made through IDT's Hong Kong subsidiary which are denominated in U.S. dollars. Export sales are subject to certain risks, including currency controls and fluctuations, changes in local economic conditions, import and export controls, and changes in tax laws, tariffs and freight rates. No single customer or distributor accounted for more than 10% of net revenues in fiscal 1993 and 1992. During fiscal 1994, two of the Company's national distributors became one entity and accounted for 15% of net revenues. If these two distributors had been a single entity during fiscal 1993 and 1992, it would have accounted for 16% and 17%, respectively, of IDT's total revenues. Backlog IDT manufactures and markets primarily standard parts. Sales are made pursuant to standard purchase orders, which are frequently revised during the agreement term to reflect changes in the customer's requirements. The Company has also entered into master purchase agreements with several of its OEM customers. These agreements do not require the OEMs to purchase minimum quantities of the Company's products. Product deliveries are scheduled upon the Company's receipt of purchase orders under the related OEM agreements. Generally, these purchase orders and OEM agreements also allow customers to reschedule delivery dates and cancel purchase orders without significant penalties. Orders are frequently rescheduled, revised or canceled. In addition, distributor orders are subject to price adjustments both prior to, and occasionally after, shipment. For these reasons, IDT believes that its backlog, while useful for scheduling production, is not necessarily a reliable indicator of future revenues. Research and Development The markets serviced by IDT are characterized by rapid technological changes and advances. IDT's competitive position has been established, to a large extent, through its emphasis on the development of proprietary products as well as enhanced performance industry standard products. In addition, the Company continues to refine its CMOS and BiCMOS process technologies to increase the speed and density of circuits in order to provide its customers with advanced products that will enhance their competitive positions. IDT's current activities are focused on the design of new circuits with higher performance capabilities utilizing consistently reproducible low-cost manufacturing technologies. In fiscal 1992, the Company purchased approximately 48% of the common stock and a majority of the preferred stock of Quantum Effect Design, Inc. (QED), a newly formed corporation. Pursuant to a development agreement between the Company and QED, QED is developing derivative products based on MIPS new 64-bit microprocessor, initially to address applications arising from the porting of Microsoft's Windows NT operating system to the MIPS RISC platform. IDT will own such derivative products, subject to the payment of royalties and other fees to QED. In an effort to increase market acceptance of these products as they are developed, IDT has licensed Toshiba and NKK to manufacture and market these products. The first of these products, the R4600 Orion processor, was successfully introduced in fiscal 1994. There can be no assurance that QED will successfully develop other such products or that any such products will be accepted in the market. The Company believes that a continued high level of research and development expenditure is necessary to retain its competitive position. The Company spent 19%, 23% and 26% of net sales on research and development in fiscal 1994, 1993, and 1992, respectively. Employees At April 3, 1994, IDT and its subsidiaries employed approximately 2,615 people worldwide. IDT's success depends in part on its ability to attract and retain qualified personnel. Since its founding, the Company has implemented policies enabling its employees to share in IDT's success. Examples are available stock option, stock purchase, profit sharing and special bonus plans for key contributors. IDT has never had a work stoppage, no employees are represented by a collective bargaining agreement, and the Company considers its employee relations to be good. Competition The semiconductor industry is highly competitive and is characterized by rapid technological advances, cyclical market patterns, price erosion, evolving industry standards, occasional shortages of materials and high capital equipment costs. Many of the Company's competitors have substantially greater technical, marketing, manufacturing and financial resources than IDT. In addition, there are several foreign competitors, some of whom receive assistance from their host governments in the form of research and development loans and grants and reduced capital costs. The Company competes in different product areas, to varying degrees, on the basis of price, performance, availability and quality. IDT's competitive strategy is to focus on markets which characteristically have less foreign competition and to differentiate its products through high performance, unique configurations and proprietary features or to offer industry standard products with higher speeds and/or lower power consumption. There can be no assurance that price competition, introductions of new products by IDT's competitors, delays in product introductions by IDT or other competitive factors will not have a material adverse effect on the Company in the future. Intellectual Property and Licensing IDT has obtained 37 patents in the United States, 9 patents abroad and has approximately 100 inventions in various stages of the patent application process. The Company intends to continue to increase the scope of its patents. There can be no assurance that any patents issued to the Company will not be challenged, invalidated or circumvented, or that the rights granted thereunder will provide competitive advantages to the Company. The Company also relies on trade secret, copyright, and trademark laws to protect its products, and a number of the Company's circuit designs are registered pursuant to the Semiconductor Chip Protection Act of 1984. This Act gives protection similar to copyright protection for the patterns which appear on integrated circuits and prohibits competitors from making photographic copies of such circuits. IDT has been notified that it may be infringing patents issued to others and in the past has been involved in patent litigation, which adversely affected its operating results. There can be no assurance that additional intellectual property claims will not be made against the Company in the future. The Company believes that licenses, to the extent required, will be available in connection with these claims. No assurance can be given, however, that the terms of any offered license will be favorable. Should licenses from any such claimant be unavailable, the Company may be required to discontinue its use of certain processes or the manufacture, use and sale of certain of its products or to develop noninfringing technology. If IDT is unable to obtain any necessary licenses, pass any increased cost of patent licenses on to its customers, or develop noninfringing technology, the Company could be materially adversely affected. In 1988, IDT entered into a manufacturing, marketing and purchase agreement with MIPS Computer Systems which allows IDT to manufacture and market the complete MIPS family of RISC microprocessors and related software and to modify the MIPS microprocessors to create subsets and supersets. The Company, consistent with normal industry practices, entered into two five-year patent cross-license agreements during fiscal 1993, in settlement of patent litigation with AT&T and Texas Instruments (TI). Under the agreement with AT&T, IDT made a lump-sum payment and issued shares of its Common Stock to AT&T, granted a discount on future purchases, and gave credit for future purchases of technology on a non-exclusive basis. Under the agreement with TI, IDT granted to TI a license to certain IDT technology and products, guaranteed TI that it will realize certain revenues from the technology and products, and is required to develop certain products which will be manufactured and sold by both IDT and TI. During fiscal 1993, the Company entered into a five-year patent cross-license agreement with Motorola which obligated the Company to pay royalties dependent upon the level of the Company's profitability. The agreement specifies minimum annual royalties and maximum royalties over the term of the agreement. See Note 13 "Cross License Agreement" of Notes to the Consolidated Financial Statements.
TEM 2. PROPERTIES The Company presently occupies six major facilities in California and Malaysia as follows: Facility Square Feet Location Wafer fabrication, SRAM and multi-port memory operations 95,000 Salinas Logic and RISC microprocessor operations 62,000 Santa Clara Administration and sales 43,700 Santa Clara Administration and RISC SubSystems 50,000 Santa Clara Assembly and test 100,000 Penang, Malaysia Wafer fabrication, process technology development, FIFO, memory subsystems operations and research and development 136,000 San Jose IDT leases its Salinas and Santa Clara facilities under leases expiring through 2000. IDT is currently negotiating the renewal of its Salinas lease. Each of IDT's other leases has a renewal option for a term of five years. The Company owns its Malaysian and San Jose facilities, although the Malaysian facility is subject to long-term ground leases and the San Jose facility is subject to a mortgage. IDT leases offices for its sales force in 17 domestic locations as well as London, Milan, Munich, Paris, Stockholm, Hong Kong and Tokyo. See Note 7 - "Commitments" of Notes to Consolidated Financial Statements for information concerning IDT's obligations under operating and capital leases. The Company believes its existing facilities and equipment, coupled with its announced capacity expansion in Malaysia and the planned conversion of its Salinas wafer fabrication line to six-inch wafer manufacturing capability along with continued capacity increases in test equipment, are adequate to meet its current requirements. IDT is also investigating either acquiring wafer fabrication capacity from existing facilities or contemplating constructing a new factory, which might involve one or more strategic partners.
ITEM 3. LEGAL PROCEEDINGS There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Registrant or any of its subsidiaries is a party, or of which any of their property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS No matters were submitted to a vote of the Company's securityholders during the last quarter of the fiscal year ended April 3, 1994. Executive Officers of the Registrant The following information as of May 3, 1994 is provided with respect to each executive officer of the Company. Name Age Position D. John Carey 58 Chairman of the Board Leonard C. Perham 51 Chief Executive Officer, President William Cortelyou 38 Vice President, Wafer Operations Robin H. Hodge 54 Vice President, Assembly and Test Alan H. Huggins 41 Vice President, Memory Division Larry T. Jordan 49 Vice President, Marketing Daniel L. Lewis 45 Vice President, Sales Chuen-Der Lien 38 Vice President, Technology Development Jack Menache 51 Vice President, General Counsel and Secretary Richard R. Picard 46 Vice President, Logic and Microprocessor Products William D. Snyder 49 Vice President, Finance and Chief Financial Officer Background of Executive Officers Mr. Carey served as Chief Executive Officer from 1982 until his resignation in April 1991 and was President from 1982 until 1986. He was elected to the Board of Directors in 1980 and has been Chairman of the Board since 1982. Mr. Perham joined IDT in October 1983 as Vice President and General Manager, SRAM Division. In October 1986, Mr. Perham was appointed President and Chief Operating Officer of the Company. In April 1991, Mr. Perham was elected Chief Executive Officer. Mr. Cortelyou joined the Company in 1982. In January 1990, he was elected Vice President, Wafer Operations, Salinas. Mr. Cortelyou currently serves as Vice President, Wafer Operations. Mr. Hodge joined IDT as Director of Assembly Operations in 1989. In January 1990, Mr. Hodge was elected Vice President, Assembly Operations. Mr. Hodge currently serves as Vice President, Assembly and Test. From 1983 until joining IDT, Mr. Hodge was director of Assembly Operations for Maxim Integrated Products. Mr. Huggins joined IDT in 1983 and was elected as Vice President in 1987. Mr. Huggins currently serves as Vice President, Memory Division. Mr. Jordan joined IDT in July 1987 as Vice President of Marketing. Mr. Lewis joined IDT in 1984 as Eastern Area Sales Manager. In 1991, he was elected as Vice President, Sales. Dr. Lien joined IDT in 1987. He was elected Vice President, Technology Development in 1992. Mr. Menache joined IDT as vice President, General counsel and Secretary in September 1989. From April 1989 until joining IDT, he was General Counsel of Berg & Berg Developers. From 1986 until April 1989, he was Vice President, General Counsel and Secretary of The Wollongong Group Inc. Mr. Picard joined IDT in 1985. In 1989 he was elected Vice President, Static RAM Product Line. Mr. Picard currently serves as Vice President, Logic and Microprocessor Products. Mr. Snyder joined the Company as Treasurer in 1985. In May 1990, he was elected Vice President, Corporate Controller, and in September 1990 Mr. Snyder was elected Vice President, Finance and Chief Financial Officer.
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS Quarterly Market and Dividend Information Year Ended April 3, 1994 First Second Third Fourth Quarter Quarter Quarter Quarter Bid Quotations Low $ 6 1/4 $ 10 3/8 $ 11 1/2 $ 13 1/2 High 11 3/8 19 1/2 19 3/4 34 3/8 Year Ended March 28, 1993 Bid Quotations Low $ 3 3/4 $ 3 1/2 $ 4 $ 6 1/4 High 6 5 6 3/4 8 3/8 The Company's Common Stock is traded in the over-the-counter market under the symbol "IDTI". The table sets forth the range of high and low bid quotations per share of Common Stock for each quarter, as reported by the National Association of Securities Dealers Automatic Quotation (NASDAQ) System. As of April 3, 1994 there were 868 shareholders of record. The Company has not regularly paid cash dividends. It is the present policy of the Company to reinvest earnings in the Company to finance expansion of the Company's operations, and the Company does not expect to pay dividends for the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA (in thousands, except per share and employee data) Fiscal Year Ended April 3 March 28 March 29 March 31 April 1 1994 1993 1992 1991 1990 Revenues $330,462 $236,263 $202,734 $198,559 $209,475 Net income (loss) $ 40,165 $ 5,336 $(32,808) $ 1,226 $ 17,007 Net income (loss) per share $ 1.21 $ .18 $ (1.25) $ .05 $ .66 Shares used in computing net income (loss) per share 33,116 29,701 26,255 26,070 25,668 Total assets $349,571 $239,994 $229,730 $258,626 $261,538 Long-term obligations, excluding current portion $ 37,462 $ 48,987 $ 53,050 $ 62,664 $ 68,083 Shareholders' equity $224,367 $117,760 $104,602 $134,524 $130,704 Research and development expenses $ 64,237 $ 53,461 $ 52,044 $ 50,848 $ 41,644 Number of employees 2,615 2,414 2,159 2,052 2,090
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table contains certain amounts, and the amounts as a percentage of revenues, reflected in the Company's consolidated financial statements of operations for the 1994, 1993, and 1992 fiscal years. (dollars in millions) 1994 % 1993 % 1992 % Net revenues $330.4 100.0 $236.3 100.0 $202.7 100.0 Cost of revenues 159.6 48.3 132.3 56.0 126.8 62.6 Operating expenses: Research and development 64.2 19.4 53.5 22.6 52.0 25.7 Selling, general and administrative 54.3 16.5 39.5 16.7 48.7 24.0 Restructuring charge 4.5 2.2 Operating income (loss) 52.3 15.8 11.0 4.7 (29.3) (14.5) Net interest expense 2.1 0.6 4.7 2.0 5.5 2.7 Provision (benefit) for income taxes 10.0 3.0 1.0 0.4 (2.0) (1.0) Net income (loss) $40.2 12.2 $5.3 2.3 $(32.8) (16.2) Overview Fiscal 1994 was an outstanding year in virtually every respect. IDT recorded record revenue, pretax income as a percentage of revenue, earnings per share, revenue per employee and new orders. As a result of a secondary stock offering and an improvement in operating cash flow, IDT's cash, cash equivalents and short-term investments improved by approximately $97 million over the prior year, while total liabilities increased less than $3 million. Demand was strong in the U.S. across all products. For the second consecutive year, European sales increased, driven in part by strong demand from the telecommunications sector. Late in the year Japanese orders showed signs of recovery. As IDT utilized more of its installed manufacturing capacity, significantly improved gross margins were realized. Finally the Company released several significant new products including the R4600, or Orion microprocessor. Results of Operations Net revenue in fiscal 1994 was $330.4 million, a 40% increase over 1993 revenue of $236.3 million and a 63% increase over fiscal 1992 revenue of $202.7 million. Growth in fiscal 1994 was across all product segments, with the microprocessor segment most pronounced on a percentage basis. In mid-year, prices on certain products rose dramatically due to concerns about availability of plastic packaged products, but by year end prices returned to normal levels. Demand outstripped supply on some products and IDT responded by ordering incremental wafer fabrication equipment, some of which will be received in fiscal 1995. Fiscal 1993 revenue growth was attributed to increases in demand for products across all market segments. As a percentage of net revenues, gross margin was 51.7% in fiscal 1994 compared to 44.0% in fiscal 1993 and 37.4% for fiscal 1992. The improvement in fiscal 1994 can be attributed to greater capacity utilization, which in turn lowered average wafer manufacturing costs, significant increases in die per wafer due to wafer fabrication process improvements, and a mix shift to products with higher average selling prices, particularly microprocessors. In fiscal 1992, gross margin was negatively influenced by $14.9 million of charges associated with writeoffs of inventory and underutilized capital equipment. Were it not for those charges, fiscal 1992 gross margin would have been similar to fiscal 1993. Research and development (R & D) expense increased 20% in fiscal 1994 compared to fiscal 1993, but decreased as a percentage of net revenue from 22.6% of 1993 revenue to 19.4% of fiscal 1994 revenue. 1992 R & D spending was 25.7% of revenue. The Company continues to invest in process technology and introduced CEMOS 7, a .6 micron technology used in a substantial portion of its manufacturing process. As previously mentioned, a number of new products, highlighted by the R4600 Orion microprocessor, were introduced in fiscal 1994. During fiscal 1995, IDT expects R & D spending to decrease slightly as a percentage of revenue while increasing in dollars. The Company believes that continued high levels of investment in R & D, both internally and with technology partners, leads to new processes and products, both of which are critical elements in offering proprietary products, resulting in enhanced gross margins. Selling, general and administrative (SG&A) expenses increased 37% compared to fiscal 1993. This was due in part to increases in bonuses for management, employee profit sharing and the variable selling expenses associated with a 40% revenue increase. SG&A spending declined slightly from 16.7% of fiscal 1993 revenue to 16.5% of fiscal 1994 revenue. Fiscal 1992 SG&A costs, which were significantly impacted by patent litigation expenses and an increase in the provision for bad debts, were 24.0% of revenue. Patent litigation expenses accrued in fiscal 1992 were resolved in fiscal 1993 and, as a consequence, the reversal of a portion of the 1992 accruals benefited fiscal 1993 results. IDT incurred approximately $4.5 million of restructuring charges in fiscal 1992 associated with the closing of its oldest wafer fabrication line and a reduction in workforce. No such expense was incurred in either fiscal 1993 and 1994. Fiscal 1994 interest expense declined to $5.2 million compared to $5.9 million and $7.0 million in fiscal years 1993 and 1992, respectively. Interest expense has decreased as IDT's asset secured debt has declined. IDT continues to incur interest on a long-term obligation associated with a patent cross-license which did not exist in fiscal 1992 and insignificant in fiscal 1993. The Company expects a small decline in interest expense in fiscal 1995 as reduced debt balances will more than offset accretion of the long-term obligation. Interest income and other, net increased to $3.1 million in fiscal 1994 compared to $1.1 million and $1.6 million in fiscal years 1993 and 1992, respectively. Fiscal 1994 was favorably impacted by higher cash balances available for investment, gains on the disposition of assets, and royalty income. IDT expects interest income and other, net to increase in fiscal 1995 due to significantly higher cash balances available for investment. The effective tax rate in fiscal 1994 was 20%. Because of tax benefits available from the Company's Malaysian operation, valuation allowances which could be reversed and other tax credits available at both the federal and state level the Company does not expect to record the full statutory (35%) tax rate in fiscal 1995. Liquidity and Capital Resources The Company's financial position improved considerably during fiscal 1994. Cash and cash equivalents and short-term investments rose by $97.4 million to $121.8 million. Working capital increased from $51.4 million to $143.2 million. The current ratio improved from 1.84 to 2.81. This growth was due to improved profitability, a secondary stock offering yielding net proceeds of approximately $46.8 million and a dramatic improvement in accounts receivable turnover, which ended below 45 days outstanding on a trailing twelve month basis. During fiscal 1994 IDT made cash payments of $38.1 million for additional capital equipment principally for its wafer fabrication operations. The Company paid down $23.3 million of equipment secured debt. A significant source of funds was IDT's several employee stock plans which generated an additional $8.9 million cash. IDT's operating plan for fiscal 1995 provides for capital equipment expenditures of approximately $65 million, principally for additional equipment for the San Jose wafer fabrication plant and the conversion of the Salinas wafer fabrication line to six-inch capability. The Company expects to fund this expansion through existing cash balances, cash flow from operations and equipment secured or other debt financings. Factors Affecting Future Results During fiscal 1994, IDT experienced consistently improved quarterly financial results and stronger bookings. Nonetheless the Company and semiconductor industry in general are subject to a number of uncertainties. IDT is impacted by shortening product life cycles, continuous evolution of process technology, the ability to secure intellectual property rights, high fixed costs and the need for large additions of wafer fabrication capacity as well as general world economic conditions. In the semiconductor industry generally, revenues are generated after a considerable amount of time and financial resources are invested in product and process development. There can be no assurance that IDT's efforts will result in successful new products. In addition, a significant number of the Company's growth opportunities are dependent on successful penetration of new, high volume desk top computer, workstation, telecommunications and office automation segments of the electronics market where the Company will face substantial competition from many well-funded competitors. No assurance can be given that market demand or customer acceptance will be realized; that such demand will be sustainable; that competitors will not force prices to fall to unacceptable levels or take market share from the Company; or that IDT can achieve or maintain profits in these markets. Also, some of the Company's customers in these markets are less well established, which could subject IDT to increased credit risk. IDT intends to convert its Salinas wafer fabrication line from a five inch to six inch facility in fiscal 1995. Problems with the installation of new equipment or conversion of old equipment could cause disruptions in the manufacturing flow, thus adversely impacting revenues. IDT's stock price has been subject to considerable volatility. If revenues or earnings fail to meet expectations of the investment community, there could be an immediate and significant impact on the price for IDT's stock.
TEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES COVERED BY REPORT OF INDEPENDENT ACCOUNTANTS Consolidated Financial Statements included in Item 8: Report of Independent Accountants Consolidated Balance Sheets at April 3, 1994 and March 28, 1993 Consolidated Statements of Operations for each of the three fiscal years in the period ended April 3, 1994 Consolidated Statements of Cash Flows for each of the three fiscal years in the period ended April 3, 1994 Consolidated Statements of Shareholder's Equity for each of the three fiscal years in the period ended April 3, 1994
Notes to consolidated financial statements Schedules for each of the three years in the period ended April 3, 1994 included in Item 14(d): I Short-term investments V Property, plant and equipment VI Accumulated depreciation and amortization of property, plant and equipment VIII Valuation and qualifying accounts IX Short-term borrowings X Supplementary income statement information All other schedules have been omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedules, or because the information required is included in the consolidated financial statements or notes thereto. R
eport of Price Waterhouse, Independent Accountants To the Shareholders and Board of Directors of Integrated Device Technology, Inc. In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Integrated Device Technology, Inc. and its subsidiaries at April 3, 1994 and March 28, 1993, and the results of their operations and their cash flows for each of the three years in the period ended April 3, 1994, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE San Jose, California April 27, 1994
CONSOLIDATED BALANCE SHEETS April 3, 1994 March 28, 1993 (In thousands, except share data) ASSETS Current assets: Cash and cash equivalents $88,490 $22,529 Short-term investments 33,351 1,877 Accounts receivable, net of allowance for returns and doubtful accounts of $4,129 and $2,994 40,643 43,190 Inventory 29,855 27,237 Deferred tax assets 26,276 15,270 Prepayments and other current assets 3,858 2,825 Total current assets 222,473 112,928 Property, plant and equipment , net 120,838 118,837 Other assets 6,260 8,229 TOTAL ASSETS $349,571 $239,994 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $15,925 $15,819 Accrued compensation and related expense 16,528 7,399 Deferred income on shipments to distributors 17,592 10,450 Income taxes payable 1,964 878 Other accrued liabilities 13,032 7,524 Current portion of long-term obligations 14,184 19,467 Total current liabilities 79,225 61,537 Long-term obligations 37,462 48,987 Deferred tax liabilities 8,517 11,710 Commitments and contingencies Shareholders' equity : Preferred stock; $.001 par value: 5,000,000 shares authorized; no shares issued Common stock; $.001 par value: 65,000,000 shares authorized; 33,405,552 and 28,377,721 shares issued and outstanding 33 28 Additional paid-in capital 160,221 93,731 Retained earnings 64,517 24,352 Cumulative translation adjustment (404) (351) Total shareholders' equity 224,367 117,760 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $349,571 $239,994 The accompanying notes are an integral part of these financial statements. CONSOLIDATED STATEMENTS OF OPERATIONS FISCAL YEAR ENDED April 3, 1994 March 28, 1993 March 29, 1992 (In thousands, except per share data) Revenues $330,462 $236,263 $202,734 Cost of revenues 159,627 132,285 126,819 Gross profit 170,835 103,978 75,915 Operating expenses: Research and development 64,237 53,461 52,044 Selling, general and administrative 54,329 39,511 48,721 Restructuring charge 4,466 Total operating expenses 118,566 92,972 105,231 Operating income (loss) 52,269 11,006 (29,316) Interest expense (5,165) (5,855) (7,045) Interest income and other, net 3,102 1,127 1,593 Income (loss) before provision (benefit) for income taxes 50,206 6,278 (34,768) Provision (benefit) for income taxes 10,041 942 (1,960) Net income (loss) $40,165 $5,336 ($32,808) Net income (loss) per share $ 1.21 $ .18 $ (1.25) Shares used in computing net income (loss) per share 33,116 29,701 26,255 The accompanying notes are an integral part of these financial statements. CONSOLIDATED STATEMENTS OF CASH FLOWS FISCAL YEAR ENDED (In thousands) April 3, March 28, March 29, 1994 1993 1992 Operating activities: Net income (loss) $40,165 $5,336 ($32,808) Adjustments: Depreciation and amortization 37,594 37,140 40,787 Provision for losses on accounts receivable 476 (742) 1,222 Restructuring charges 4,466 Changes in assets and liabilities: Accounts receivable 2,071 (6,167) (1,926) Inventory (2,618) (3,843) 8,670 Deferred tax assets (10,897) 2,616 2,324 Other assets (1,247) (391) 2,180 Accounts payable 106 (804) 5 Accrued compensation and related expense 9,799 3,158 (157) Deferred income to distributors 7,142 1,093 610 Income taxes payable 11,574 477 722 Other accrued liabilities 5,885 (679) 5,816 Net cash provided by operating activities 100,050 37,194 31,911 Investing activities: Additions to property, plant and equipment (38,083) (28,188) (25,706) Proceeds from sale of equipment 671 178 416 Purchases of short-term investments (40,221) (4,927) (18,458) Proceeds from sales of short-term investments 8,747 4,110 27,624 Net cash used for investing activities (68,886) (28,827) (16,124) Financing activities: Issuance of common stock, net 55,337 2,981 2,358 Proceeds from borrowings 2,731 32,161 11,665 Payment on capital leases and other debt (23,271) (41,006) (21,423) Net cash provided (used) for financing activities 34,797 (5,864) (7,400) Net increase in cash and cash equivalents 65,961 2,503 8,387 Cash and cash equivalents at beginning of period 22,529 20,026 11,639 Cash and cash equivalents at end of period $88,490 $22,529 $20,026 Supplemental disclosure of cash flow information: Interest paid 4,713 5,893 6,876 Income taxes paid (refunded) 9,163 (2,050) (5,638) Issue of Common Stock for acquisition of technology 7,738 Tax benefits from exercise of Stock Options 10,488 582 477 The accompanying notes are an integral part of these financial statements. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Additional Cumulative Total Common Stock Paid-In Retained Translation Shareholders' Shares Amount Capital Earnings Adjustment Equity (In thousands, except share data) Balance, March 31, 1991 25,889,601 $26 $82,834 $51,824 ($160) $134,524 Issuance of common stock 664,130 1 2,358 2,359 Tax benefits of stock option transactions 477 477 Translation adjustment 50 50 Net loss (32,808) (32,808) Balance, March 29, 1992 26,553,731 27 85,669 19,016 (110) 104,602 Issuance of common stock 1,823,990 1 7,480 7,481 Tax benefits of stock option transactions 582 582 Translation adjustment (241) (241) Net income 5,336 5,336 Balance, March 28, 1993 28,377,721 28 93,731 24,352 (351) 117,760 Issuance of common stock 2,027,831 2 9,241 9,243 Issuance of common stock at $15.71 per share, pursuant to public offering, net of expenses of $366 3,000,000 3 46,761 46,764 Tax benefits of stock option transactions 10,488 10,488 Translation adjustment (53) (53) Net income 40,165 40,165 Balance, April 3, 1994 33,405,552 $33 $160,221 $64,517 ($404) $224,367 The accompanying notes are an integral part of these financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 Summary of Significant Accounting Policies Basis of Presentation The consolidated financial statements include the accounts of Integrated Device Technology, Inc. (IDT or "the Company") and all of its subsidiaries. All significant intercompany accounts and transactions have been eliminated. Fiscal year The Company's fiscal year ends on the Sunday nearest March 31. Fiscal years 1993 and 1992 each included 52 weeks. The fiscal year ended on April 3, 1994 was a 53-week year. The fiscal year end of certain of the Company's foreign subsidiaries are March 31, and the results of their operations as of their fiscal year end have been combined with the Company's results of operations as of April 3, 1994. Transactions during the intervening period were not significant. Cash, Cash Equivalents and Short-term Investments Cash equivalents are highly liquid investments with original maturities of three months or less at the time of acquisition or with guaranteed on-demand buy-back provisions. Short-term investments are valued at amortized cost, which approximates market and consist primarily of time deposits, corporate notes, and treasuries. Short-term investments have maturities greater than three months and less than one year. Cash equivalents and short-term investments included certificates of deposit totaling $10,603,000 and $9,349,000 at April 3, 1994 and March 28, 1993, respectively. The Company will adopt Statement of Financial Accounting Standards (FAS) 115, "Accounting for Certain Investments in Debt and Equity Securities" effective April 4, 1994 as required by that pronouncement. The Statement requires reporting of investments as either held to maturity, trading or available for sale. The Company's investments will be classified as available for sale. The effect of adoption was not material as of April 3, 1994. Inventory Inventory is stated at the lower of standard cost (which approximates actual cost on a first-in, first-out basis) or market. Market is based upon estimated realizable value reduced by normal gross margin. Inventory at April 3, 1994 and March 28, 1993 was: (in thousands) April 3, 1994 March 28, 1993 Inventory: Raw materials $ 2,834 $ 3,117 Work-in-process 10,201 13,494 Finished goods 16,820 10,626 $ 29,855 $ 27,237 Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation is computed for property, plant and equipment using the straight-line method over estimated useful lives of the assets. Leasehold improvements and leasehold interests are amortized over the shorter of the estimated useful lives of the assets or the remaining term of the lease. Accelerated methods of depreciation are used for tax computations. Property, plant and equipment at April 3, 1994 and March 28, 1993 were: (in thousands) April 3, 1994 March 28, 1993 Property, plant and equipment: Land $ 4,382 $ 4,382 Machinery and equipment 248,095 217,167 Building and leasehold improvements 40,063 39,896 Construction-in-progress 76 10 292,616 261,455 Accumulated depreciation and amortization (171,778) (142,618) $ 120,838 $ 118,837 Income Taxes The Company adopted Statement of Financial Accounting Standards (FAS) 109, "Accounting for Income Taxes" in the year ended March 28, 1993. The Company elected to apply the provisions of FAS 109 retroactively to the beginning of its year ended March 29, 1992. The adoption of FAS 109 changed the Company's method of accounting for income taxes from the deferred method to an asset and liability approach. The asset and liability approach requires that the expected future tax consequences of temporary differences between book and tax bases of assets and liabilities be recognized as deferred tax assets and liabilities. Net Income (Loss) Per Share Net income (loss) per share is computed using the weighted average number of shares of common stock outstanding during the year, plus incremental common equivalent shares, if dilutive. Common stock equivalents consist of stock options (using the treasury stock method). Revenue Recognition Revenue from product sales is generally recognized upon shipment and a reserve is provided for estimated returns and discounts. A portion of the Company's sales are made to distributors under agreements which allow certain rights of return and price protection on products unsold by the distributors; such sales and profits thereon are deferred until the products are resold by the distributors. Reclassifications Certain amounts in prior fiscal years' consolidated financial statements and notes have been reclassified to conform with fiscal 1994 presentation. Translation of Foreign Currencies Amounts denominated in foreign currencies have been translated in accordance with Statement of Financial Accounting Standards (FAS) 52. The functional currency for the Company's sales operations is the applicable local currency with the exception of the Hong Kong sales subsidiary whose functional currency and reporting currency is the U.S. dollar. For subsidiaries whose functional currency is the local currency, gains and losses resulting from translation of these foreign currencies into U.S. dollars are accumulated in a separate component of shareholders' equity. For the Malaysian manufacturing and the Hong Kong sales subsidiaries, where the functional currency is the U.S. dollar, gains and losses resulting from the process of remeasuring foreign currency financial statements into U.S. dollars are included in income. Aggregate net foreign currency transaction gains (losses) totaled $(232,000), $(93,000) and $(141,000) in fiscal 1994, 1993 and 1992, respectively. The effect of foreign currency exchange rate fluctuations on cash balances held in foreign currencies have not been material. Foreign Exchange Contracts The Company enters into forward exchange contracts to hedge against the short-term impact of foreign currency fluctuations on certain assets denominated in foreign currencies. The total amount of these contracts is offset by the underlying assets denominated in foreign currencies. The gains or losses on these contracts are included in income as the exchange rates change and are offset by gains and losses on the underlying assets being hedged. At April 3, 1994, the Company had $12 million of forward exchange contracts outstanding, with maturity dates through July 1994. The Company does not anticipate non-performance by the counterparties to these contracts. Concentration of Credit Risk and Off-Balance-Sheet Risk The Company markets high-speed integrated circuits to OEMs and distributors primarily in the United States, Europe, and the Far East. The Company performs on-going credit evaluations of its customers' financial conditions and limits the amount of credit extended when deemed necessary but generally does not require collateral. Management believes that any risk of loss is significantly reduced due to the diversity of its products, customers and geographic sales areas. The Company maintains a provision for potential credit losses. The Company sells a significant portion of its products through third- party distributors. As a result of the merger of two of the Company's national distributors, the receivable balance from the merged company is significant in aggregate for fiscal 1994. If the financial condition and operations of this distributor deteriorate below critical levels, the Company's operating results could be adversely affected. This distributor receivable balance represented 11% and 9% of total accounts receivable at April 3, 1994 and March 28, 1993, respectively. The Company invests its cash and cash equivalents in time deposits, money market funds and commercial paper. Securities comprising cash equivalents and short-term investments are maintained with high quality institutions, the composition and maturities of which are regularly monitored by management. Generally, these securities maintain a highly liquid market and may be redeemed upon demand and, therefore, bear minimal risk. The Company has not experienced any material losses on its investments. NOTE 2 Restructuring and Significant Other Events In fiscal year 1992, the Company recorded $4.5 million of charges to net income relating to the abandonment of IDT's original wafer processing facility and product line reorganizations. The Company has substantially completed this restructuring. Also in fiscal 1992, due to changes in the market, the Company revised its estimated useful lives and the future realizable values of several items. These charges included a $7.2 million writeoff of excess inventory and $5.4 million of writeoffs and changes in useful lives of underutilized capital assets. Also, due to specific events during the second fiscal quarter, the Company provided a $1.3 million reserve for doubtful accounts and recorded $6.4 million of accrued legal expenses. Subsequent developments and resolution of one of these legal matters led the Company to recognize a $1 million benefit during fiscal 1993. NOTE 3 Other Assets - Intangibles During fiscal 1993, IDT entered into various royalty-free patent cross- license agreements. The patents licenses granted to IDT under these agreements have been recorded at their cost of approximately $8,200,000 and are being amortized on a straight-line basis over five years. The amortization relating to patents licenses was $1,647,000 and $780,000 at April 3, 1994 and March 28, 1993, respectively. NOTE 4 Long-Term Obligations The Company leases certain equipment under long-term leases or finances purchases of equipment under bank financing agreements. Leased assets and assets pledged under financing agreements which are included under property, plant and equipment are as follows: (in thousands) April 3, 1994 March 28, 1993 Building improvements $ 6,907 $ 6,907 Machinery and equipment 65,403 86,091 Accumulated depreciation and amortization (43,949) (49,001) 28,361 43,997 The capital lease agreements and equipment financings are collateralized by the related leased equipment and contain certain restrictive covenants. Future minimum payments under capital leases and equipment financing agreements, at varying interest rates (4.9% - 11%), are as follows: (Fiscal Year) (in thousands) 1995 $ 14,339 1996 5,898 1997 3,075 1998 1,486 1999 3 Total minimum payments 24,801 Less interest 2,420 Present value of net minimum payments 22,381 Less current portion 12,878 $ 9,503 During fiscal 1993, IDT recorded a long-term obligation in connection with the dismissal of certain litigation and entering into a patent cross-license agreement. The present values of the amount due at the end of the license term were $7,471,000 and $7,041,000 at April 3, 1994 and March 28, 1993, respectively. During the year, this amount payable has been reduced by an amount of royalty income pursuant to certain guaranteed revenues realized on sales of IDT's products. The Company is accreting $3.3 million in future interest charges from the recorded amount at April 3, 1994 to the amount due at the end of the term using the effective interest method. NOTE 5 Long-Term Debt Long-term debt consists of the following: (in thousands) April 3, 1994 March 28, 1993 Mortgage payable bearing interest at 9.625% due in monthly installments of $142,000 including interest through April 1, 2005. The note is secured by property and improvements in San Jose, California. $ 11,543 $ 12,152 Term loan payable to a Malaysian bank at 8% due in monthly installments of $54,000 791 1,448 12,334 13,600 Less current portion 1,306 1,188 11,028 12,412 Principal payments required in the next five years and beyond are as follows (in thousands): $1306 (1995), $790 (1996), $752 (1997), $828 (1998), $8,658 (Beyond 1998). NOTE 6 Lines of Credit The Company's Malaysian subsidiary has unsecured revolving lines of credit that allow borrowings up to $2,500,000 with three local banks. These lines have no expiration date. At April 3, 1994, there were no outstanding borrowings against these lines. The borrowing rate for these lines would be incurred at the local bank's cost of funds plus 0.75% to 1% (8.80-9.25% on April 3, 1994). In fiscal 1994, the Company's Japanese subsidiary had an unsecured revolving line of credit that allowed borrowings up to approximately $1,940,000. The line of credit automatically extends until the Company requests termination. As of April 3, 1994, no amounts were outstanding under this line of credit. The borrowing rate for this line of credit is the local bank's short-term prime rate existing at the borrowing date plus 0.2%. At April 3, 1994, this short-term borrowing rate was 3.2%. The Company also has foreign exchange contract facilities with several banks that allow the Company to enter into foreign exchange contracts of up to $30,000,000, of which $18,026,000 was available at April 3, 1994. NOTE 7 Commitments Lease Commitments The Company leases most of its administrative and several manufacturing facilities under operating lease agreements which expire through 1996. Two facilities were leased from a principal shareholder. The annual rent paid to this shareholder totaled approximately $1,396,000, $1,396,000 and $1,995,000 in fiscal 1994, 1993 and 1992, respectively. One shareholder lease expired during fiscal 1992 and the other will expire in June 1995. The aggregate minimum rent commitments under all operating leases are as follows: (Fiscal Year) (in thousands) 1995 $ 4,122 1996 2,902 1997 2,217 1998 1,924 1999 1,933 2000 and thereafter 1,980 $ 15,078 Rent expense for the years ended April 3, 1994, March 28, 1993, and March 29, 1992 totaled approximately $3,488,000, $3,303,000 and $3,839,000, respectively. As of April 3, 1994, four secured standby letters of credit were outstanding totaling $1,937,000. Three letters of credit are held in connection with the Company's workers compensation insurance and mature on June 30, 1994, June 30, 1995 and June 30, 1996. The fourth letter of credit secures the credit facility for the Company's Japanese subsidiary and matured on April 4, 1994. NOTE 8 Fair Value Disclosures of Financial Instruments The estimated fair value of financial instruments has been determined by the Company, using available market information and valuation methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies could have a material effect on the estimated fair value amounts. The amounts reported for cash and cash equivalents, short-term investments, foreign exchange contracts, and the Malaysian term loan were considered to be a reasonable estimate of their fair value. The fair values of short-term and long-term debt were based upon estimated interest rates available to the Company for issuance of debt with similar terms and remaining maturities for existing asset-secured equipment loans and capital leases. The estimated fair value of the Company's short-term and long-term debt at April 3, 1994 was $20,784,000. The fair value for the mortgage loan is $10,748,000 estimated using discounted cash flow analysis based on an estimated interest rate of 7.5% percent for similar types of borrowing arrangements. The fair value estimates presented herein were based upon information available to management as of April 4, 1994. Although management is not aware of any factors that would materially affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of the consolidated financial statements since that date, and current estimates of fair value may differ significantly from the amounts presented herein. NOTE 9 Shareholders' Equity Stock Option Plans The Company has stock option plans under which key employees, officers, directors and consultants may be granted options to purchase shares of the Company's common stock at prices which are not less than fair market value at the date of grant. Options granted are generally exercisable in 25% increments each year beginning one year after the grant date. At April 3, 1994, options for 1,172,000 shares were exercisable at an aggregate exercise price of $4,856,000. At March 28, 1993, options for 2,093,853 shares were exercisable at an aggregate exercise price $7,692,000. Activity under the plans is summarized as follows: Options Outstanding Options Available for Number Price per Share Aggregate Issuance Price Balance, March 31, 1991 1,463,734 4,391,764 $ 3.25 - $14.25 16,832,000 Additional Authorization 1,500,000 Granted (2,697,815) 2,697,815 $ 3.75 - $ 9.50 14,459,000 Surrendered, canceled or expired 1,807,581 (1,809,971) $ 3.25 - $14.25 (11,321,000) Exercised ( 464,036) $ 3.25 - $ 5.13 ( 1,683,000) Balance, March 29, 1992 2,073,500 4,815,572 $ 3.25 - $13.25 18,287,000 Additional Authorization Granted (1,358,323) 1,358,323 $ 3.625- $ 8.25 6,701,000 Surrendered, canceled or expired 254,930 ( 447,625) $ 3.25 - $13.25 (1,810,000) Exercised ( 529,371) $ 3.25 - $ 7.50 (1,933,000) Balance, March 28, 1993 970,107 5,196,899 $ 3.25 - $12.125 21,245,000 Additional Authorization 975,000 Granted (1,850,234) 1,850,234 $ 7.00 - $25.375 26,599,000 Surrendered, canceled or expired 284,010 (287,423) $ 3.25 - $22.125 (1,738,000) Exercised (1,780,613) $ 3.25 - $17.625 (6,695,000) Balance, April 3, 1994 378,883 4,979,097 $ 3.25 - $25.375 39,411,000 Stock Purchase Plan The Company has a stock purchase plan under which employees and officers may purchase shares of the Company's Common Stock. The purchase price at which shares may be purchased under this plan is 85% of the lower of the fair market value on the first or last day of each quarterly plan period. As of April 3, 1994 and March 28, 1993, 1,457,771 and 1,277,328 shares,respectively, had been purchased by employees, net of repurchases by the Company, under the terms of the plan agreements. At April 3, 1994, 567,229 shares were reserved and available for issuance under this plan. Stockholder Rights Plan In February 1992, the Board approved certain amendments to the Company's Stockholder Rights Plan. Under the plan, the Company declared a dividend of one preferred share purchase right (a "Right") for each outstanding share of common stock. Each Right entitles the holder, under certain circumstances, to purchase common stock of the Company with a value of twice the exercise price of the Right. In addition, the Board of Directors may, under certain circumstances, cause each Right to be exchanged for one share of common stock or substitute consideration. The Rights are redeemable by the Company and expire in 1998. NOTE 10 Employee Benefits Profit Sharing Plan Prior to September 24, 1993, under the profit sharing plan, the Board of Directors could authorize semiannual contributions of up to 10% of pre-tax earnings, before profit sharing, in connection with the Company's Profit Sharing Plan. Half of the annual contribution, net of expenses, was in the form of cash payments directly to all domestic and Malaysian employees meeting certain service criteria, and the residual half was contributed directly to the Company's Long-Term Incentive Plan. The Company received approval from the IRS to terminate the Long-term Incentive Plan effective September 24, 1993. Effective this date, all shares were 100% vested and no additional shares of IDT stock will be added to this account. Beginning September 27, 1993, all IDT employees will receive an increase in their cash profit sharing from 5% to 7% and an additional 1% of pre-tax profits will be divided equally among all domestic employees and placed in their accounts under the Company 401(k) plan. Administrative expenses are netted against the profit sharing plan contribution. Contributions for the years ended April 3, 1994 and March 28, 1993 were $5,128,000 and $477,000 respectively. There were no contributions for the year ended March 29, 1992. NOTE 11 Income Taxes The components of income before provision (benefit) for income taxes are as follows: April 3, March 28, March 29, (in thousands) 1994 1993 1992 United States $ 44,808 $ 2,240 $(37,858) Foreign 5,398 4,038 3,090 $ 50,206 $ 6,278 $(34,768) The provisions (benefits) for income taxes consist of the following: April 3, March 28, March 29, 1994 1993 1992 Current income taxes (benefits): United States $ 14,699 ( 2,467) 242 State 4,039 0 0 Foreign 798 102 161 $ 19,536 $( 2,365) $ 403 Deferred (prepaid) income taxes: United States $ (5,379) $ 3,307 $( 2,363) State (4,116) 0 0 $( 9,495) $ 3,307 $( 2,363) Provision (benefit) for income taxes $ 10,041 $ 942 $( 1,960) 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. The significant components of deferred assets and liabilities are as follows: April 3, 1994 March 28, 1993 (in thousands) Deferred tax assets: Deferred income on shipment to distributors $ 7,466 $ 4,330 Non-deductible accruals and reserves 13,527 8,313 Capitalized inventory and other expenses 4,071 6,014 Capitalized research & development 825 752 Other 273 746 Refund receivables 2,451 3,560 Total deferred tax asset $ 28,613 $ 23,715 Valuation allowance (2,337) ( 8,445) Net deferred tax asset $ 26,276 $ 15,270 Deferred tax liabilities: Depreciation (8,517) (11,710) Total deferred tax liability $ (8,517) $(11,710) Net deferred tax asset $ 17,759 $ 3,560 The provision (benefit) for income taxes differs from the amount computed by applying the U.S. statutory income tax rate of 35% for the year ended April 3, 1994 (34% for the years ended March 28, 1993 and March 29, 1992) to income before the provision (benefit) for income taxes as follows: April 3, March 28, March 29, (in thousands) 1994 1993 1992 Provision at U.S. Statutory rate $ 17,572 $ 2,134 $(11,821) Earnings of foreign subsidiaries considered permanently reinvested, less foreign taxes (951) (1,701) ( 232) General business credits (2,710) 0 ( 660) Tax rate differential (1,167) 574 3,220 State Tax 3,558 0 0 Valuation allowance (6,108) 414 8,031 Other (153) ( 479) ( 498) Provision (benefit) for income taxes $10,041 $ 942 $( 1,960) The Company's Malaysian subsidiary operated under a tax holiday which extended through July, 1993. Management believes it is likely that carryovers of depreciation from the tax holiday period along with expected additional depreciation grants will defer the time when the Malaysian subsidiary will first begin to pay local taxes beyond its year ended April 3, 1994. The Company's intention is to permanently reinvest its earnings in all of its foreign subsidiaries. Accordingly, U.S. taxes have not been provided on approximately $19,700,000 of unremitted earnings, of which approximately $17,100,000 were earned by the Company's Malaysian subsidiary. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes and various foreign country withholding taxes. NOTE 12 Industry Segment, Foreign Operations and Significant Customers IDT operates predominantly in one industry segment and is engaged in the design, development, manufacture and marketing of high-performance integrated circuits. No single customer or distributor accounted for more than 10% of net revenues in fiscal 1993 and 1992. During fiscal 1994, two of the Company's national distributors became one entity and accounted for 15% of net revenues. If these two distributors had been a single entity during fiscal 1993 and 1992, it would have accounted for 16% and 17%, respectively, of IDT's total revenues. Major operations outside the United States include manufacturing facilities in Malaysia and sales subsidiaries in Japan, the Pacific Rim and throughout Europe. At April 3, 1994 and March 28, 1993, total liabilities for operations outside of the United States were $20,704,000 and $20,152,000,respectively. The following is a summary of IDT's operations by the geographic area for fiscal 1994, 1993 and 1992: Transfers Sales to Between Operating Unaffiliated Geographic Net Income Identifiable (in thousands) Customers Areas Revenue ( Loss) Assets Fiscal year ended April 3, 1994 United States 223,600 42,500 266,100 70,788 197,385 Japan 29,959 29,959 ( 257) 8,033 Europe 60,064 3,274 63,338 677 8,182 Asia-Pacific 16,839 24,869 41,708 5,146 27,202 Eliminations (70,643) (70,643) ( 408) (24,470) Corporate (23,677) 133,239 Consolidated $330,462 $ 0 $330,462 $52,269 $349,571 Fiscal year ended March 28, 1993 United States 152,303 23,585 175,888 22,159 198,993 Japan 23,022 23,022 ( 419) 5,651 Europe 33,907 2,847 36,754 374 8,028 Asia-Pacific 27,031 20,566 47,597 4,715 24,155 Eliminations (46,998) (46,998) ( 94) (24,081) Corporate (15,729) 27,248 Consolidated $236,263 $ 0 $236,263 $11,006 $239,994 Fiscal year ended March 29, 1992 United States 140,999 21,616 162,615 ( 4,800) 190,801 Japan 23,018 23,018 41 6,192 Europe 26,861 2,838 29,699 303 5,703 Asia-Pacific 11,856 15,230 27,086 3,234 18,838 Eliminations (39,684) (39,684) ( 71) (26,172) Corporate (28,023) 34,368 Consolidated $202,734 $ 0 $202,734 $(29,316) $229,730 Transfers between geographic areas are accounted for at amounts which are generally above cost and consistent with the rules and regulations of governing tax authorities. Such transfers are eliminated in the consolidated financial statements. Operating income by geographic areas reflects foreign earnings reported by the foreign entities and does not include an allocation of general corporate expenses. Identifiable assets are those assets that can be directly associated with a particular foreign entity and thus do not include assets used for general corporate purposes: cash and cash equivalents, short-term investments and prepaid income taxes. NOTE 13 Cross-license Agreement During fiscal 1993, the Company entered into a patent cross-license agreement which obligated the payment of an amount of royalties dependent upon the level of the Company's profitability. The amount of royalties accrued during fiscal 1994 was approximately $4.4 million and has been included in other accrued liabilities. The Company will not be negatively impacted by any further royalty payment from this agreement beginning fiscal 1995. SUPPLEMENTARY FINANCIAL INFORMATION (Unaudited) Quarterly Results of Operations (in thousands, except per share data) Year Ended April 3, 1994 First Second Third Fourth Quarter Quarter Quarter Quarter * Revenues $72,766 $80,295 $85,330 $92,071 Gross profit 33,948 39,967 45,419 51,501 Net income 4,628 7,733 11,625 16,179 Net income per share $ .15 $ .24 $ .35 $ .45 Year Ended March 28, 1993 Revenues $53,758 $57,479 $60,590 $64,436 Gross profit 23,366 24,734 27,234 28,645 Net income 475 838 1,493 2,530 Net income per share $ .02 $ .03 $ .05 $ .08 * represents a 14-week quarter in fiscal 1994.
TEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT There is incorporated herein by reference the information required by this Item included in the Company's Proxy Statement for the 1994 Annual Meeting of Stockholders which will be filed with the Securities and Exchange Commission no later than 120 days after the close of the fiscal year ended April 3, 1994, and the information from the section entitled "Executive Officers of the Registrant" in Part I, Item 4 of this Report.
ITEM 11. EXECUTIVE COMPENSATION There is incorporated herein by reference the information required by this Item included in the Company's Proxy Statement for the 1994 Annual Meeting of Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT There is incorporated herein by reference the information required by this Item included in the Company's Proxy statement for the 1994 Annual Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS There is incorporated herein by reference the information required by this Item included in the Company's Proxy Statement for the 1994 Annual Meeting of Stockholders.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Financial Statements The following consolidated financial statements are included in
Item 8: - Consolidated Balance Sheets at April 3, 1994 and March 28, 1993 - Consolidated Statements of Operations for each of the three fiscal years in the period ended April 3, 1994 - Consolidated Statements of Shareholder's Equity for each of the three fiscal years in the period ended April 3, 1994 - Consolidated Statements of Cash Flows for each of the three fiscal years in the period ended April 3, 1994 (a) 2. Financial Statements Schedules The following consolidated financial statement schedules are included in Item 14(d): Schedule I - Short-term Investments Schedule V - Property, plant and equipment Schedule VI - Accumulated depreciation and amortization of property, plant and equipment Schedule VIII - Valuation and qualifying accounts Schedule IX - Short-term borrowings Schedule X - Supplementary income statement information Schedules other than those listed above have been omitted since the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements or the notes thereto. (a) 3. Listing of Exhibits Exhibit No. Description Page 3.1* Restated Certificate of Incorporation (previously filed as Exhibit 3A to Registration Statement on Form 8-B [File No. 0-12695] dated September 23, 1987). 3.2* Certificate of Amendment of Restated Certificate of Incorporation (previously filed as Exhibit 3.2 to Annual Report on From 10-K [File No. 0-12695] for the Fiscal Year Ended April 2, 1989). 3.3* Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock (previously filed as Exhibit 3.3 to Annual Report on Form 10-K [File No. 0-12695] for the Fiscal Year Ended April 2, 1989). 3.4* Bylaws dated January 25, 1993 (previously filed as Exhibit 3.4 to Annual Report on Form 10-K [File No. 0-12695] for the Fiscal Year Ended March 28, 1993). 4.1* Amended and Restated Rights Agreement dated as of February 27, 1992, between the Company and The First National Bank of Boston (previously filed as Exhibit 4.1 to Current Report on Form 8-K [File No. 0-12695] dated February 27, 1992). 10.1* Lease for 1566 Moffet Street, Salinas, California, dated June 28, 1985 between the Company and Carl E. Berg and Clyde J. Berg, dba Berg & Berg Developers (previously filed as Exhibit 10.7 to Form S-1 Registration Statement No. 33-3189). 10.2* Assignment of Lease dated October 30, 1985 between the Company and Synertek Inc. relating to 2975 Stender Way, Santa Clara, California (previously filed as Exhibit 10.4 to Annual Report on Form 10-K [File No. 0-12695] for the Fiscal Year Ended April 1, 1990). 10.3* Assignment of Lease dated October 30, 1985 between the Company and Synertek Inc. relating to 3001 Stender Way, Santa Clara, California (previously filed as Exhibit 10.5 to Annual Report on Form 10-K [File No. 0-12695] for Fiscal Year Ended April 1, 1990). 10.4* Lease dated October 23, 1989 between Integrated Device Technology International Inc. and RREEF USA FUND - III relating to 2972 Stender Way, Santa Clara, California (previously filed as Exhibit 10.6 to Annual Report on Form 10-K [File No. 0-12695] for the Fiscal Year Ended April 1, 1990). 10.5* First Deed of Trust and Assignment of Rents, Security Agreement and Fixture Filing dated March 28, 1990 between the Company and Santa Clara Land Title Company for the benefit of The Variable Annuity Life Insurance Company relating to 2670 Seeley Avenue, San Jose, California (previously filed as Exhibit 10.7 to Annual Report on Form 10-K [File No. 0-12695] for the Fiscal Year Ended April 1, 1990). 10.6 Amended and Restated 1984 Employee Stock Purchase Plan.** 10.7 Amended and Restated 1985 Incentive and Non-Qualified Stock Option Plan, together with related form of Stock Option Agreement.** 10.8* 1989 Nonemployee Director Stock Option Plan with related form of Stock Option Agreement (previously filed as Exhibit 10.45 to Annual Report on Form 10-K [File No. 0-12695] for the Fiscal Year Ended April 1, 1990).** 10.9* Property Acquisition and Construction Management Agreement dated February 1, 1989 between the Company and Baccarat Development Partnership (previously filed as Exhibit 10.52 to Annual Report on Form 10-K [File No. 0-12695] for the Fiscal Year Ended April 1, 1990). 10.10* Form of Indemnification Agreement between the Company and its directors and officers(previously filed as Exhibit 10.68 to Annual Report on Form 10-K [File No. 0-12695] for the Fiscal Year Ended April 2, 1989).** 10.11* Manufacturing, Marketing and Purchase Agreement between the Company and MIPS computer Systems, Inc. dated January 16, 1988 (previously filed as Exhibit 10.12 to Annual Report on Form 10-K [File No. 0-12695] for the Fiscal Year Ended March 29, 1992) (Confidential Treatment). 10.12* Preferred Stock Purchase Agreement dated January 14, 1992 among the Company, Berg & Berg Enterprises, Inc. and Quantum Effect Design, Inc. (previously filed as Exhibit 10.13 to Annual Report on Form 10-K [File No. 0-12695] for the Fiscal Year Ended March 29, 1992). 10.13* Patent License Agreement between the Company and American Telephone and Telegraph Company dated May 1, 1992 (previously filed as Exhibit 19.1 to Quarterly Report on Form 10-Q [File No. 0-12695] for the Quarter Ended June 28, 1992) (Confidential Treatment). 10.14* Patent License Agreement dated September 22, 1992 between the Company and Motorola, Inc. (previously filed as Exhibit 19.1 to Quarterly Report on Form 10-Q [File No. 0-12695] for the Quarter Ended September 27, 1992) (Confidential Treatment). 10.15* Agreement between the Company and Texas Instruments Incorporated effective December 10, 1992, including all related exhibits, among others, the Patent Cross-License Agreement and the OEM Purchase Agreement (previously filed as Exhibit 19.1 to Quarterly Report on Form 10-Q [File No. 0-12695] for the Quarter Ended December 27, 1992) (Confidential Treatment). 22.1* Subsidiaries of the Company (previously filed as Exhibit 22.1 to Annual Report on Form 10-K [File No. 0-12695] for the Fiscal Year Ended March 28, 1993). 24.1 Consent of Price Waterhouse. * These exhibits were previously filed with the Commission as indicated and are incorporated herein by reference. ** These exhibits are management contracts or compensatory plans or arrangements required to be filed pursuant to Item 14 (c) of Form 10-K. (b) Reports on Form 8-K Not applicable.
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INTEGRATED DEVICE TECHNOLOGY, INC. Registrant May 20, 1994 By: /s/ Leonard C. Perham Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ D. John Carey Chairman of the Board May 20, 1994 (D. John Carey) /s/ Leonard C. Perham Chief Executive Officer May 20, 1994 (Leonard C. Perham) and Director (Principal Executive Officer) /s/ William D. Snyder Vice President, Chief May 20, 1994 (William D. Snyder) Financial Officer (Principal Financial and Accounting Officer) /s/ Carl E. Berg Director May 20, 1994 (Carl E. Berg) /s/ John C. Bolger Director May 20, 1994 (John C. Bolger) /s/ Federico Faggin Director May 20, 1994 (Federico Faggin)
ITEM 14 (d) FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION SCHEDULE I INTEGRATED DEVICE TECHNOLOGY, INC. SHORT-TERM INVESTMENTS (in thousands) Amount at which Each Security Name of Issuer and Issue Carried in Title of Each Issue the Balance Sheet (1) April 3, 1994: Certificates of Deposits $ 2,440 Corporate Notes 20,784 Corporate Paper 1,995 Treasuries 5,591 Agencies 2,541 TOTAL $ 33,351 (1) The cost of issue and carrying and market value of each issue at the balance sheet date are the same amounts as listed. No individual security issue exceeds 2% of total assets. F-1 SCHEDULE V INTEGRATED DEVICE TECHNOLOGY, INC. PROPERTY, PLANT AND EQUIPMENT Balance at Balance Beginning of Additions Retirements at End (in thousands) Period at Cost and Sales of Period Year Ended March 29, 1992: Land $ 4,382 $ $ $ 4,382 Machinery and Equipment 200,193 25,226 (30,772) 194,647 Building and Leasehold Improvements 44,062 372 ( 4,942) 39,492 Construction in Progress 11 108 119 248,648 25,706 (35,714) 238,640 Year Ended March 28, 1993: Land 4,382 4,382 Machinery and Equipment 194,647 27,850 ( 5,330) 217,167 Building and Leasehold Improvements 39,492 447 ( 43) 39,896 Construction in Progress 119 (109) 10 238,640 28,188 ( 5,373) 261,455 Year Ended April 3, 1994: Land 4,382 4,382 Machinery and Equipment 217,167 37,850 ( 6,922) 248,095 Building and Leasehold Improvements 39,896 167 40,063 Construction in Progress 10 66 76 $261,455 $38,083 ($6,922) $292,616 F-2 SCHEDULE VI INTEGRATED DEVICE TECHNOLOGY, INC. ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT Balance at Additions Balance Beginning Charged to Cost Retirements at End (in thousands) of Period and Expenses (1) and Sales of Period Year Ended March 29, 1992: Machinery and Equipment $94,782 $36,098 ($29,192) $101,688 Building and Leasehold Improvements 10,753 4,306 ( 4,907) 10,152 105,535 40,404 (34,099) 111,840 Year Ended March 28, 1993: Machinery and Equipment 101,688 32,361 ( 5,153) 128,896 Building and Leasehold Improvements 10,152 3,613 ( 43) 13,722 111,840 35,974 ( 5,196) 142,618 Year Ended April 3, 1994: Machinery and Equipment 128,896 31,783 ( 6,249) 154,430 Building and Leasehold Improvements 13,722 3,626 17,348 $142,618 $35,409 ($6,249) $171,778 F-3 SCHEDULE VIII INTEGRATED DEVICE TECHNOLOGY, INC. VALUATION AND QUALIFYING ACCOUNTS Balance at Additions Recoveries Balance Beginning of Charged to Cost and at End (in thousands) Period and Expenses Write-offs of Period Allowance for returns and doubtful accounts Year ended March 29, 1992 $2,514 $2,172 ($ 950) $3,736 Year ended March 28, 1993 $3,736 $258 ($1,000) $2,994 Year ended April 3, 1994 $2,994 $1,144 ($ 9) $4,129 Inventory Valuation Reserve Year ended March 29, 1992 $6,042 $7,267 ($2,840) $10,469 Year ended March 28, 1993 $10,469 $3,647 ($2,286) $11,830 Year ended April 3, 1994 $11,830 $2,453 ($1,745) $12,538 F-4 SCHEDULE IX INTEGRATED DEVICE TECHNOLOGY, INC. SHORT-TERM BORROWINGS Balance Weighted Maximum Average Weighted at Average Amount Amount Average End Interest Outstanding Outstanding Interest Rate of Period Rate During the During the During the (in thousands, Period Period (1) Period (2) except percentages) Notes Payable to Bank: Year ended March 29, 1992 $1,551 10.5% $1,551 $257 9.6% Year ended March 28, 1993 $545 10.2% $1,908 $1,223 9.9% Year ended April 3, 1994 $0 9.8% $1,448 $494 10.0% (1) Computed by dividing the sum of the daily outstanding balances by the number of days such balances were outstanding. (2) Represents the effective annual interest rate on short-term borrowings for the period. F-5 SCHEDULE X INTEGRATED DEVICE TECHNOLOGY, INC. SUPPLEMENTARY INCOME STATEMENT INFORMATION Year Ended Year Ended Year Ended (in thousands) April 3, 1994 March 28, 1993 March 29, 1992 Maintenance and Repairs $6,702 $5,970 $7,328 Items omitted if less than 1% of revenues or separately reported in financial statements in Registrant's Annual Report to Shareholders. F-6
INTEGRATED DEVICE TECHNOLOGY, INC. 1984 EMPLOYEE STOCK PURCHASE PLAN (Amended and Restated Effective as of August 25, 1993) Section 1. Establishment of the Plan. The Integrated Device Technology, Inc. qualified Employee Stock Purchase Plan (the "Plan") is amended and restated to increase the shares available for purchase under the Plan and to comply with the requirements of Section 16 of the Securities Exchange Act of 1934. The Plan provides Eligible Employees with an opportunity to purchase the Company's common stock so that they may increase their proprietary interest in the success of the Company. The Plan, which provides for the purchase of stock through payroll withholding, is intended to qualify under section 423 of the Code. Section 2. Definitions. (a) "Board of Directors" or "Board" means the Board of Directors of the Company. (b) "Code" means the Internal Revenue Code of 1986, as amended. (c) "Company" means Integrated Device Technology, Inc., a Delaware corporation. (d) "Compensation" means the base compensation paid to a Participant during a Participation Period in cash or in kind including overtime and shift differential. Incentive compensation, commissions and other bonuses and other forms of compensation
for work outside the regular work schedule are excluded. (e) "Date of Participation" means the first day of a Participation Period. (f) "Eligible Employee" means any Employee of a Participating Company (i) who has been continuously employed by the Participating Company for at least three (3) months prior to the commencement of a Participation Period, (ii) who is customarily employed for more than twenty (20) hours per week, (iii) who is customarily employed for more than five (5) months per calendar year, and (iv) who is an Employee at the commencement of a Participation Period. If an Employee has been employed less than three months and is granted a formal leave of absence, service, prior to and after the leave, will count toward the three months waiting period for eligibility. Rehired Employees with less than a six month break in service will receive full credit for past service to determine eligibility; otherwise, rehired Employees will be treated as new Employees for purposes of eligibility. In the event an Eligible Employee fails to remain in the continuous employ of a Participating Company customarily for at least twenty (20) hours per week during a Participation Period, he will be deemed to have elected to withdraw from the Plan and the payroll deductions credited to his account will be returned to him; provided that a Participant who goes on an unpaid leave of absence shall be permitted to remain in the Plan with respect to a Participation Period which commenced prior to such leave of absence. If such Participant is not guaranteed reemployment by contract or statute and the leave of absence extends beyond ninety (90) days, such Participant shall be deemed to have terminated employment on the ninety-first (91st) day of such leave of absence. Payroll deductions for a Participant who has been on an unpaid leave of absence will resume at the same rate as in effect prior to such leave upon return to work unless changed by such Participant or unless the Participant has been on an unpaid leave of absence either throughout an entire Participation Period or for more than 90 days, in which case the Participant shall not be permitted to re-enter the Plan until a participation agreement is filed with respect to a subsequent Participation Period which commences after such Participant has returned to work from the unpaid leave of absence. (g) "Employee" means any common-law employee of a Participating Company. (h) "Fair Market Value" of a share of Stock means the market price of Stock, determined as follows: (i) if the Stock was traded over-the-counter on the date in question but was not classified as a national market issue, then the Fair Market Value shall be equal to the closing bid price quoted by the National Association of Securities Dealers, Inc. ("NASDAQ") for such date; (ii) if the Stock is traded over-the-counter on the date in question and was classified as a national market issue, then the Fair Market Value shall be equal to the last-transaction price quoted by the NASDAQ system for such date; (iii) if the Stock is traded on a national exchange on the date in question, then the Fair Market Value shall be the highest closing bid price reported on such exchange for such date. If the Stock is not traded on the date as of which the Fair Market Value is to be determined, Fair Market Value shall be determined as of the first preceding date on which Stock was traded. In all cases the determination of Fair Market Value by the Board of Directors shall be conclusive and binding on all persons. (i) "Participant" means an Eligible Employee who elects to participate in the Plan, as provided in Section 5 hereof. (j) "Participating Company" means the Company and such present or future Subsidiaries of the Company as the Board of Directors shall from time to time designate. (k) "Participation Period" means a period during which contributions may be made toward the purchase of Stock under the Plan, as determined pursuant to Section 6. (l) "Plan Account" means the account established for each Participant pursuant to Section 9(a). (m) "Purchase Price" means the price at which Participants may purchase Stock under Section 5 of the Plan, as determined pursuant to Section 7. (n) "Stock" means the common stock, no par value, of the Company. (o) "Subsidiary" means a subsidiary corporation as defined in section 425 of the Code. Section 3. Duration; Shares Authorized The Plan shall terminate on the last day of the Company's 2008-2009 fiscal year, unless terminated earlier by the Board of Directors. The maximum aggregate number of shares which may be offered under the Plan shall be 2,025,000 shares of Stock, subject to adjustment as provided in Section 13 hereof. Section 4. Administration. (a) The Plan shall be administered by a Plan Administrator appointed by the Board of Directors. The interpretation and construction by the Plan Administrator of any provision of the Plan or of any right to purchase stock qualified hereunder shall be conclusive and binding on all persons. (b) No member of the Board or the Plan Administrator shall be liable for any action or determination made in good faith with respect to the Plan or the right to purchase Stock hereunder. The Plan Administrator shall be indemnified by the Company against the reasonable expenses, including attorney's fees actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which it may be a party by reason of any action taken or failure to act under or in connection with the Plan or any stock purchased thereunder, and against all amounts paid by it in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by it in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that the Plan Administrator is liable for negligence or misconduct in the performance of its duties; provided that within sixty (60) days after institution of any such action, suit or proceeding, the Plan Administrator shall in writing offer the Company the opportunity, at its own expense, to handle and defend the same. (c) All costs and expenses incurred in administering the Plan shall be paid by the Company. The Board or the Plan Administrator may request advice for assistance or employ such other persons as are necessary for proper administration of the Plan. Section 5. Eligibility and Participation. (a) Any person who qualifies or will qualify as an Eligible Employee on the Date of Participation with respect to a Participation Period may elect to participate in the Plan for such Participation Period. An Eligible Employee may elect to participate by executing the participation agreement prescribed for such purpose by the Plan Administrator. The participation agreement shall be filed with the Plan Administrator no later than the deadline stated on the participation agreement, and if none is stated, then no later than the first day of the Participation Period. The Eligible Employee shall designate on the participation agreement the percentage of his or her Compensation which he or she elects to have withheld for the purchase of Stock, which may be any whole percentage from 2 to 10% of the Participant's Compensation. (b) By enrolling in the Plan, a Participant shall be deemed to have elected to purchase the maximum number of whole shares of Stock which can be purchased with the amount of the Participant's Compensation which is withheld during the Participation Period. However, with respect to any Participation Period, no Participant shall be eligible to purchase more than two thousand five hundred (2,500) shares of Stock (appropriately adjusted if the Participation Period is longer than a fiscal quarter and for events described in Section 13), provided that such amount shall not result in the limitations set forth in Section 14 being exceeded. (c) Once enrolled, a Participant will continue to participate in the Plan for each succeeding Participation Period until he or she terminates participation or ceases to qualify as an Eligible Employee. A Participant who withdraws from the Plan in accordance with Section 10 may again become a Participant, if he or she then is an Eligible Employee, by following the procedure described in Section 5(a). Section 6. Participation Periods. The Plan shall be implemented by one or more Participation Periods of not more than twenty-seven (27) months each. (The current duration of each Participation Period is each of the Company's fiscal quarters, and the Participation Periods commence on the first day of each such quarter.) The Board of Directors may determine the duration of each Participation Period and the commencement dates, provided that no Participation Period shall have a commencement date after January 1, 2009. Section 7. Purchase Price. The Purchase Price for each share of Stock shall be the lesser of (i) eighty-five percent (85%) of the Fair Market Value of such share on the Date of Participation or (ii) eighty-five percent (85%) of the Fair Market Value of such share on the last trading day during the Participation Period. Section 8. Employee Contributions. A Participant may purchase shares of Stock solely by means of payroll deductions. Payroll deductions, as designated by the Participant pursuant to Section 5(a), shall commence with the first paycheck issued during the Participation Period and shall be deducted from each subsequent paycheck throughout the Participation Period. If a Participant desires to decrease the rate of payroll withholding during the Participation Period, he or she may do so, if permitted by the Plan Administrator, one time during a Participation Period by filing a new participation agreement with the Plan Administrator. Such decrease will be effective as of the first day of the second payroll period which begins following the receipt of the new participation agreement. If a Participant desires to increase or decrease the rate of payroll withholding, he or she may do so effective for the next Participation Period by filing a new participation agreement with the Plan Administrator on or before the date specified by the Plan Administrator, and if none is stated, then no later than the first day of the Participation Period for which such change is to be effective. Section 9. Plan Accounts; Purchase of Shares. (a) The Company will maintain a Plan Account on its books in the name of each Participant. At the close of each pay period, the amount deducted from the Participant's Compensation will be credited to the Participant's Plan Account. (b) As of the last day of each Participation Period, the amount then in the Participant's Plan Account will be divided by the Purchase Price, and the number of whole shares which results (subject to the limitations described in Sections 5(b), 9(c) and 14) shall be purchased from the Company with the funds in the Participant's Plan Account. Share certificates representing the number of shares of Stock so purchased shall be delivered to a brokerage account designated by the Plan Administrator and kept in such account pursuant to a participation agreement (which shall be uniform) between each Participant and the Company and subject to the conditions described therein. (c) In the event that the aggregate number of shares which all Participants elect to purchase during a Participation Period shall exceed the number of shares remaining available for issuance under the Plan, then the number of shares to which each Participant shall become entitled shall be determined by multiplying the number of shares available for issuance by a fraction the numerator of which is the sum of the number of shares the Participant has elected to purchase pursuant to Section 5, and the denominator of which is the sum of the number of shares which all employees have elected to purchase pursuant to Section 5. Any cash amount remaining in the Participant's Plan Account under these circumstances shall be refunded to the Participant. (d) Any amount remaining in the Participant's Plan Account caused by a surplus due to fractional shares after deducting the amount of the Purchase Price for the number of whole shares issued to the Participant shall be carried over in the Participant's Plan Account for the succeeding Participation Period, without interest. Any amount remaining in the Participant's Plan Account caused by anything other than a surplus due to fractional shares shall be refunded to the Participant in cash, without interest. (e) As soon as practicable following the end of each Participation Period, the Company shall deliver to each Participant a Plan Account statement setting forth the amount of payroll deductions, the purchase price, the number of shares purchased and the remaining cash balance, if any. Section 10. Withdrawal From the Plan. A Participant may elect to withdraw from participation under the Plan at any time up to the last day of a Participation Period by filing the prescribed form with the Plan Administrator. As soon as practicable after a withdrawal, payroll deductions shall cease and all amounts credited to the Participant's Plan Account will be refunded in cash, without interest. A Participant who has withdrawn from the Plan shall not be a Participant in future Participation Periods, unless he or she again enrolls in accordance with the provisions of Section 5. Section 11. Effect of Termination of Employment or Death. (a) Termination of employment as an Eligible Employee for any reason, including death, shall be treated as an automatic withdrawal from the Plan under Section 10. A transfer from one Participating Company to another shall not be treated as a termination of employment. (b) A Participant may file a written designation of a beneficiary who is to receive any shares and cash, if any, from the Participant's Account under the Plan in the event of such Participant's death subsequent to the purchase of shares but prior to delivery to him of such shares and cash. In addition, a Participant may file a written designation of a beneficiary who is to receive any cash from the Participant's Account under the Plan in the event of such Participant's death prior to the last day of a Participation Period. (c) Such designation of beneficiary may be changed by the Participant at any time by written notice. In the event of the death of a Participant in the absence of a valid designation of a beneficiary who is living at the time of such Participant's death, the Company shall deliver such shares and/or cash in accordance with the Participant's designation of beneficiaries under the Integrated Device Technology, Inc. Long Term Incentive Plan; or, in the absence of such designation, to the executor or administrator of the estate of the Participant; or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the Participant; or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate. Section 12. Rights Not Transferable. The rights or interests of any Participant in the Plan, or in any Stock or moneys to which he or she may be entitled under the Plan, shall not be transferable by voluntary or involuntary assignment or by operation of law, or by any other manner other than as permitted by the Code or by will or the laws of descent and distribution. If a Participant in any manner attempts to transfer, assign or otherwise encumber his or her rights or interest under the Plan, other than as permitted by the Code or by will or the laws of descent and distribution, such act shall be treated as an automatic withdrawal under Section 10. Section 13. Recapitalization, Etc. (a) The aggregate number of shares of Stock offered under the Plan, the number and price of shares which any Participant has elected to purchase pursuant to Section 5 and the maximum number of shares which a Participant may elect to purchase under the Plan in any Participation Period shall be proportionately adjusted for any increase or decrease in the number of issued shares of Stock resulting from a subdivision or consolidation of shares or any other capital adjustment, the payment of a stock dividend, or other increase or decrease in such shares effected without receipt of consideration by the Company. (b) In the event of a dissolution or liquidation of the Company, or a merger or consolidation to which the Company is a constituent corporation, this Plan shall terminate, unless the plan of merger, consolidation or reorganization provides otherwise, and all amounts which each Participant has paid towards the Purchase Price of Stock hereunder shall be refunded, without interest. (c) The Plan shall in no event be construed to restrict in any way the Company's right to undertake a dissolution, liquidation, merger, consolidation or other reorganization. Section 14. Limitation on Stock Ownership. Notwithstanding any provision herein to the contrary, no Participant shall be permitted to elect to participate in the Plan (i) if such Participant, immediately after his or her election to participate, would own stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or any parent or Subsidiary of the Company, or (ii) if under the terms of the Plan the rights of the Employee to purchase Stock under this Plan and all other qualified employee stock purchase plans of the Company or its Subsidiaries would accrue at a rate which exceeds twenty-five thousand dollars ($25,000) of the Fair Market Value of such Stock (determined at the time such right is granted) for each calendar year for which such right is outstanding at any time. For purposes of this Section 14, ownership of stock shall be determined by the attribution rules of section 425(d) of the Code, and Participants shall be considered to own any stock which they have a right to purchase under this or any other stock plan. Section 15. No Rights as an Employee. Nothing in the Plan shall be construed to give any person the right to remain in the employ of a Participating Company. Each Participating Company reserves the right to terminate the employment of any person at any time and for any reason. Section 16. Rights as a Stockholder. A Participant shall have no rights as a stockholder with respect to any shares he or she may have a right to purchase under the Plan until the date of issuance of a stock certificate to the brokerage account designated by the Plan Administrator for shares of Stock issued pursuant to the Plan. Section 17. Use of Funds. All payroll deductions received or held by the Company under the Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions in separate accounts. Section 18. Amendment or Termination of the Plan. The Board of Directors shall have the right to amend, modify or terminate the Plan at any time without notice. An amendment of the Plan shall be subject to shareholder approval only to the extent required by applicable laws, regulations or rules. Section 19. Governing Law. The Plan shall be governed by, and construed and interpreted in accordance with, the laws of the State of Delaware. To record the adoption of this amended and restated Plan, the Company has caused its authorized officer to execute the same this ___ day of ___________, 1993. Integrated Device Technology, Inc. By ____________________________ Jack Menache Its Vice President, General Counsel and Secretary INTEGRATED DEVICE TECHNOLOGY, INC. 1984 EMPLOYEE STOCK PURCHASE PLAN (Amended and Restated Effective as of August 25, 1993) TABLE OF CONTENTS Page Section 1. Establishment of the Plan 1 Section 2. Definitions 1 Section 3. Duration; Shares Authorized 3 Section 4. Administration. 3 Section 5. Eligibility and Participation 4 Section 6. Participation Periods 5 Section 7. Purchase Price. 5 Section 8. Employee Contributions 5 Section 9. Plan Accounts; Purchase of Shares 5 Section 10. Withdrawal From the Plan 6 Section 11. Effect of Termination of Employment or death 7 Section 12. Rights Not Transferable 7 Section 13. Recapitalization, Etc. . 8 Section 14. Limitation on Stock Ownership 8 Section 15. No Rights as an Employee 9 Section 16. Rights as a Stockholder 9 Section 17. Use of Funds 9 Section 18. Amendment or Termination 9 of the Plan Section 19. Governing Law 9
1985 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN FOR INTEGRATED DEVICE TECHNOLOGY, INC. (Amended and Restated Effective as of August 25, 1993) TABLE OF CONTENTS Page 1. Purpose 1 2. Definitions 1 3. Administration 2 4. Eligibility 3 5. Shares Available 3 6. Term 4 7. Stock Options 4 8. Exercise of Stock Options Upon Termination of Employment. 5 9. Nonassignability 5 10. Accelerated Vesting 5 11. Adjustment of Shares Available 6 12. Payment of Withholding Taxes 7 13. Amendments 7 14. Regulatory Approvals and Listings 7 15. No Right to Continued Employment or Grants 8 16. Governing Law 8 17. Execution 8 1985 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN FOR INTEGRATED DEVICE TECHNOLOGY, INC. (Amended and Restated Effective as of August 25, 1993) 1. Purpose The purpose of this amended and restated Plan is to increase the number of shares of Common Stock available for Awards, to comply with applicable law and to provide a long-term incentive vehicle under which stock options may be granted to employees of the Company and its Subsidiaries to promote the Company's success. 2. Definitions A. "Award" means a stock option granted under the Plan. B. "Award Notice" means any written notice from the Company to a Participant or an agreement
between the Company and a Participant that establishes the terms applicable to an Award. C. "Board of Directors" means the Board of Directors of the Company. D. "Code" means the Internal Revenue Code of 1986, as amended. E. "Committee" means the committee designated by the Board of Directors, which is authorized to administer the Plan under Section 3 hereof. The Committee shall have membership composition which enables the Plan to qualify under Rule 16b-3 with regard to Awards to persons who are subject to Section 16 of the Exchange Act. F. "Common Stock" means common stock of the Company, par value of $0.001. G. "Company" means Integrated Device Technology, Inc., a Delaware corporation. H. "Exchange Act" means the Securities Exchange Act of 1934, as amended. I. "Fair Market Value" means the closing price of a share of the Company's Common Stock, on the principal exchange which the shares of the Company's Common Stock are trading, on the trading day immediately preceding the date on which the Fair Market Value is determined. J. "Key Employee" means any employee of the Company or a Subsidiary whose performance the Committee determines can have a significant effect on the success of the Company. "Key Employee" also means a nonemployee consultant to the Company or any Subsidiary who is not an "insider" under Section 16 of the Exchange Act with respect to the Company, as determined by the Committee. Notwithstanding Section 7.A., a Key Employee who is a consultant may not receive an Award that is an incentive stock option. K. "Participant" means any Key Employee to whom an Award is granted under the Plan. L. "Plan" means this Plan, which shall be known as the 1985 Incentive and Nonqualified Stock Option Plan For Integrated Device Technology, Inc., as amended and restated. M. "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act, or any successor rule. N. "Subsidiary" means any corporation or entity in which the Company directly or indirectly controls 50% or more of the total voting power of all classes of its stock having voting power and which the Board of Directors has designated as a Subsidiary for purposes of the Plan. 3. Administration A. The Committee shall have the authority to administer the Plan in its sole discretion. To this end, the Committee is authorized to: (i) construe and interpret the Plan; (ii) promulgate, amend and rescind rules relating to the implementation of the Plan; (iii) make all determinations necessary or advisable for the administration of the Plan, including the selection of Key Employees who shall be granted Awards, the number of shares of Common Stock to be subject to each Award, the Award price, the vesting or duration of Awards, including accelerating the vesting of Awards, and the designation of stock options as incentive stock options or nonstatutory stock options; (iv) determine the disposition of Awards in the event of a Participant's divorce or dissolution of marriage; (v) determine whether Awards will be granted in replacement of other grants under an incentive or compensation plan of an acquired business unit; (vi) correct any defect, supply any omission, or reconcile any inconsistency in the Plan, any Award or any Award Notice; and (vii) take any and all other actions it deems necessary or advisable for the proper administration of the Plan. B. Subject to the requirements of applicable law, the Committee may designate persons other than members of the Committee to carry out its responsibilities and may prescribe such conditions and limitations as it may deem appropriate, except that the Committee may not delegate its authority with regard to the selection for participation of or the granting of Awards to persons subject to Section 16 of the Exchange Act. Any determination, decision or action of the Committee in connection with the construction, interpretation, administration, or application of the Plan shall be final, conclusive and binding upon all persons participating in the Plan and any person validly claiming under or through persons participating in the Plan. C. The Committee may adopt such Plan amendments, procedures, regulations, subplans and the like as it deems necessary to enable Key Employees who are foreign nationals or employed outside the United States to receive Awards. D. The Committee may at any time, and from time to time, amend or cancel any outstanding Award but only with the consent of the person to whom the Award was granted. 4. Eligibility Any Key Employee is eligible to become a Participant in the Plan. 5. Shares Available A. Subject to Section 11, the maximum number of shares of Common Stock available for Award grants (including incentive stock options) shall be 7,750,000. B. For the purpose of computing the total number of shares of Common Stock available for Awards under the Plan, there shall be counted against the 7,750,000 maximum limitation shares of Common Stock subject to Awards. If any Award is forfeited or terminates for any reason before being exercised, then the shares of Common Stock subject to such Award shall again become available for future Awards under the Plan. C. The shares of Common Stock available under the Plan may be authorized and unissued shares or treasury shares. 6. Term The amended and restated Plan shall become effective upon approval by the Company's shareholders not later than the 1993 annual meeting of shareholders, and shall continue in effect until May, 1995. 7. Stock Options A. Stock options may be incentive stock options within the meaning of Section 422 of the Code or nonstatutory stock options (i.e., stock options which are not incentive stock options). B. Subject to Section 7.C., options shall be in such form and contain such terms as the Committee deems appropriate. While the terms of options need not be identical, each option shall be subject to the following terms: (i) The exercise price shall be the price set by the Committee but may not be less than 100% of the Fair Market Value of the shares of Common Stock on the date of the grant. (ii) The exercise price shall be paid in cash (including check, bank draft, or money order), or at the discretion of the Committee, all or part of the exercise price may be paid by delivery of Common Stock already owned by the Participant and valued at its Fair Market Value or any combination of the foregoing methods of payment. In addition, payment may be made by the delivery (on a form prescribed by the Committee) of an irrevocable direction to a securities broker approved by the Company to sell Common Stock and to deliver all or part of the sales proceeds to the Company in payment of all or part of the exercise price and any withholding taxes. (iii) The term of an option may not be greater than 10 years from the date of the grant. (iv) Neither a person to whom an option is granted nor such person's legal representative, heir, legatee or distributee shall be deemed to be the holder of, or to have any of the rights of a holder with respect to any shares subject to such option unless and until such person has exercised the option. C. A Key Employee who owns more than 10 percent of the total combined voting power of all classes of outstanding stock of the Company or any of its Subsidiaries shall not be eligible for the Award of an incentive stock option unless (a) the exercise price under such incentive stock option is at least 110 percent of the Fair Market Value of share of Common Stock on the date of grant and (b) such incentive stock option by its terms is not exercisable after the expiration of five years from the date of grant. 8. Exercise of Stock Options Upon Termination of Employment Each Award Notice for options shall set forth the extent to which the Participant shall have the right to exercise the Award following termination of the Participant's employment with the Company and its Subsidiaries. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Awards issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination of employment. 9. Nonassignability The rights of a Participant under the Plan shall not be assignable by such Participant, by operation of law or otherwise, except by will or the applicable laws of descent and distribution in the event of the Participant's death. Subject to Section 3.A.(iv), during the lifetime of the person to whom an Award is granted, he or she alone may exercise it. No Participant may create a lien on any funds, securities, rights or other property to which he or she may have an interest under the Plan, or which is held by the Company for the account of the Participant under the Plan. 10. Accelerated Vesting In the event of a Change in Control (as defined below) of the Company, all outstanding Awards, notwithstanding the terms of the Awards, shall become fully exercisable, with respect to the events described in clauses (i), (ii) or (iii) of this Section 10, one day prior to the effective date of the Change in Control and, with respect to an event described in clause (iv) of this Section 10, fifteen days following the effective date of the Change in Control, unless a majority of the Continuing Directors (as defined below) determine that such Change in Control is in the best interests of the Company and its shareholders. For purposes of this Section 10 a Change in Control shall be deemed to occur if (i) any person or entity, including any combination or group acting in concert (an "Acquiring Entity"), other than a Subsidiary of the Company, shall merge into the Company or otherwise combine with the Company and the Company shall be the continuing or surviving corporation of such merger or combination, and the Common Stock of the Company shall remain outstanding and shall not be changed or exchanged, (ii) the Company shall consolidate with, or merge with and into, any Acquiring Entity (other than a Subsidiary of the Company) and the Company shall not be the continuing or surviving corporation of such consolidation or merger, (iii) any Acquiring Entity (other than a Subsidiary of the Company) shall consolidate with the Company, or merge with or into, the Company, and the Company shall be the continuing or surviving corporation of such consolidation or merger, and in connection with such consolidation or merger, all or part of the outstanding shares of Common Stock shall be changed or exchanged for stock or other securities of any other Acquiring Entity or cash or any other property, or (iv) any Acquiring Entity shall become, in one transaction or a series of transactions, the beneficial owner of 15% or more of the shares of outstanding capital stock of the Company entitled to vote generally in the election of directors. For the purposes of this Section 10, Continuing Director shall mean (i) any member of the Board of Directors of the Company who is not an Acquiring Entity or an affiliate or associate of an Acquiring Entity, or a representative of an Acquiring Entity or of any such affiliate or associate, and who was a member of the Board of Directors prior to January 28, 1989, or (ii) any person who subsequently becomes a member of the Board of Directors, while a member, who is not an Acquiring Entity, or an affiliate or associate of an Acquiring Entity, or a representative of an Acquiring Entity or of any such affiliate or associate, if such person's nomination for election or election to the Board of Directors is recommended or approved by a majority of the Continuing Directors. 11. Adjustment of Shares Available A. If there shall be any change in the Common Stock subject to this Plan or the Common Stock subject to any Award granted hereunder, through merger, consolidation, reorganization, recapitalization, reincorporation, stock split, stock dividend, or other change in the corporate structure of the Company, appropriate adjustments will be made by the Committee in the aggregate number of shares subject to this Plan and the number of shares and the price per share subject to outstanding Awards in order to preserve, but not to increase, the benefits of the Participant. B. Subject to Section 10, in the event of a dissolution or liquidation of the Company or a merger, consolidation or other reorganization, each outstanding Award shall be treated in accordance with the terms of the agreement of merger, consolidation or reorganization, which may provide for the full vesting, redemption, cancelation or assumption of such Awards; provided, however, that in the absence of such terms, each outstanding Award shall be treated as determined by the Committee in its sole discretion. 12. Payment of Withholding Taxes To the extent required by applicable federal, state, local or foreign law, a Participant shall make arrangements satisfactory to the Committee for the satisfaction of any withholding tax obligations that arise by reason of an Award. The Committee shall not be required to issue any Common Stock under the Plan until such obligations are satisfied. The Committee may permit a Participant to satisfy all or part of his or her withholding tax obligations by having the Company withhold a portion of any Common Stock that otherwise would be issued to him or her or by surrendering a portion of any Common Stock that previously were issued to him or her. Such Common Stock shall be valued at their Fair Market Value on the date when taxes otherwise would be withheld in cash. The payment of withholding taxes by assigning Common Stock to the Company, if permitted by the Committee, shall be subject to such restrictions as the Committee may impose. 13. Amendments The Board of Directors may amend the Plan at any time and from time to time. Rights and obligations under any Award Notice or Award granted before amendment of the Plan shall not be materially altered, or impaired adversely, by such amendment, except with consent of the person to whom the Award was granted. An amendment of the Plan shall be subject to the approval of the Company's stockholders only to the extent required by applicable laws, regulations or rules. 14. Regulatory Approvals and Listings Notwithstanding any other provision in the Plan, the Company shall have no obligation to issue or deliver certificates of Common Stock under the Plan prior to A.obtaining approval from any governmental agency which the Company determines is necessary or advisable, B.admitting such shares to listing on any stock exchange on which the Common Stock may be listed and C.completing any registration or other qualification of such shares under any state or Federal law or ruling of any governmental body which the Company determines to be necessary or advisable. 15. No Right to Continued Employment or Grants Participation in the Plan shall not give any Key Employee any right to remain in the employ of the Company or any Subsidiary, and a Key Employee may be terminated at any time and for any reason. Further, the adoption of this Plan shall not be deemed to give any Key Employee or other individual the right to be selected as a Participant or to be granted an Award. 16. Governing Law The Plan shall be governed by and construed in accordance with the laws of the State of Delaware. 17. Execution To record the adoption of this amended and restated Plan, the Company has caused its authorized officer to execute the same this ___ day of _________, 1993. By___________________________ Jack Menache Its Vice President, General Counsel and Secretary 1985 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN FOR INTEGRATED DEVICE TECHNOLOGY, INC. (Amended and Restated as of August 25, 1993) The 1985 Incentive and Nonqualified Stock Option Plan for Integrated Device Technology, Inc. (Amended and Restated as of August 25, 1993) is amended in the following respects: 1. Shares Available. Section 5(A) is amended to read, in its entirety, as follows: "Subject to Section 11, the maximum number of shares of Common Stock available for Award grants (including incentive stock options) shall be 8,525,000." Section 5(B) is amended to read, in its entirety, as follows: "For the purpose of computing the total number of shares of Common Stock available for Awards under the Plan, there shall be counted against the 8,525,000 maximum limitation shares of Common Stock subject to Awards. If any Award is forfeited or terminates for any reason before being exercised, then the shares of Common Stock subject to such Award shall again become available for future Awards under the Plan." 2. Effective Date. This First Amendment is effective this 19th day of October, 1993. This First Amendment is adopted this 19th day of October, 1993. INTEGRATED DEVICE TECHNOLOGY, INC. By _________________________ As Its _____________________ By___________________________ Jack Menache Its Vice President, General Counsel and Secretary INTEGRATED DEVICE TECHNOLOGY NOTICE OF GRANT OF STOCK OPTIONS AND GRANT AGREEMENT ID: You have been granted an Employee Stock Option to purchase Common Stock of Integrated Device Technology, Inc. as follows: Non-Qualified Stock Option Grant No. Date of Grant Stock Option Plan 85 Option Price per Share Total Number of Shares Granted Total Price of Shares Granted By our signatures we agree that this option is granted under and governed by the terms of the Integrated Device Technology, Inc. 1985 Employee Stock Option Plan. The term of this option is Ten (10) years from the Grant Date. This option shall be exercisable in accordance with the schedule on the attached Grant Summary. _____________________________________ __________________ For INTEGRATED DEVICE TECHNOLOGY Date _____________________________________ __________________ Optionee Date
Exhibit 24.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No.33-46831 and 33-34458) of Integrated Device Technology, Inc. of our report dated April 27, 1994, listed in the index appearing under Item 8 of the Annual Report on Form 10-K. PRICE WATERHOUSE San Jose, California May 18, 1994