-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DMaL4BryoE3wNRej3T153vYWg11urweQzAqE4bW1ZRmN+C7UJJaclHt4FajT3Xhx b2Kr9ciz+XmEjRzWR4yK6A== 0001012870-99-004147.txt : 19991115 0001012870-99-004147.hdr.sgml : 19991115 ACCESSION NUMBER: 0001012870-99-004147 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IXYS CORP /DE/ CENTRAL INDEX KEY: 0000945699 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 770140882 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-26124 FILM NUMBER: 99749905 BUSINESS ADDRESS: STREET 1: 3540 BASSETT STREET CITY: SANTA CLARA STATE: CA ZIP: 95054 BUSINESS PHONE: 4089540500 MAIL ADDRESS: STREET 1: 3540 BASSETT STREET CITY: SANTA CLARA STATE: CA ZIP: 95054 FORMER COMPANY: FORMER CONFORMED NAME: PARADIGM TECHNOLOGY INC /DE/ DATE OF NAME CHANGE: 19951031 10-Q 1 FORM 10-Q FOR THE QUARTER ENDED 09/30/1999 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 PERIOD ENDED SEPTEMBER 30, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___________ TO _____________ COMMISSION FILE NUMBER 000-26124 IXYS CORPORATION (Exact name of Registrant as specified in its charter) Delaware 770140882-5 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization)
3540 BASSETT STREET SANTA CLARA, CALIFORNIA 95054-2704 (Address of principal executive offices) Registrant's telephone number, including area code: (408) 982-0700 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 periods 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 [ ] The number of shares of the Registrant's Common Stock outstanding as of November 1, 1999 was 12,002,311 INDEX PART I FINANCIAL INFORMATION............................................................... 1 ITEM 1. FINANCIAL STATEMENTS................................................................ 1 Condensed Consolidated Balance Sheets................................................... 1 Condensed Consolidated Statements of Operations......................................... 2 Condensed Consolidated Statements of Comprehensive Income............................... 4 Condensed Consolidated Statements of Cash Flows......................................... 5 Condensed Notes to Consolidated Financial Statements.................................... 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................................................ 9 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF RISK.................................... 14 PART II OTHER INFORMATION................................................................... 15 ITEM 1. LEGAL PROCEEDINGS................................................................... 15 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................................................... 17 SIGNATURES................................................................................... 18
i PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS IXYS CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
March 31, September 30, 1999 1999 --------- -------- (Unaudited) ASSETS Cash and cash equivalents................ $ 8,480 $ 8,631 Trade accounts receivable................ 11,731 13,778 Inventories.............................. 20,167 19,759 Other current assets..................... -- 295 Deferred income taxes.................... 1,617 1,617 --------- -------- Total current assets.................. 41,995 44,080 Property and equipment, net.............. 11,323 10,973 Goodwill and other intangible assets..... 693 462 Other.................................... 2,050 1,928 Deferred income taxes.................... 1,039 1,039 --------- -------- Total Assets........................... $ 57,100 $ 58,482 --------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY Current portion, capital leases.......... $ 1,102 $ 1,103 Current portion, long term debt.......... 4,369 3,265 Accounts payable......................... 5,161 4,238 Other accrued liabilities................ 6,954 8,437 --------- -------- Total current liabilities.............. 17,586 17,043 --------- -------- Long term capital leases................. 2,195 2,252 Long term debt........................... 6,211 6,596 Pension obligations...................... 5,388 5,380 --------- -------- Total liabilities..................... 31,380 31,271 --------- -------- Common stock............................. 120 120 Additional paid-in capital............... 43,297 43,295 Notes receivable from employees.......... (936) (901) Cumulative translation adjustment........ (164) (1,440) Accumulated deficit...................... (16,597) (13,863) --------- -------- Total stockholders' equity............ 25,720 27,211 Total liabilities and stockholders' $ 57,100 $ 58,482 equity................................ --------- --------
The accompanying notes are an integral part of these condensed consolidated financial statements. 1. IXYS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (amounts in thousands, except per share data)
Three Months Ended September 30, -------------------------------- 1998 1999 ------- ------- (Unaudited) Net Sales................................ $16,449 $17,417 Cost of sales............................ 10,629 11,077 ------- ------- Gross profit.......................... 5,820 6,340 Operating expenses Research and development................ 1,366 1,113 Selling, general and administrative..... 2,396 2,626 Acquisition of in-process research and 5,807 -- development............................ Amortization of goodwill and intangibles -- 116 ------- ------- Total operating expenses.............. 9,569 3,855 ------- ------- Operating income (loss).................. (3,749) 2,485 Other income (expense), net.............. 82 (71) ------- ------- Income (loss) before income tax provision............................ (3,667) 2,414 Income tax provision..................... 813 843 ------- ------- Net income (loss) $(4,480) $ 1,571 ------- ------- Net income available for common stockholders per share: Basic................................... $(0.94) $0.13 ------- ------- Diluted................................. $(0.94) $0.13 ------- ------- Shares used in computing per share amounts: Basic................................... 4,766 11,973 ------- ------- Diluted................................. 4,766 12,379 ------- -------
The accompanying notes are an integral part of these condensed consolidated financial statements. 2. IXYS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (amounts in thousands, except per share data)
Six Months Ended September 30, -------------------------------- 1998 1999 ------- ------- (Unaudited) Net Sales................................ $32,717 $34,489 Cost of sales............................ 22,076 22,507 ------- ------- Gross profit.......................... 10,641 11,982 Operating expenses Research and development................ 2,094 2,369 Selling, general and administrative..... 4,693 5,323 Acquisition of In-Process Research and 5,807 -- Development Amortization of goodwill and intangibles -- 231 ------- ------- Total operating expenses.............. 12,594 7,923 ------- ------- Operating income (loss).................. (1,953) 4,059 Other, net............................... 99 (99) ------- ------- Income (loss) before income tax provision (1,854) 3,960 Income tax provision 1,493 1,226 ------- ------- Net income (loss) $(3,347) $ 2,734 ------- ------- Net income available for common stockholders per share: Basic................................... $(0.75) $0.23 ------- ------- Diluted................................. $(0.75) $0.22 ------- ------- Shares used in computing per share amounts: Basic................................... 4,472 11,988 ------- ------- Diluted................................. 4,472 12,374 ------- -------
The accompanying notes are an integral part of these condensed consolidated financial statements. 3. IXYS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Amounts in thousands) (Unaudited)
Three Months Ended September 30, ----------------------- 1998 1999 ------- ------ Net Sales................................. $(4,480) $1,157 Other comprehensive income (expense), net of tax: Foreign currency translation adjustments. 204 118 ------- ------ Comprehensive income...................... $(4,276) $1,275 ------- ------ Six Months Ended September 30, ----------------------- 1998 1999 ------- ------ Net Sales................................ $(3,347) $2,734 Other comprehensive income (expense), net of tax: Foreign currency translation adjustments 606 (829) ------- ------ Comprehensive income..................... $(2,741) $1,905 ------- ------
The accompanying notes are an integral part of these condensed consolidated financial statements. 4. IXYS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Six Months Ended September 30, ----------------------------- 1998 1999 ------- ------- (Unaudited) Cash flows from operating activities: Net income.............................. $(3,347) $ 2,734 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization......... 1,079 1,505 Provision for bad debts............... (870) 1,485 Provision for excess and obsolete inventory............................ 1,483 811 Losses on foreign currency translation 962 11 Acquisition of in-process research and development...................... 5,807 -- Changes in operating assets and liabilities Accounts receivable................. 1,725 (3,543) Inventories......................... (2,542) (436) Prepaid expenses and other current assets............................. 73 (238) Other assets........................ (25) 64 Accounts payable.................... (1,354) (928) Accrued expenses and other liabilities........................ (417) 1,492 Pension liabilities................. (260) 6 ------- ------- Net cash provided by (used in) operating activities............ 2,314 2,963 Cash flows from investing activities: Acquisition of Paradigm Technology, net of cash (606) -- Purchases of plant and equipment........ (1,236) (1,006) ------- ------- Net cash provided (used in) investing activities............ (1,842) (1,006) Cash flows from financing activities: Proceeds from capital lease obligations and debt............................... 991 69 Principal payments on capital lease obligations and debt................... (225) -- Payment of notes receivable and loans... (305) (612) Other, net 4 5 ------- ------- Net cash provided by (used in) financing activities............ 465 (538) ------- ------- Effect of foreign exchange rate fluctuations on cash and cash equivalents......................... (402) (1,268) ------- ------- Net increase (decrease) in cash and cash equivalents............ 535 151 ------- ------- Cash and cash equivalents at beginning of year................................. 10,594 8,480 ------- ------- Cash and cash equivalents at end of period.................................. $11,129 $ 8,631 ------- -------
The accompanying notes are an integral part of these condensed consolidated financial statements. 5. CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Interim Financial Data (Unaudited): The unaudited financial statements for the quarters ended September 30, 1998 and 1999 have been prepared on the same basis as the audited financial statements and, in the opinion of management, include all material adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and results of operations in accordance with generally accepted accounting principles. Although certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the "Commission"), IXYS Corporation, a Delaware corporation (the "Company"), believes the disclosures made are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the Company's consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1999. Effective September 23, 1998, the Company acquired and merged into Paradigm Technology, Inc. ("Paradigm"), a company that designs and markets fast SRAM products. The acquisition was structured as a reverse merger whereby Paradigm issued approximately 11,513,821 shares of its common stock in exchange for all outstanding shares of IXYS stock. At the conclusion of the merger, IXYS stockholders held approximately 96% of the combined company. For financial accounting purposes, IXYS was the surviving company and the historic financial information is of IXYS. In the Current Report on Form 8-K, filed with the Commission on September 23, 1998, pro forma results of the merger are presented and pro forma statements should be read in conjunction with the Company's consolidated financial statements and notes thereto. The Company's balance sheet as of March 31, 1999 was derived from the Company's audited financial statements, but does not include all disclosures necessary for the presentation to be in accordance with generally accepted accounting principles. 2. Foreign Currency Translation: The local currency is considered to be the functional currency of the operations of IXYS GmbH. Accordingly, assets and liabilities are translated at the exchange rate in effect at period-end and revenues and expenses are translated at average rates during the period. Adjustments resulting from the translation of the accounts of IXYS GmbH into U.S. dollars are included in cumulative translation adjustment, a separate component of stockholders' equity. Foreign currency transaction gains and losses are included as a component of other income and expense. 3. Earnings Per Share: Basic EPS is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution from the exercise or conversion of other securities into common stock. 6. 4. Recent Accounting Pronouncements: In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and Related Information" (SFAS 131). SFAS 131 establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports issued to stockholders. SFAS 131 generally supersedes Statement of Financial Accounting Standards No.14, "Financial Reporting for Segments of Business Enterprise." Under SFAS 131, operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Generally, financial information is required to be reported on the basis it is used internally. SFAS 131 is effective for financial statements for periods beginning after December 15, 1997, and restatement of comparative information for earlier years is required. However, SFAS 131 is not required to be applied to interim financial statements in the initial year of application. Based upon the criteria of SFAS 131, the Company has a single operating segment. Accordingly, the financial statements provided herein satisfy the standard for reporting. Geographic information about revenues, operating income and identifiable assets are provided in the notes to the financial statements. In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, or SFAS 133, Accounting for Derivative Instruments and Hedging Activities. SFAS 133 establishes new standards of accounting and reporting for derivative instruments and hedging activities. SFAS 133 requires that all derivatives be recognized at fair value in the balance sheet, and that the corresponding gains or losses be reported either in the statement of operations or as a component of comprehensive income, depending on the type of hedging relationship that exists. SFAS 133 will be effective for fiscal years beginning after June 15, 1999. The Company does not currently hold derivative instruments or engage in hedging activities. In March 1998, the Accounting Standards Executive Committee, or AcSEC, released Statement of Position 98-1, or SOP 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. SOP 98-1 requires companies to capitalize certain costs of computer software developed or obtained for internal use, provided that those costs are not research and development. SOP 98-1 is effective for fiscal years beginning after December 15, 1998. The Company is evaluating the requirements of SOP 98-1 and the effects, if any, on the Company's current policies on accounting for software costs. 5. Comprehensive Income: The only component of comprehensive income for the three months September 30, 1998 and 1999 was the change in the cumulative translation adjustment. 6. Inventories: Inventories consist of the following (in thousands): 7.
March 31, September 30, 1999 1999 ------------- ------------- Raw materials............................ $ 3,368 $ 3,612 Work in process.......................... 13,654 11,349 Finished goods........................... 9,172 11,629 ------------- ------------- 26,194 26,590 Less inventory reserve................... (6,027) (6,831) ------------- ------------- Raw materials............................ $20,167 $19,759 ------------- -------------
7. Computation of Net Income (Loss) Per Share: Basic and diluted earnings per share are calculated as follows (in thousands, except per share amounts):
Three Months Ended September 30, ---------------------------------- 1998 1999 ------------- ------------- Basic: Weighted average shares outstanding for the period(1)........................... 4,766 11,973 ------------- ------------- Shares used in computing per share amounts................................. 4,766 11,973 ------------- ------------- Net income available for common stockholders............................ $(4,480) $ 1,571 Net income available for common stockholders per share.................. $ (0.94) $ 0.13 ------------- ------------- Diluted (1): Weighted average shares outstanding for the period(1)........................... 4,476 11,973 Net effect of dilutive stock options based on the treasury stock method 405 using average market price.............. Shares used in computing per share amounts................................. 4,476 12,379 ------------- ------------- Net income available for common stockholders $(4,480) $ 1,571 Net income per share available for common stockholders $ (0.94) $ 0.13
8.
Six Months Ended September 30, ---------------------------------- 1998 1999 ------------- ------------- Basic: Weighted average shares outstanding for the period(1)........................... 4,472 11,988 ------------- ------------- Shares used in computing per share amounts................................. 4,472 11,988 ------------- ------------- Net income available for common stockholders............................ $(3,347) $ 2,734 Net income available for common stockholders per share.................. $ (0.75) $ 0.23 ------------- ------------- Diluted Weighted average shares outstanding for the period(1)........................... 4,472 11,988 Net effect of dilutive stock options based on the treasury stock method 386 using average market price.............. Shares used in computing per share amounts................................. 4,472 12,374 ------------- ------------- Net income available for common stockholders $(3,347) $ 2,734 Net income per share available for common stockholders $ (0.75) $ 0.22
(1) 1998 shares represents shares outstanding prior to the September 1998 merger. See Note 1. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This discussion contains forward-looking statements, which are subject to certain risks and uncertainties, including without limitation those described in the Company's Annual Report on Form 10-K, which has been filed with the Securities and Exchange Commission (the "SEC"). Actual results may differ materially from the results discussed in the forward-looking statements. Actual results may differ materially from the results discussed in the forward-looking statements. Important factors affecting the Company's (as defined below) ability to achieve future revenue growth include whether, and the extent to which, demand for the Company's products increases and reflects real end-user demand; whether customer cancellations and delays of outstanding orders increase; and whether the Company is able to manufacture in a correct mix to respond to orders on hand and new orders received in the future; whether the Company is able to achieve its new product development and introduction goals, including, without limitation, goals for recruiting, retaining, training, and motivating engineers, particularly design engineers, and goals for conceiving and introducing timely new products that are well received in the marketplace; and whether the Company is able to successfully commercialize its new technologies, which it has been investing in by designing and introducing new products based on these new technologies. Other important factors that could cause actual results to differ materially from those predicted include overall economic conditions, such as the economic issues affecting Asian countries; fluctuations in currency exchange ratios as the Company sells products in currencies other than the U.S. dollar; demand for electronic products and semiconductors generally; demand for the end- user products for which the Company's semiconductors are suited; the level of 9. utilization of the Company's production capacity; timely availability of, and changes in the cost of, raw materials, equipment, supplies and services; unanticipated manufacturing problems; problems in obtaining products from outside foundries that manufacture for the Company; increases in production and engineering costs associated with initial manufacture of new products; technological and product development risks; competitors' actions; and other risk factors described in the Company's filings with the Commission on Form 10- K. The impact of these and other factors on the Company's revenues and operating results in any future period cannot be forecasted with certainty. The Company's expense levels are based, in part, on its expectations as to future revenues. Because the Company's sales are generally made pursuant to purchase orders that are subject to cancellation, modification, quantity reduction or rescheduling on short notice and without significant penalties, the Company's backlog as of any particular date may not be indicative of sales for any future period, and such changes could cause the Company's net sales to fall below expected levels. If revenue levels are below expectations, operating results are likely to be materially adversely effected. Net income, if any, and gross margins may be disproportionately affected by a reduction in net sales because a proportionately smaller amount of the Company's expenses varies with its revenues. All forward-looking statements included in this document are made as of the date hereof, based on the information available to the Company as of the date hereof, and the Company assumes no obligation to update any forward- looking statement. OVERVIEW On September 23, 1998, IXYS Corporation, a Delaware corporation ("IXYS") merged with Paradigm in a transaction accounted for as a reverse merger. In the merger, the historic accounting records of IXYS became those of the combined company, and, accordingly, Paradigm formally changed its name to "IXYS Corporation" (the combined company of which is referred to in this report as the "Company" or the "Registrant"). The Company designs, develops and markets power semiconductors used primarily in controlling energy in motor drives, power conversion (including uninterruptible power supplies ("UPS") and switch mode power supplies ("SMPS")) and medical electronics. The Company's power semiconductors convert electricity at relatively high voltage and current levels to create efficient power as required by a specific application. The Company's target market includes segments of the power semiconductor market that require medium to high power semiconductors, with a particular emphasis on higher power semiconductors, which the Company considers to be those capable of processing greater than 500 watts of power. The Company offers a broad line of power semiconductors, including power MOSFETs, insulated gate bipolar transistors ("IGBTs"), thyristors (silicon controlled rectifiers or "SCRs") and rectifiers, including fast recovery epitaxial diodes ("FREDs"). In addition, the Company also designs and markets high speed, high density static random access memory ("SRAM") semiconductor devices to meet the needs of advanced telecommunications devices, networks, workstations, high performance PCs, advanced modems and complex military/aerospace applications. 10. RESULTS OF OPERATIONS Net Sales. Net sales for the three months ended September 30, 1999 were $17.4 million, an increase of 5.9% from the $16.4 million reported in the three months ended September 30, 1998. For the first six months of fiscal 2000, net sales of $34.5 million were $1.8 million, or 5.4% higher than for the same period in fiscal 1999. Average selling prices for the three months ended September 30, 1999 and for the year to date period increased over the same periods in the prior year and the effect on revenue was offset partially by declines in unit sales volume. Future revenue will depend largely upon customer demand. Gross Profit. Gross margin was 36.4% of net sales for the three months ended September 30, 1999 and was relatively unchanged as compared with 35.4% for the three months ended September 30, 1998. Gross margin was 34.7% of net sales for the six months ended September 30, 1999 as compared to 32.5% for the six- month period ended September 30, 1998. The increase in gross margin for the six month period ended September 30, 1999 as compared to the same period in 1998 was due to higher average selling prices per unit. Research and Development. Research and development expenses decreased $253,000 in the three months ended September 30, 1999, compared to the same period in 1998. Research and development expenses increased $275,000 in the six months ended September 30, 1999, compared to the same period in 1998. Research and development expenses increased primarily due to expanded research efforts to support the Company's overall plan. Selling, General and Administrative. Selling, general and administrative expenses increased $230,000 in the three months ended September 30, 1999, compared to the same period in the prior fiscal year. Selling, general and administrative expenses increased $630,000 in the six months ended September 30, 1999, compared to the same period in the prior fiscal year. The increase in selling, general and administrative expenses was primarily related to increased compliance costs associated with being a publicly traded company, including compliance with SEC rules and regulations. The Company anticipates that operating expenses will fluctuate in absolute dollars and as a percentage of net sales as headcount is modified to support new product introductions, and due to changes in levels of production volume and unit shipments. Acquisition of in-process research and development. The Company recorded a one-time charge of $5.8 million in connection with the acquisition of Paradigm in the period ending September 30, 1998. Other Income, Net. Net other income decreased $153,000 during the three months ended September 30, 1999, compared to the same period in fiscal 1999, and $198,000 during the six months ended September 30,1999, compared to the same period in fiscal 1999. Provision for Income Taxes. The income tax provision for the three months and six months ended September 30, 1999 reflects the Company's expected effective tax rate for fiscal year 2000. 11. LIQUIDITY AND CAPITAL RESOURCES The Company has financed its operations to date through the private sale of equity, lease financing, and bank borrowings. As of September 30, 1999, cash and cash equivalents were $8.6 million, an increase of $151,000 from cash and cash equivalents of $8.4 million at March 31, 1999. The increase in cash and cash equivalents was primarily due to cash generated from operations. Line of credit facilities available to the Company are as follows: A line of credit with a U.S. bank that as of September 30, 1999 consists of a $5.0 million commitment amount which is available through October 1999. The line bears interest at the bank's prime rate (8.25% at September 30, 1999). The line is collateralized by certain assets and contains certain general and financial covenants, which include provisions stating that the Company cannot incur additional debt or pledge assets without the prior approval of such bank. At September 30, 1999, the Company had drawn $2.1 million against such line of credit. As of March 31, 1999, the Company had cash deposits with a financial institution in the amount of $222,000, which is restricted as to use and represents compensating balances on future discounted acceptances and letters of credit. The accounts receivable at September 30, 1999 increased 17% as compared to March 31, 1999 due to an increase in net sales. The inventories at September 30, 1999 were 2% less than the inventories at March 31, 1999. Net plant and equipment at September 30, 1999 decreased 3% as compared to March 31, 1999. The Company evaluates the acquisition of businesses, products or technologies that complement the Company's business. Any such transactions, if consummated, may use a portion of the Company's working capital or require the issuance of equity securities, which may result in further dilution to the Company's stockholders. The Company believes that cash generated from operations, if any, and banking facilities will be sufficient to meet its cash requirements through fiscal 1999. To the extent that funds generated from operations, together with bank facilities are insufficient to meet its capital requirements, the Company will be required to raise additional funds. No assurance can be given that additional financing will be available or, if available, that it will be available on acceptable terms. The lack of such financing, if needed, would have a material adverse effect on the Company's business, financial condition and results of operations. Recent Accounting Pronouncements In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and Related Information" (SFAS 131). SFAS 131 establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports issued to stockholders. SFAS 131 generally supersedes Statement of Financial Accounting Standards No.14, "Financial Reporting for Segments of Business Enterprise." Under 12. SFAS 131, operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Generally, financial information is required to be reported on the basis it is used internally. SFAS 131 is effective for financial statements for periods beginning after December 15, 1997, and restatement of comparative information for earlier years is required. However, SFAS 131 is not required to be applied to interim financial statements in the initial year of application. Based upon the criteria of SFAS 131, the Company has a single operating segment. Accordingly, the financial statements provided herein satisfy the standard for reporting. Geographic information about revenues, operating income and identifiable assets are provided in the notes to the financial statements. In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, or SFAS 133, Accounting for Derivative Instruments and Hedging Activities. SFAS 133 establishes new standards of accounting and reporting for derivative instruments and hedging activities. SFAS 133 requires that all derivatives be recognized at fair value in the balance sheet, and that the corresponding gains or losses be reported either in the statement of operations or as a component of comprehensive income, depending on the type of hedging relationship that exists. SFAS 133 will be effective for fiscal years beginning after June 15, 1999. The Company does not currently hold derivative instruments or engage in hedging activities. In March 1998, the Accounting Standards Executive Committee, or AcSEC, released Statement of Position 98-1, or SOP 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. SOP 98-1 requires companies to capitalize certain costs of computer software developed or obtained for internal use, provided that those costs are not research and development. SOP 98-1 is effective for fiscal years beginning after December 15, 1998. The Company is evaluating the requirements of SOP 98-1 and the effects, if any, on the Company's current policies on accounting for software costs. Year 2000 Compliance The Company has reviewed both its internal computer systems and its products that could be affected by the "Year 2000" issue and has identified certain minor software applications that will be affected. In the ordinary course of replacing computer equipment and software, the Company attempts to obtain replacements that are Year 2000 compliant. Utilizing both internal and external resources to identify and assess needed Year 2000 remediation, the Company currently anticipates that its internal Year 2000 identification, assessment, remediation and testing efforts, will be completed on or about December 31, 1999, and that such efforts will be completed prior to any currently anticipated impact on its internal computer equipment and software. The Company presently believes, with modification to existing software and conversion to new software, the "Year 2000" issues relating to internal computer systems and products will not cause significant operational problems or computer problems. Furthermore, the cost of implementing these solutions is not anticipated to be material to the financial position or results of operations. The plan is currently expected to result in non-recurring expenses over the next 13. six months of approximately $250,000 in the aggregate. However, if such modifications and conversions are not made, or not completed, the Company does not expect the "Year 2000" issue to have a material adverse impact on the operations of the Company as there are inexpensive alternatives available. Although the Company has completed its internal assessment of the Year 2000 issue and believes that it is substantially compliant, there can be no assurance that all potential problem areas have been identified and the Year 2000 risks accurately assessed. Should there be systems that were not included in the assessment and which are not Year 2000 compliant or should the Company's assessment prove to be in error in some material respect, the Company may be unable to conduct business or manufacture its products, which could cause a material adverse effect on the Company's results of operations. The Company has initiated formal communications with all of its significant suppliers during fiscal 1999 and 2000 to determine the extent to which the Company is vulnerable to those third parties failure to remediate their own "Year 2000" issues. To date, all of the significant suppliers have responded to the Company that they are Year 2000 compliant. However, there can be no guarantee that the systems or products of other companies or significant suppliers will be converted. A failure to convert by another company, or a conversion that is incompatible with the Company's systems may have a material adverse impact on the Company. The Company's suppliers and customers may be adversely affected by their respective failure to address the Year 2000 problem. Should any of the Company's suppliers encounter Year 2000 problems that cause them to delay manufacturing or shipments of key components, the Company may be forced to delay or cancel shipments of its products, which would have a material adverse effect on the Company's results of operations. Additionally, any inability of material customers to become Year 2000 compliant, which would cause them to delay or cancel substantial purchase orders or delivery of products, would also have a material adverse effect on the Company's results of operations. The Company is currently working with its suppliers to address their Year 2000 compliance in a timely manner. The Company has completed its internal assessment and believes that it is substantially compliant. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF RISK There has been no change to the disclosure made in the Company's Report on Form 10-K for the fiscal year ended March 31, 1999. 14. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On August 12, 1996, the Company and Michael Gulett, Robert McClelland, Richard A. Veldhouse, Dennis McDonald and Chiang Lam (the "Paradigm Defendants") were named, along with PaineWebber, Inc., as defendants in a purported class action (entitled Bulwa et al. v. Paradigm Technology, Inc. et al., Santa Clara County Superior Court Case No. CV759991) brought on behalf of stockholders who purchased the Company's stock between November 20, 1995 and March 22, 1996 (the "Class Period"). The complaint asserted six causes of action against the Paradigm Defendants: negligent misrepresentation, fraud, breach of fiduciary duty, violations of California Corporations Code sections 25400 and 25500 ("Sections 25400 and 25500"), violation of Corporations Code section 1507, and violation of California Civil Code sections 1709 and 1710. The Paradigm Defendants responded to the complaint by filing a demurrer which challenged the legal sufficiency of all six causes of action. On December 12, 1996, the Court sustained the demurrer as to all of the causes of action except for the fourth cause of action for violation of Sections 25400 and 25500 (and as to all causes of action for defendant Michael Gulett). The Court, however, granted plaintiffs leave to amend the complaint to attempt to cure the defects which caused the Court to sustain the demurrer. Plaintiffs failed to amend within the allotted time and independently expressed an intent to prosecute only the fourth cause of action. On January 8, 1997, the Paradigm Defendants, with the exception of Michael Gulett (who by virtue of the ruling on the demurrer has obtained a dismissal with prejudice as to all causes of action asserted against him), filed an answer to the complaint denying any liability for the acts and damages alleged by the plaintiffs. Plaintiffs have since served the Paradigm Defendants with discovery requests for production of documents and interrogatories, to which the Paradigm Defendants have responded. Plaintiffs have also subpoenaed documents from various third parties. Plaintiffs have also taken the depositions of three former employees and the analyst who covered the Company for Smith Barney. The Paradigm Defendants have served the plaintiffs with an initial set of discovery requests, to which plaintiffs have responded. The Paradigm Defendants also took the depositions of the named plaintiffs on April 9, 1997. On January 15, 1997, plaintiffs filed a motion to certify the matter as a class action. After several hearings and continuances, on February 9, 1998 the Court certified a class consisting only of California purchasers of the Company's stock during the Class Period. Following the California Supreme Court decision in Diamond Multimedia Systems, Inc. v. Superior Court, 19 Cal.4th 1036 (1999), plaintiffs moved to modify the prior class certification ruling to include also non-California purchasers. The Court granted this motion on April 28, 1999. On April 9, 1998, the Court granted plaintiffs' motion to amend their complaint to incorporate factual allegations derived from the Campbell, et al. v. Paradigm Technology, Inc. et al., Case No. CV 766271 suit filed in Santa Clara County Superior Court. Following a series of demurrers, the Campbell plaintiffs have since dismissed with prejudice the Campbell complaint 15. itself in exchange for defendants' agreement not to seek to recover defendants' costs incurred in defending against the action and not to pursue any action against plaintiffs for having filed the action. The Campbell complaint alleged that the defendants misled the Campbell plaintiffs and committed fraud by allegedly overstating the Company's back orders in the fourth quarter of 1995 and inflated reported sales in the fourth quarter of 1995 and the first quarter of 1996, which allegedly resulted in distorting the Company's financial condition, which allegedly inflated its stock price. The Campbell plaintiffs alleged that they purchased the Company's stock at the allegedly inflated prices and were damaged thereby. Their complaint identified two allegedly fraudulent sale transactions. The Court overruled the Paradigm Defendants' demurrer to the amended complaint on August 6, 1998. The Paradigm Defendants filed an answer to the amended complaint on August 27, 1998. On December 4, 1998, defendant Dennis McDonald, Paradigm's former Vice President of Human Resources, filed a motion for summary judgment on the amended complaint. Following his deposition, and prior to the hearing on the motion, plaintiffs agreed to dismiss defendant McDonald from the action with prejudice in exchange for a waiver of costs. Defendant McDonald has since obtained a judgment of dismissal. There can be no assurance that the Company will be successful in the defense of this action. If unsuccessful in the defense of any such claim, the Company's business, operating results and cash flows could be materially adversely affected. On May 19, 1998, the law firm that filed the Bulwa, et al. action described above filed an additional securities class action lawsuit against the Company, Michael Gulett, Robert McClelland, Richard A. Veldhouse and Chiang Lam, this time in the United States District Court for the Northern District of California. The complaint alleged violations of section 10(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Commission Rule 10b-5 and section 20(a) of the Exchange Act. Plaintiff alleged the same class and the same substantive factual allegations that are contained in the Bulwa, et al. action as amended. Defendants responded to the complaint on July 27, 1998 by filing a motion to dismiss the complaint for failure to state claims upon which relief can be granted and for various pleading inadequacies. In lieu of opposing the motion, plaintiff filed a first amended complaint. Defendants renewed their motion to dismiss, and on January 20, 1999 the Court issued an order granting the motion and dismissing plaintiff's action and entered judgment thereon. On February 3, 1999, the Court entered an amended judgment clarifying that the judgment is with prejudice. On March 12, 1999, plaintiff filed a notice of appeal. Plaintiff then agreed to dismiss the appeal in exchange for defendant's costs incurred in responding to the appeal and agreement not to pursue any action against the plaintiff for having filed the action. The appeal was dismissed with prejudice on October 25, 1999. 16. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) 27 Financial Data Schedule. (b) The Company did not file a Current Report on Form 8-K during this fiscal period. 17. 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. IXYS CORPORATION By: /s/ Arnold Agbayani ------------------- Arnold Agbayani, Vice President, Finance and Administration (Principal Financial Officer) Date: November 12, 1999 18. EXHIBIT INDEX 27 Financial Data Schedule. 19. EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS INCLUDED IN THE COMPANY'S FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS MAR-31-2000 JUL-01-1999 SEP-30-1999 8,631 0 15,862 2,084 19,759 44,080 28,390 (17,417) 58,482 17,043 0 0 0 120 40,954 58,482 17,417 17,417 (11,077) (11,077) (3,855) 0 (92) 2,414 (843) 1,571 0 0 0 1,571 0.13 0.13
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