10-Q 1 d10q.txt 10-Q FOR QUARTER ENDED 12/29/2001 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 29, 2001 [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from _______ to _______ Commission File Number 0-27026 Pericom Semiconductor Corporation (Exact Name of Registrant as Specified in Its Charter) California 77-0254621 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 2380 Bering Drive San Jose, California 95131 (408) 435-0800 (Address of Principal Executive Offices and Issuer's Telephone Number, Including Area Code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act 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 [_] As of February 4, 2002 the Registrant had outstanding 25,314,643 shares of Common Stock. Pericom Semiconductor Corporation Form 10-Q for the Quarter Ended December 29, 2001 INDEX
PART I. FINANCIAL INFORMATION Page ---- Item 1: Financial Statements Condensed Balance Sheets as of December 31, 2001 and June 30, 2001 3 Condensed Statements of Operations for the three and six months ended December 31, 2001 and December 31, 2000 4 Condensed Statements of Cash Flows for the six months ended December 31, 2001 and December 31, 2000 5 Notes to Condensed Financial Statements 6 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3: Quantitative and Qualitative Disclosures about Market Risk 21 PART II. OTHER INFORMATION Item 1: Legal Proceedings 21 Item 4: Submission of Matters to Vote of Security Holders 22 Item 6: Exhibits and Reports on Form 8-K 22 Signatures 23
2 PART I. FINANCIAL INFORMATION Item 1: Financial Statements Pericom Semiconductor Corporation Condensed Balance Sheets (In thousands)
December 31, June 30, 2001 2001 (1) ---- -------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 9,682 $ 89,076 Short-term investments 139,925 61,811 Accounts receivable: Trade (net of allowances of $7,998, and $4,296) 2,008 7,096 Other receivables 1,858 1,050 Inventories 11,750 14,440 Prepaid expenses and other current assets 594 732 Deferred income taxes 3,609 1,776 ------------------------- Total current assets 169,426 175,981 Property and equipment - net 9,815 10,473 Investment in and advances to joint venture 6,798 7,330 Goodwill, net of amortization 1,325 1,325 Other assets 5,405 1,318 ------------------------- Total $ 192,769 $ 196,427 ========================= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 3,766 $ 4,168 Accrued liabilities 3,172 3,747 ------------------------- Total current liabilities 6,938 7,915 Deferred income taxes 1,322 1,322 Shareholders' equity: Common stock 137,109 136,007 Accumulated other comprehensive loss (674) (204) Retained earnings 48,074 51,387 ------------------------- Total shareholders' equity 184,509 187,190 ------------------------- Total $ 192,769 $ 196,427 =========================
(1) Derived from the June 30, 2001 audited balance sheet included in the Company's Annual Report on Form 10-K. See notes to condensed financial statements. 3 Pericom Semiconductor Corporation Condensed Statements of Operations (Unaudited) (In thousands, except per share amounts)
Three Months Ended Six Months Ended December 31 December 31, 2001 2000 2001 2000 ---- ---- ---- ---- Net revenues $ 8,962 $ 35,718 $ 22,076 $ 69,078 Cost of revenues 9,018 20,250 17,651 39,300 -------------------------------------------- Gross profit (loss) (56) 15,468 4,425 29,778 -------------------------------------------- Operating expenses: Research and development 3,160 2,754 5,739 5,341 Selling, general and administrative 3,185 4,231 6,128 8,216 -------------------------------------------- Total 6,345 6,985 11,867 13,557 -------------------------------------------- Income (loss) from operations (6,401) 8,483 (7,442) 16,221 Equity in net loss of investee (326) (132) (531) (357) Interest income 1,439 2,323 2,795 4,546 -------------------------------------------- Income (loss) before income taxes (5,288) 10,674 (5,178) 20,410 Provision (benefit) for income taxes (1,904) 4,056 (1,865) 7,756 -------------------------------------------- Net income (loss) ($3,384) $ 6,618 ($3,313) $ 12,654 ============================================ Basic earnings (loss) per share ($0.13) $ 0.27 ($0.13) $ 0.51 ============================================ Diluted earnings (loss) per share ($0.13) $ 0.24 ($0.13) $ 0.46 ============================================ Shares used in computing basic earnings (loss) per share 25,242 24,875 25,216 24,785 ============================================ Shares used in computing diluted earnings (loss) per share 25,242 27,272 25,216 27,374 ============================================
See notes to condensed financial statements. 4 Pericom Semiconductor Corporation Condensed Statements of Cash Flows (Unaudited) (In thousands) Six Months Ended December 31, ------------ 2001 2000 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) ($3,313) $ 12,654 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,063 1,591 Equity in net loss of investee 532 357 Changes in assets and liabilities: Accounts receivable 4,280 (5,065) Inventories 2,690 1,298 Prepaid expenses and other current assets (1,773) (75) Accounts payable (402) 2,153 Accrued liabilities (575) 388 Income taxes payable --- 957 --------- --------- Net cash provided by operating activities 3,502 14,258 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment (1,405) (3,131) Purchase of short-term investments (131,962) (4,253) Maturities of short-term investments 53,456 2,250 Decrease (increase) in other assets (4,087) 49 Advances to investee --- (421) --------- --------- Net cash used in investing activities (83,998) (5,506) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Sale of common stock, net 1,102 1,335 --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (79,394) 10,087 CASH AND CASH EQUIVALENTS: Beginning of period 89,076 124,115 --------- --------- End of period $ 9,682 $ 134,202 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Income taxes $ 37 $ 4,954 ========= ========= See notes to condensed financial statements. 5 Pericom Semiconductor Corporation Notes To Condensed Financial Statements (Unaudited) 1. Basis of Presentation The financial statements have been prepared by Pericom Semiconductor Corporation ("Pericom" or the "Company") pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, these unaudited financial statements include all adjustments, consisting only of normal recurring adjustments and accruals, necessary for a fair presentation of the Company's financial position as of December 31, 2001 and the results of operations and cash flows for the three and six-month periods ended December 31, 2001 and 2000. This unaudited quarterly information should be read in conjunction with the audited financial statements of Pericom and the notes thereto incorporated by reference in the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission. The preparation of the interim condensed financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the interim condensed financial statements and the reported amounts of revenue and expenses during the period. Actual amounts could differ from these estimates. The results of operations for the three and six-month periods ended December 31, 2001 are not necessarily indicative of the results to be expected for the entire year. The Company's fiscal periods in the accompanying financial statements have been shown as ending on June 30 and December 31. The Company's fiscal year 2001 ended on June 30, 2001. The three and six-month periods in fiscal years 2002 and 2001 ended on December 29, 2001 and December 30, 2000, respectively. The Company participates in a dynamic high technology industry and believes that changes in any of the following areas could have a material adverse effect on the Company's future financial position or results of operations: advances and trends in new technologies; competitive pressures in the form of new products or price reductions on current products; changes in the overall demand for products and services offered by the Company; changes in customer relationships; litigation or claims against the Company based on intellectual property, patent, product, regulatory or other factors; risks associated with changes in domestic and international economic and/or political conditions or regulations; availability of necessary components; and the Company's ability to attract and retain employees necessary to support its growth. 2. Earnings (Loss) Per Share Basic earnings (loss) per share is based upon the weighted average number of common shares outstanding. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. 6 Basic and diluted earnings (loss) per share for the three and six-month periods ended December 31, 2001 and December 31, 2000 are computed as follows (in thousands, except for per share data):
Three Months Ended Six Months Ended December 31, December 31, 2001 2000 2001 2000 ---- ---- ---- ---- Net income (loss) ($ 3,384) $ 6,618 ($ 3,313) $ 12,654 =========================================== Computation of common shares outstanding - basic earnings (loss) per share: Weighted average shares of common stock 25,242 24,875 25,216 24,785 ------------------------------------------- Shares used in computing basic earnings (loss) per share 25,242 24,875 25,216 24,785 =========================================== Basic earnings (loss) per share ($ 0.13) $ 0.27 ($ 0.13) $ 0.51 =========================================== Computation of common shares outstanding - diluted earnings (loss) per share: Weighted average shares of common stock 25,242 24,875 25,216 24,785 Dilutive options using the treasury stock method --- 2,397 --- 2,589 ------------------------------------------- Shares used in computing diluted earnings (loss) per share 25,242 27,272 25,216 27,374 =========================================== Diluted earnings (loss) per share ($ 0.13) $ 0.24 ($ 0.13) $ 0.46 ===========================================
Options to purchase 2,418,633 shares of Common stock at prices ranging from $14.50 to $42.75 and options to purchase 1,515,787 shares of Common stock at prices ranging from $23.50 to $42.75 were outstanding as of December 31, 2001 and December 31, 2000, respectively, but not included in the computation of diluted net income per share because the options' exercise prices were greater than the average market price of the common shares as of such dates and therefore, would be anti-dilutive under the treasury stock method. For the three and six-month periods ended December 31, 2001, options to purchase 1,898,080 shares of Common stock and 1,911,536 shares of Common stock, respectively, were not included in the computation of diluted net income per share because the Company had net losses for those periods and those options would be anti-dilutive. 3. Inventories Inventories consist of (in thousands): December 31, June 30, 2001 2001 ---- ---- Raw materials $ 5,247 $ 5,674 Work in process 3,872 3,341 Finished goods 2,631 5,425 ------------------------- $ 11,750 $ 14,440 ========================= 7 4. Accrued Liabilities Accrued liabilities consist of (in thousands): December 31 June 30, 2001 2001 ---- ---- Accrued compensation $1,018 $1,598 External sales representative commissions 725 819 Other accrued expenses 1,429 1,330 ---------------------- $3,172 $3,747 ====================== 5. Industry and Segment Information In fiscal year 1999, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of an Enterprise and Related Information" which establishes annual and interim reporting standards for an enterprise's business segments and related disclosures about its products, services, geographical areas and major customers. The Company operates in one reportable segment. 6. Comprehensive Income SFAS No. 130, "Reporting Comprehensive Income" requires an enterprise to report, by major components and as a single total, the change in net assets during the period from non-owner sources. For the three and six-month periods ended December 31, 2001 and 2000, comprehensive income, which was comprised of the Company's net income for the periods and changes in cumulative unrealized gain/(loss) on short-term investments was as follows: Three Months Ended Six Months Ended December 31, December 31, --------------------------------------- 2001 2000 2001 2000 ---- ---- ---- ---- Net income (loss) ($3,384) $ 6,618 ($3,313) $12,654 Unrealized gain/(loss) on investment (861) 17 (468) 90 --------------------------------------- Comprehensive income (loss) ($4,245) $ 6,635 ($3,781) $12,744 ======================================= 7. Business Combinations In June 2001, the Financial Accounting Standards Board issued SFAS No. 141, "Business Combinations" which eliminates the pooling of interests method of accounting for all business combinations initiated after June 30, 2001 and addresses the initial recognition and measurement of goodwill and other intangible assets acquired in a business combination. 8. Intangible Assets On July 1, 2001 the Company adopted SFAS No. 142, "Goodwill and Other Intangible Assets" which addresses the financial accounting and reporting standards for the acquisition of intangible assets outside a business combination and for goodwill and other intangible assets subsequent to their acquisition. This accounting standard requires that goodwill be separately disclosed from other intangible assets in the statements of financial position, and no longer be amortized but tested for impairment on a periodic basis. The provisions of this accounting standard also require the Company to continually review its equity method investment for impairment. The Company performed an impairment test at December 31, 2001 and identified no impairments. 8 In accordance with SFAS No. 142, Pericom discontinued the amortization of goodwill effective July 1, 2001. A reconciliation of previously reported net income and earnings per share to the amounts adjusted for the exclusion of goodwill amortization net of the related income tax effect follows:
Three Months Ended Six Months Ended December 31, December 31, ---------------------- ----------------------- 2001 2000 2001 2000 --------- --------- --------- ---------- Reported net income (loss) ($3,384) $ 6,618 ($3,313) $ 12,654 Add: Goodwill amortization, net of tax -- 52 -- 100 ------------------------------------------------ Adjusted net income (loss) ($3,384) $ 6,670 ($3,313) $ 12,754 ================================================ Reported basic earnings (loss) per share ($0.13) $ 0.27 ($0.13) $ 0.51 Add: Goodwill amortization, net of tax per basic share -- $ 0.00 -- $ 0.00 ------------------------------------------------ Adjusted basic earnings (loss) per share ($0.13) $ 0.27 ($0.13) $ 0.51 ================================================ Reported diluted earnings (loss) per share ($0.13)$ 0.24 ($0.13) $ 0.46 Add: Goodwill amortization, net of tax per diluted share -- $ 0.00 -- $ 0.01 ------------------------------------------------ Adjusted diluted earnings (loss) per share ($0.13) $ 0.24 ($0.13) $ 0.47 ================================================
9. Impairment or Disposal of Long-Lived Assets In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. It supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of", and the accounting and reporting provisions of Accounting Principles Board No. 30, "Reporting the results of Operations - Reporting the Effects of Disposal of a Segment of a Business and Extraordinary, Unusual and Infrequently Occurring Events and Transactions" for the disposal of a segment of a business. The Company is required to adopt SFAS No. 144 on July 1, 2002. The Company has not yet determined the impact that the adoption of SFAS No. 144 will have on its results of operations or financial position. 9 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Pericom Semiconductor Corporation The following information should be read in conjunction with the unaudited financial statements and notes thereto included in Part 1 - Item 1 of this Quarterly Report and the audited financial statements and notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the Company's Annual Report on Form 10-K (the "Form 10-K"). Results of Operations The following table sets forth certain statement of operations data as a percentage of net revenues for the periods indicated.
Three Months Ended Six Months Ended December 31, December 31, -------------------- --------------------- 2001 2000 2001 2000 -------- -------- -------- -------- Net revenues 100.0% 100.0% 100.0% 100.0% Cost of revenues 100.6% 56.7% 80.0% 56.9% ---------------------------------------------- Gross profit (loss) (0.6%) 43.3% 20.0% 43.1% ---------------------------------------------- Operating expenses: Research and development 35.3% 7.7% 26.0% 7.7% Selling, general and administrative 35.5% 11.8% 27.8% 11.9% ---------------------------------------------- Total 70.8% 19.6% 53.8% 19.6% ---------------------------------------------- Income (loss) from operations (71.4%) 23.7% (33.8%) 23.5% Other income, net 12.4% 6.1% 10.3% 6.1% ---------------------------------------------- Income (loss) before income taxes (59.0%) 29.9% (23.5%) 29.5% Provision for income taxes (21.2%) 11.4% (8.5%) 11.2% ---------------------------------------------- Net income (loss) (37.8%) 18.5% (15.0%) 18.3% ==============================================
Net Revenues Net revenues consist primarily of product sales, which are recognized upon shipment, less an estimate for returns and allowances. Net revenues decreased 74.8% from $35.7 million for the quarter ended December 31, 2000 to $9.0 million for the quarter ended December 31, 2001. The decrease in net revenues resulted from the rapid, steep and prolonged decline in world wide semiconductor demand, a decline in the weighted average selling price of certain products and allowances for distributor returns. Sales to domestic and international distributors as a percentage of total revenues decreased from 58.6% for the quarter ended December 31, 2000 to 54.6% for the quarter ended December 31, 2001. Direct sales to Techmosa, an international distributor, accounted for approximately 13.0% of sales in the quarter ended December 31, 2001 and less than 10% of sales in the quarter ended December 31, 2000. Direct sales to Future Electronics, an international distributor, accounted for approximately 15.1% of sales in the quarter ended December 31, 2001 and less than 10% of sales in the quarter ended December 31, 2000. As a percentage of gross revenues, sales through distribution and contract manufacturing sales channels to one end-user customer, Dell Computer Corp., increased to 15.2% in the quarter ended December 31, 2001 from less than 10% in the quarter ended December 31, 2000. As a percentage of gross revenues, sales through distribution and contract manufacturing sales channels to another end-user customer, Compaq Computer Corp., decreased from 11.4% in the quarter ended December 31, 2000 to 10.3% in the quarter ended December 31, 2001. As a percentage of gross revenues, sales through distribution and contract manufacturing sales channels to a 10 third end-user customer, Cisco Systems, decreased from 12.0% in the quarter ended December 31, 2000 to 10.5% in the quarter ended December 31, 2001. Net revenues decreased 68.0% from $69.1 million for the six-month period ended December 31, 2000 to $22.1 million for the six-month period ended December 31, 2001. The decrease in net revenues resulted from rapid, steep and prolonged decline in world wide semiconductor demand and a significant decline in the weighted average selling price of certain products caused by the decline in demand and resultant increased competitive price pressure and special allowances for distributor returns and price protection. Sales to domestic and international distributors as a percentage of total revenues decreased to 50.0% in the first six months of fiscal 2001 from 55.2% in the comparable period in fiscal 2000. Direct sales to Techmosa, an international distributor, accounted for approximately 13.3% of sales in the six months ended December 31, 2001 and less than 10% of sales in the comparable period last year. Direct sales to Jabil Circuit, a global contract manufacturer, accounted for approximately 10.9% of sales in the six months ended December 31, 2001 and less than 10% of sales in the comparable period last year. As a percentage of gross revenues, sales through distribution and contract manufacturing sales channels to two end-user customers, Dell Computer Corp. and Compaq Computer, were 14.7% and 11.1%, respectively, in the six months ended December 31, 2001. Both accounted for less than 10% of gross revenue in the comparable period last year. As a percentage of gross revenues, sales through distribution and contract manufacturing sales channels to a third end-user customer, Cisco Systems, decreased from 11.4% in the six months ended December 31, 2000 to 10.2% in the six months ended December 31, 2001. Gross Profit Gross profit decreased 100.6% from $15.5 million for the quarter ended December 31, 2000 to a loss of $56,000 for the quarter ended December 31, 2001. Gross profit as a percentage of net revenues, or gross margin, decreased from 43.3% in the quarter ended December 31, 2000 to (0.6%) in the quarter ended December 31, 2001. The decrease in gross margin resulted from pricing pressure resulting in lower average selling prices, reduced manufacturing volumes resulting in a higher fixed cost per unit, and write-down of inventories caused by end-customer program slowdowns and cancellations, all of which were partially offset by ongoing cost reduction efforts. Gross profit decreased 85.2% from $29.8 million for the six-month period ending December 31, 2000 to $4.4 million for the six-month period ended December 31, 2001. Gross margin decreased from 43.1% for the six-month period ended December 31, 2000 to 20.0% for the six-month period ended December 31, 2001. These decreases are for the same reasons cited in the above analysis of the three-month periods ending December 31, 2001 and 2000 with the exception of the inventory write-down which occurred in the December quarter only. Research and Development Research and development expenses increased 14.3% from $2.8 million in the quarter ended December 31, 2000 to $3.2 million in the quarter ended December 31, 2001, and increased as a percentage of net revenues from 7.7% to 35.3%. The expense increase was due to increased staffing, legal, and settlement costs associated with the alleged patent infringement suit brought by a competitor. The increase in costs as a percentage of sales is primarily due to the decline in sales. Research and development expenses increased from $5.3 million in the six-month period ended December 31, 2000 to $5.7 million in the six-month period ended December 31, 2001, an increase of 7.5%, and also increased as a percentage of net revenue from 7.7% to 26.0%. The increases were due to the same reasons cited above. The Company believes that continued spending on research and development to develop new products and improve manufacturing processes is critical to the Company's success and, consequently, expects to increase research and development expenses in future periods over the long term. In the short term, we intend to continue our emphasis on cost control during the current industry slowdown. 11 Selling, General and Administrative Selling, general and administrative expenses consist primarily of personnel and related overhead costs for sales, marketing, finance, human resources and general management. Such costs also include advertising, sales materials, sales commissions and other marketing and promotional expenses. Selling, general and administrative expenses decreased 23.8% from $4.2 million for the quarter ended December 31, 2000 to $3.2 million for the quarter ended December 31, 2001, and increased as a percentage of net revenues from 11.8% to 35.5%. Selling, general and administrative expenses decreased 25.6% from $8.2 million in the six months ended December 31, 2000 to $6.1 million in the six months ended December 31, 2001, but increased as a percentage of net revenue from 11.9% to 27.8%. The decrease in expense in the six months ended December 31, 2001 was due to reduced sales commissions and bonuses due to the sales decline and to a reduction in force that took place in the quarter ended December 31, 2001. The Company anticipates that selling, general and administrative expenses will increase in future periods over the long term due to increased staffing levels, particularly in sales and marketing, as well as increased commission expense to the extent the Company achieves higher sales levels. In the short term, we intend to continue our focus on cost control during the current industry slowdown. Other Income, Net Other income, net, includes interest income and the Company's allocated portion of the net income or losses of Pericom Technology, Inc. ("PTI"). Other income, net decreased from $2.2 million for the quarter ended December 31, 2000 to $1.1 million for the quarter ended December 31, 2001. From the quarter ended December 31, 2000 to the quarter ended December 31, 2001, the Company's share of the net losses of PTI increased from a loss of $132,000 to a loss of $326,000 as a result of the slowdown in China markets which have been negatively affected by the present global macro-economic situation. Interest income for the quarter ended December 31, 2001 declined from $2.3 million to $1.4 million due to a decline in the interest rate earned on the cash balances that resulted from the net proceeds from the Company's follow-on public offering in March 2000. From the six-month period ended December 31, 2000 to the same period ended December 31, 2001, other income, net declined from $4.2 million to $2.3 million as the Company's share in the net losses of PTI increased from $357,000 to $531,000 and interest income fell from $4.5 million to $2.8 million. These six-month declines were for the same reasons cited above. Provision for Income Taxes The provision for income taxes decreased from $4,056,000 for the quarter ended December 31, 2000 to ($1,904,000) for the quarter ended December 31, 2001. The decrease in the provision for income taxes for the current fiscal quarter is due primarily to the decrease in taxable income. The effective tax rate of 36.0% in the quarter ended December 31, 2001 has decreased from the 38.0% rate used in the comparable period in the prior year. The provision for income taxes also differed from the federal statutory rate due to state income taxes. For the six month periods ended December 31, 2001 and December 31, 2000 the provision for income taxes was ($1,856,000) and $7,756,000, respectively, and the effective tax rates were 36% and 38%. Liquidity and Capital Resources Operating activities generated $3.5 million of cash during the six months ended December 31, 2001 and $14.3 million of cash during the six months ended December 31, 2000. Net cash used for investing activities increased from $5.5 million for the six months ended December 31, 2000 to $84.0 million for the six months ended December 31, 2001. The Company made capital expenditures of approximately $1,405,000 during the six months ended December 31, 2001 compared with $3,131,000 in the comparable period of the previous year, and also increased net purchases of short-term investments by $76.5 million during the six months ended December 31, 2001 compared to the six months ended December 31, 2000. 12 On March 8, 2000 the Company sold 2.2 million shares (on a pre-split basis before the Company's 2-for-1 stock split in September 2000) of common stock in a follow-on public offering. Net proceeds to the Company, before expenses, from this offering were $101,376,000 after underwriting discounts and commissions. Expenses were approximately $427,000. These funds are invested in short-term money market funds and other predominantly short-term taxable and tax advantaged instruments. As of December 31, 2001, the Company's principal sources of liquidity included cash, cash equivalents and short-term investments of approximately $149.6 million. Management believes that existing cash balances and cash generated from operations will be sufficient to fund necessary purchases of capital equipment and to provide working capital at least through the next twelve months. However, future events may require the Company to seek additional capital sooner. If the Company determines that it needs to seek additional capital, the Company may not be able to obtain such additional capital on terms acceptable to it. Factors That May Affect Operating Results This Quarterly Report on Form 10-Q includes "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements other than statements of historical fact are "forward-looking statements" for purposes of these provisions, including any statements regarding: projections of revenues, expenses or other financial items; the plans and objectives of management for future operations; the Company's tax rate; the adequacy of allowances for returns, price protection and other concessions; proposed new products or services; the sufficiency of cash generated from operations and cash balances; the Company's exposure to interest rate risk; future economic conditions or performance; plans for increases in research and development expenses and selling, general and administrative expenses; plans to seek intellectual property protection for the Company's technologies; expectations regarding export sales and net revenues; the expansion of sales efforts; acquisition prospects; and assumptions underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of terminology such as "may," "will," "expects," "plans," "anticipates," "estimates," "potential," or "continue," or the negative thereof or other comparable terminology. Although the Company believes that the expectations reflected in the forward-looking statements contained herein are reasonable, there can be no assurance that such expectations or any of the forward-looking statements will prove to be correct, and actual results could differ materially from those projected or assumed in the forward-looking statements. The Company's future financial condition and results of operations, as well as any forward-looking statements, are subject to risks and uncertainties, including but not limited to the factors set forth (i) below, (ii) in the Company's Form 10-K under the heading "Risk Factors; Factors That May Affect Future Results", and (iii) in Note 1 to the Notes to Condensed Financial Statements. All forward-looking statements and reasons why results may differ included in this Quarterly Report are made as of the date hereof, and the Company assumes no obligation to update any such forward-looking statement or reason why actual results may differ. Our results of operations have been adversely affected by the continuing slowdown in the global economy. During the past year, the global economy has been experiencing a slowdown due to many factors, including decreased consumer confidence and reduced corporate profits and capital spending. As a result of these unfavorable economic conditions, our new customer order rates have stabilized at a much lower level than in the first half of fiscal 2001. The significant order cancellations that we experienced during the second half of fiscal 2001 have largely abated, however. In addition, the recent terrorist attacks on September 11, 2001 appear to have further depressed economic activity in the United States. If these weak economic conditions in the United States continue or worsen or if a wider or global economic slowdown occurs, our business, financial condition and results of operations may be materially and adversely affected. 13 Downturns in the semiconductor industry, rapidly changing technology and evolving industry standards can harm our operating results. The semiconductor industry has historically been cyclical and periodically subject to significant economic downturns--characterized by diminished product demand, accelerated erosion of selling prices and overcapacity--as well as rapidly changing technology and evolving industry standards. We believe that the semiconductor industry is currently in such a downturn and that the decrease in our net revenues from $35.7 million for the quarter ended December 31, 2000 to $9.0 million for the quarter ended December 31, 2001 was primarily due to this downturn. Our net revenues may continue to be adversely affected if this downturn continues. In general, we may in the future experience substantial period-to-period fluctuations in our business and operating results due to general semiconductor industry conditions, overall economic conditions or other factors. Our business is also subject to the risks associated with the effects of legislation and regulations relating to the import or export of semiconductor products. If we do not develop products that our customers and end-users design into their products, or if their products do not sell successfully, our business and operating results would be harmed. We have relied in the past and continue to rely upon our relationships with our customers and end-users for insights into product development strategies for emerging system requirements. We generally incorporate new products into a customer's or end-user's product or system at the design stage. However, these design efforts, which can often require significant expenditures by us, may precede product sales, if any, by a year or more. Moreover, the value to us of any design win will depend in large part on the ultimate success of the customer's or end-user's product and on the extent to which the system's design accommodates components manufactured by our competitors. If we fail to achieve design wins or if the design wins fail to result in significant future revenues, our operating results would be harmed. If we have problems developing or maintaining our relationships with our customers and end-users, our ability to develop well-accepted new products may be impaired. The trading price of our common stock and our operating results are likely to fluctuate substantially in the future. The trading price of our common stock has been and is likely to continue to be highly volatile. Our stock price could fluctuate widely in response to factors some of which are not within our control, including: . general conditions in the semiconductor and electronic systems industries; . quarter-to-quarter variations in operating results; . announcements of technological innovations or new products by us or our competitors; . changes in earnings estimates by analysts; and price and volume fluctuations in the overall stock market, which have particularly affected the market prices of many high technology companies. In the past, our quarterly operating results have varied significantly and are likely to fluctuate in the future. A wide variety of factors affect our operating results. These factors might include the following: . general conditions in the semiconductor industry; . changes in our product mix; . a decline in the gross margins of our products; . expenses incurred in obtaining, enforcing, and defending intellectual property rights; . the timing of new product introductions and announcements by us and by our competitors; . customer acceptance of new products introduced by us; . delay or decline in orders received from distributors; . growth or reduction in the size of the market for interface ICs; . the availability of manufacturing capacity with our wafer suppliers; . changes in manufacturing costs; 14 . fluctuations in manufacturing yields; . the ability of customers to pay us; and . increased research and development expenses associated with new product introductions or process changes. All of these factors are difficult to forecast and could seriously harm our operating results. Our expense levels are based in part on our expectations regarding future sales and are largely fixed in the short term. Therefore, we may be unable to reduce our expenses fast enough to compensate for any unexpected shortfall in sales. Any significant decline in demand relative to our expectations or any material delay of customer orders could harm our operating results. In addition, if our operating results in future quarters fall below public market analysts' and investors' expectations, the market price of our common stock would likely decrease. The markets for our products are characterized by rapidly changing technology, and our financial results could be harmed if we do not successfully develop and implement new manufacturing technologies or develop, introduce and sell new products. The markets for our products are characterized by rapidly changing technology, frequent new product introductions and declining selling prices over product life cycles. We currently offer over 650 products. Our future success depends upon the timely completion and introduction of new products, across all our product lines, at competitive price and performance levels. The success of new products depends on a variety of factors, including the following: . product performance and functionality; . customer acceptance; . competitive pricing; . successful and timely completion of product development; . sufficient wafer fabrication capacity; and . achievement of acceptable manufacturing yields by our wafer suppliers. We may also experience delays, difficulty in procuring adequate fabrication capacity for the development and manufacture of new products or other difficulties in achieving volume production of these products. Even relatively minor errors may significantly affect the development and manufacture of new products. If we fail to complete and introduce new products in a timely manner at competitive price and performance levels, our business would be significantly harmed. Intense competition in the semiconductor industry may reduce the demand for our products or the prices of our products, which could reduce our revenues. The semiconductor industry is intensely competitive. Our competitors include Cypress Semiconductor Corporation, Integrated Circuit Systems, Inc., Integrated Device Technology, Inc., Maxim Integrated Products, Inc., Fairchild Semiconductor, Int'l., and Texas Instruments, Inc. Most of those competitors have substantially greater financial, technical, marketing, distribution and other resources, broader product lines and longer-standing customer relationships than we do. We also compete with other major or emerging companies that sell products to certain segments of our markets. Competitors with greater financial resources or broader product lines may have a greater ability to sustain price reductions in our primary markets in order to gain or maintain market share. We believe that our future success will depend on our ability to continue to improve and develop our products and processes. Unlike us, many of our competitors maintain internal manufacturing capacity for the fabrication and assembly of semiconductor products. This ability may provide them with more reliable manufacturing capability, shorter development and manufacturing cycles and time-to-market advantages. In addition, competitors with their own wafer fabrication facilities that are capable of producing products with the same design geometries as ours may be able to manufacture and sell competitive products at lower 15 prices. Any introduction of products by our competitors that are manufactured with improved process technology could seriously harm our business. As is typical in the semiconductor industry, our competitors have developed and marketed products that function similarly or identically to ours. If our products do not achieve performance, price, size or other advantages over products offered by our competitors, our products may lose market share. Competitive pressures could also reduce market acceptance of our products, reduce our prices and increase our expenses. We also face competition from the makers of ASICs and other system devices. These devices may include interface logic functions, which may eliminate the need or sharply reduce the demand for our products in particular applications. Product price declines and fluctuations may cause our future financial results to vary. Historically, selling prices in the semiconductor industry generally, as well as for our products, have decreased significantly over the life of each product. We expect that selling prices for our existing products will continue to decline over time and that average selling prices for our new products will decline significantly over the lives of these products. Declines in selling prices for our products, if not offset by reductions in the costs of producing these products or by sales of new products with higher gross margins, would reduce our overall gross margins and could seriously harm our business. The demand for our products depends on the growth of our end users' markets. Our continued success depends in large part on the continued growth of markets for the products into which our semiconductor products are incorporated. These markets include the following: . computers and computer related peripherals; . data communications and telecommunications equipment; . electronic commerce and the Internet; and . consumer electronics equipment. Any decline in the demand for products in these markets could seriously harm our business, financial condition and operating results. These markets have also historically experienced significant fluctuations in demand. We may also be seriously harmed by slower growth in the other markets in which we sell our products. Our contracts with our wafer suppliers do not obligate them to a minimum supply or set prices. Any inability or unwillingness of our wafer suppliers generally, and Chartered Semiconductor Manufacturing Ltd. in particular, to meet our manufacturing requirements would delay our production and product shipments and harm our business. In fiscal 2001, 2000 and 1999 we purchased approximately 59%, 75% and 85%, respectively, of our wafers from Chartered Semiconductor Manufacturing Ltd., and in the first half of fiscal 2002 we purchased 49% of our wafers from Chartered. In the first half of fiscal 2002, and in fiscal 2000 and 1999, only four other suppliers manufactured the remainder of our wafers. In fiscal 2001, only five other suppliers manufactured the remainder of our wafers. Our reliance on independent wafer suppliers to fabricate our wafers at their production facilities subjects us to possible risks such as: . lack of adequate capacity; . lack of available manufactured products; . lack of control over delivery schedules; and . unanticipated changes in wafer prices. 16 Any inability or unwillingness of our wafer suppliers generally, and Chartered in particular, to provide adequate quantities of finished wafers to meet our needs in a timely manner would delay our production and product shipments and seriously harm our business. At present, we purchase wafers from our suppliers through the issuance of purchase orders based on our rolling six-month forecasts. The purchase orders are subject to acceptance by each wafer supplier. We do not have long-term supply contracts which obligate our suppliers to a minimum supply or set prices. We also depend upon our wafer suppliers to participate in process improvement efforts, such as the transition to finer geometries. If our suppliers are unable or unwilling to do so, our development and introduction of new products could be delayed. Furthermore, sudden shortages of raw materials or production capacity constraints can lead wafer suppliers to allocate available capacity to customers other than us or for the suppliers' internal uses, interrupting our ability to meet our product delivery obligations. Any significant interruption in our wafer supply would seriously harm our operating results and our customer relations. Our reliance on independent wafer suppliers may also lengthen the development cycle for our products, providing time-to-market advantages to our competitors that have in-house fabrication capacity. In the event that our suppliers are unable or unwilling to manufacture our key products in required volumes, we will have to identify and qualify additional wafer foundries. The qualification process can take up to six months or longer. Furthermore, we are unable to predict whether additional wafer foundries will become available to us or will be in a position to satisfy any of our requirements on a timely basis. We depend on single or limited source assembly subcontractors with whom we do not have written contracts. Any inability or unwillingness of our assembly subcontractors to meet our assembly requirements would delay our product shipments and harm our business. We primarily rely on foreign subcontractors for the assembly and packaging of our products and, to a lesser extent, for the testing of finished products. Some of these subcontractors are our single source supplier for some of our new packages. In addition, changes in our or a subcontractor's business could cause us to become materially dependent on a single subcontractor. We have from time to time experienced difficulties in the timeliness and quality of product deliveries from our subcontractors and may experience similar or more severe difficulties in the future. We generally purchase these single or limited source components or services pursuant to purchase orders and have no guaranteed arrangements with these subcontractors. These subcontractors could cease to meet our requirements for components or services, or there could be a significant disruption in supplies from them, or degradation in the quality of components or services supplied by them. Any circumstance that would require us to qualify alternative supply sources could delay shipments, result in the loss of customers and limit or reduce our revenues. We may have difficulty accurately predicting revenues for future periods. Our expense levels are based in part on anticipated future revenue levels, which can be difficult to predict. Our business is characterized by short-term orders and shipment schedules. We do not have long-term purchase agreements with any of our customers, and customers can typically cancel or reschedule their orders without significant penalty. We typically plan production and inventory levels based on forecasts of customer demand generated with input from customers and sales representatives. Customer demand is highly unpredictable and can fluctuate substantially. If customer demand falls significantly below anticipated levels, our gross profit would be reduced. We compete with others to attract and retain key personnel, and any loss of, or inability to attract, key personnel would harm us. To a greater degree than non-technology companies, our future success will depend on the continued contributions of our executive officers and other key management and technical personnel. None of these individuals has an employment agreement with us and each one would be difficult to replace. We do not maintain any key person life insurance policies on any of these individuals. The loss of the services of one or more of our executive officers or key personnel or the inability to continue to attract qualified personnel 17 could delay product development cycles or otherwise harm our business, financial condition and results of operations. Our future success also will depend on our ability to attract and retain qualified technical, marketing and management personnel, particularly highly skilled design, process and test engineers, for whom competition is intense. In particular, the current availability of qualified engineers is limited and competition among companies for skilled and experienced engineering personnel is very strong. During strong business cycles, we expect to experience continued difficulty in filling our needs for qualified engineers and other personnel. Our limited ability to protect our intellectual property and proprietary rights could harm our competitive position. Our success depends in part on our ability to obtain patents and licenses and preserve other intellectual property rights covering our products and development and testing tools. In the United States, we hold 39 patents covering certain aspects of our product designs and have at least 16 additional patent applications pending. Copyrights, mask work protection, trade secrets and confidential technological know-how are also key to our business. Additional patents may not be issued to us or our patents or other intellectual property may not provide meaningful protection. We may be subject to, or initiate, interference proceedings in the U.S. Patent and Trademark Office. These proceedings can consume significant financial and management resources. We may become involved in litigation relating to alleged infringement by us of others' patents or other intellectual property rights. This type of litigation is frequently expensive to both the winning party and the losing party and takes up significant amounts of management's time and attention. In addition, if we lose such a lawsuit, a court could require us to pay substantial damages and/or royalties or prohibit us from using essential technologies. For these and other reasons, this type of litigation could seriously harm our business. Also, although we may seek to obtain a license under a third party's intellectual property rights in order to bring an end to certain claims or actions asserted against us, we may not be able to obtain such a license on reasonable terms or at all. In July 2001, Cypress Semiconductor Corporation ("Cypress"), one of our competitors, filed a complaint with the U.S. International Trade Commission against us, alleging, among other things, patent infringement. Cypress also filed suit in federal district court against us with respect to the same alleged patent infringement. These actions were settled in the quarter ended December 31, 2001 without material adverse effect on our financial position or results of operations. Because it is important to our success that we are able to prevent competitors from copying our innovations, we intend to continue to seek patent, trade secret and mask work protection for our technologies. The process of seeking patent protection can be long and expensive, and we cannot be certain that any currently pending or future applications will actually result in issued patents, or that, even if patents are issued, they will be of sufficient scope or strength to provide meaningful protection or any commercial advantage to us. Furthermore, others may develop technologies that are similar or superior to our technology or design around the patents we own. We also rely on trade secret protection for our technology, in part through confidentiality agreements with our employees, consultants and third parties. However, these parties may breach these agreements. In addition, the laws of some territories in which we develop, manufacture or sell our products may not protect our intellectual property rights to the same extent as do the laws of the United States. The process technology used by our independent foundries, including process technology that we developed with our foundries, can generally be used by them to produce their own products or to manufacture products for other companies including our competitors. In addition, we may not have the right to implement key process technologies used to manufacture some of our products with foundries other than our present foundries. 18 We may not provide adequate allowances for exchanges, returns and concessions. We recognize revenue from the sale of products when shipped, less an allowance based on future authorized and historical patterns of returns, price protection, exchanges and other concessions. We believe our methodology and approach are appropriate. However, if the actual amounts we incur exceed the allowances, it could decrease our revenue and corresponding gross profit. The complexity of our products makes us highly susceptible to manufacturing problems, which could increase our costs and delay our product shipments. The manufacture and assembly of our over 650 products are highly complex and sensitive to a wide variety of factors, including: . the level of contaminants in the manufacturing environment; . impurities in the materials used; and . the performance of manufacturing personnel and production equipment. In a typical semiconductor manufacturing process, silicon wafers produced by a foundry are cut into individual die. These die are assembled into individual packages and tested for performance. Our wafer fabrication suppliers have from time to time experienced lower than anticipated yields of suitable die. In the event of such decreased yields, we would incur additional costs to sort wafers, an increase in average cost per usable die and an increase in the time to market for our products. These conditions could reduce our net revenues and gross margin and harm our customer relations. We do not manufacture any of our products. Therefore, we are referred to in the semiconductor industry as a "fabless" producer. Consequently, we depend upon third party manufacturers to produce semiconductors that meet our specifications. We currently have third party manufacturers that can produce semiconductors that meet our needs. However, as the industry continues to progress to smaller manufacturing and design geometries, the complexities of producing semiconductors will increase. Decreasing geometries may introduce new problems and delays that may affect product development and deliveries. Due to the nature of the industry and our status as a "fabless" semiconductor company, we could encounter fabrication-related problems that may affect the availability of our products, delay our shipments or increase our costs. A large portion of our revenues is derived from sales to a few customers, who may cease purchasing from us at any time. A relatively small number of customers have accounted for a significant portion of our net revenues in each of the past several fiscal years. We expect this trend to continue for the foreseeable future. Techmosa, an international distributor that in turn ships to many end users, accounted for approximately 13.3% of net revenues during the first six months of fiscal 2002 and Jabil Circuit, a global contract manufacturer, accounted for approximately 10.9% of net revenues in the same time period. Sales to our top five direct customers accounted for approximately 48.9% of net revenues in the first half of fiscal 2002. Of our end-user customers, Dell Computer, Compaq Computer and Cisco Systems accounted for approximately 14.7%, 11.1% and 10.2%, respectively, of our gross revenues in the first six months of fiscal 2002 and sales to our top five end-user customers accounted for approximately 49.8% of gross revenues in the same period. We do not have long-term sales agreements with any of our customers. Our customers are not subject to minimum purchase requirements, may reduce or delay orders periodically due to excess inventory and may discontinue selling our products at any time. Our distributors typically offer competing products in addition to ours. For the six months ended December 31, 2001 sales to our distributors were 50.0% of net revenues. The loss of one or more significant customers, or the decision by a significant distributor to carry the product lines of our competitors, could decrease our revenues. 19 Almost all of our wafer suppliers and assembly subcontractors are located in Southeast Asia, which exposes us to the problems associated with international operations. Almost all of our wafer suppliers and assembly subcontractors are located in Southeast Asia, which exposes us to risks associated with international business operations, including the following: . disruptions or delays in shipments; . changes in economic conditions in the countries where these subcontractors are located; . currency fluctuations; . changes in political conditions; . potentially reduced protection for intellectual property; . foreign governmental regulations; . import and export controls; and . changes in tax laws, tariffs and freight rates. In particular, there is a potential risk of conflict and further instability in the relationship between Taiwan and the People's Republic of China. Conflict or instability could disrupt the operations of one of our principal wafer suppliers and several of our assembly subcontractors located in Taiwan. Because we sell our products to customers outside of the United States, we face foreign business, political and economic risks that could seriously harm us. In the six months ended December 31, 2001, approximately 47% of our net revenues derived from sales in Asia excluding Japan, approximately 7% from sales in Europe and approximately 5% from sales in Japan. We expect that export sales will continue to represent a significant portion of net revenues. We intend to expand our sales efforts outside the United States. This expansion will require significant management attention and financial resources and further subject us to international operating risks. These risks include: . tariffs and other barriers and restrictions; . unexpected changes in regulatory requirements; . the burdens of complying with a variety of foreign laws; and . delays resulting from difficulty in obtaining export licenses for technology. We are also subject to general geopolitical risks in connection with our international operations, such as political and economic instability and changes in diplomatic and trade relationships. In addition, because our international sales are denominated in U.S. dollars, increases in the value of the U.S. dollar could increase the price in local currencies of our products in foreign markets and make our products relatively more expensive than competitors' products that are denominated in local currencies. Regulatory, geopolitical and other factors could seriously harm our business or require us to modify our current business practices. Our potential future acquisitions may not be successful because we have not made acquisitions in the past. We have depended on internal growth in the past and have not made any acquisitions. As part of our business strategy, we expect to seek acquisition prospects that would complement our existing product offerings, improve market coverage or enhance our technological capabilities. We have no current agreements or negotiations underway with respect to any acquisitions, and we may not be able to locate suitable acquisition opportunities. Future acquisitions could result in the following: . potentially dilutive issuances of equity securities; . large one-time write-offs; . the incurrence of debt and contingent liabilities or amortization expenses related to goodwill and other intangible assets; 20 . difficulties in the assimilation of operations, personnel, technologies, products and the information systems of the acquired companies; . diversion of management's attention from other business concerns; and . risks of entering geographic and business markets in which we have no or limited prior experience and potential loss of key employees of acquired organizations. We are not certain that we will be able to successfully integrate any businesses, products, technologies or personnel that may be acquired in the future. Our failure to do so could seriously harm our business. Our operations and financial results could be severely harmed by natural disasters. Our headquarters and some of our major suppliers' manufacturing facilities are located near major earthquake faults. One of the foundries we use is located in Taiwan, which suffered a severe earthquake during fiscal 2000. We did not experience significant disruption to our operations as a result of that earthquake. However, if a major earthquake or other natural disaster were to affect our suppliers, our sources of supply could be interrupted, which would seriously harm our business. Item 3. Quantitative and Qualitative Disclosures about Market Risk At December 31, 2001, our investment portfolio consisted of investment-grade fixed income securities, excluding those classified as cash equivalents, of $139.9 million. These securities are subject to interest rate risk and will decline in value if market interest rates increase. For example, if market interest rates were to increase immediately and uniformly by 10% per annum from levels as of December 31, 2001, the fair market value of the portfolio would decrease. However, we do not believe that such a decrease would have a material effect on our results of operations over the next fiscal year. Due to the short duration and conservative nature of these instruments, we do not believe that we have a material exposure to interest rate risk. PART II. OTHER INFORMATION Item 1. Legal Proceedings. On July 20, 2001, a complaint was filed with the U.S. International Trade Commission ("USITC"), under section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. (S)1337, on behalf of Cypress Semiconductor Corporation ("Cypress"), of San Jose, California, a competitor of Pericom. In the complaint, Cypress requested that the USITC institute an investigation and, after the investigation, issue a permanent exclusion order and permanent cease and desist order. The complaint, as supplemented, alleged violations of section 337 in the importation into the United States, the sale for importation and the sale within the United States after importation of certain power saving integrated circuits and products containing those power saving integrated circuits that infringe claims 1-4, 6-10, and 12-15 of United States Patent No. 5,949,261 entitled "Method and Circuit for Reducing Power and/or Current Consumption." ("the `261 patent"). On July 24, 2001, Cypress Semiconductor Corporation also filed suit in Federal District Court in the Eastern District of Texas - Sherman Division, generally alleging that Pericom infringes United States Patent No. 5,949,261 entitled "Method and Circuit for Reducing Power and/or Current Consumption.". The suit sought injunctive relief, damages, costs, attorney fees, and pre-judgment and post-judgment interest, and further alleged that Pericom's infringement was willful and that any damages awarded should be trebled. In December 2001 the Company and Cypress entered into a settlement agreement with respect to both of the legal actions mentioned above and a license agreement that provided for ceasing domestic shipments of certain products, a fully paid-up one time royalty fee for allegations of past infringement, and a royalty- 21 bearing, worldwide, non-exclusive, non-transferable license agreement. This agreement will not have a material effect on the Company's business, financial condition or results of operations. Item 4. Submission of Matters to Vote of Security Holders The Annual Meeting of Shareholders was held on December 12, 2001 in San Jose, California. The results of proposals approved by the Company's shareholders are as follows: 1. Election of six directors of the Company to serve for the ensuing year and until their successors are elected and qualified. Votes Votes Name of Director For Withheld --------------- --- -------- Alex Chi-Ming Hui 23,255,328 42,557 Chi-Hung (John) Hui, Ph.D. 23,210,055 42,557 Hau L. Lee, Ph.D. 23,254,500 42,557 Millard (Mel) Phelps 23,250,288 42,557 Tay Thiam Song 23,254,968 42,557 Jeffrey Young 23,254,968 42,557
2. To ratify and approve the appointment of Votes Votes Votes Deloitte & Touche LLP as the independent For Against Abstained --- ------- --------- auditors for the Company for the fiscal year ending June 30, 2002. 23,212,285 70,737 5,620
Item 6. Exhibits and Reports on Form 8-K. a. Exhibits Exhibit Number Description ------ ----------- None. b. Reports on Form 8-K. No reports on Form 8-K were filed with the Securities and Exchange Commission during the quarter ended December 31, 2001. 22 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Pericom Semiconductor Corporation (Registrant) Date: February 11, 2002 By: /s/ Alex Hui ------------ Alex Hui Chief Executive Officer Date: February 11, 2002 By: /s/ Michael D. Craighead ------------------------ Michael D. Craighead Chief Financial Officer (Chief Accounting Officer) 23