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<SEC-DOCUMENT>0000898430-02-002309.txt : 20020611
<SEC-HEADER>0000898430-02-002309.hdr.sgml : 20020611
<ACCEPTANCE-DATETIME>20020611170913
ACCESSION NUMBER:		0000898430-02-002309
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20020428
FILED AS OF DATE:		20020611

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			SEMTECH CORP
		CENTRAL INDEX KEY:			0000088941
		STANDARD INDUSTRIAL CLASSIFICATION:	SEMICONDUCTORS & RELATED DEVICES [3674]
		IRS NUMBER:				952119684
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0131

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-06395
		FILM NUMBER:		02676675

	BUSINESS ADDRESS:	
		STREET 1:		652 MITCHELL RD
		CITY:			NEWBURY PARK
		STATE:			CA
		ZIP:			91320
		BUSINESS PHONE:		8054982111

	MAIL ADDRESS:	
		STREET 1:		652 MITCHELL ROAD
		STREET 2:		652 MITCHELL ROAD
		CITY:			NEWBURY PARK
		STATE:			CA
		ZIP:			91320
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>d10q.txt
<DESCRIPTION>FORM 10-Q DATED APRIL 28, 2002
<TEXT>
<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    ---------

                                    FORM 10-Q

                                   (Mark One)

[X]   Quarterly report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934 for the quarterly period ended April 28, 2002

                                       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 1-6395


                               SEMTECH CORPORATION
             (Exact name of registrant as specified in its charter

           Delaware                                    95-2119684
 (State or other jurisdiction                      (I.R.S. Employer
 incorporation or organization)                    identification No.)

                200 Flynn Road, Camarillo, California, 93012-8790
               (Address of principal executive offices, Zip Code)

       Registrant's telephone number, including area code: (805) 498-2111



Indicate by check mark, whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant has required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                           Yes    X        No
                                -----          ------


Number of shares of Common Stock, $0.01 par value, outstanding at April 30,
2002: 73,039,368.
      -----------


                                       1

<PAGE>

                         PART I - FINANCIAL INFORMATION
                         ------------------------------

ITEM 1.  FINANCIAL STATEMENTS
         --------------------

      The consolidated condensed financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these condensed financial
statements be read in conjunction with the consolidated financial statements and
the notes thereto included in the Company's latest annual report on Form 10-K.

      In the opinion of the Company, these unaudited statements contain all
adjustments (consisting of normal recurring adjustments) necessary to present
fairly the financial position of Semtech Corporation and subsidiaries as of
April 28, 2002, and the results of their operations and their cash flows for the
three months then ended.

                                        2

<PAGE>

                      SEMTECH CORPORATION AND SUBSIDIARIES
                   CONSOLIDATED CONDENSED STATEMENTS OF INCOME
                      (in thousands, except per share data)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                         Three Months Ended
                                                         ------------------
                                                    April 28,         April 29,
                                                       2002             2001
      --------------------------------------------------------------------------
    <S>                                              <C>                <C>
      Net sales                                       $49,188           $60,528
      Cost of sales                                    21,108            25,442
                                                      -------           -------
      Gross profit                                     28,080            35,086
                                                      -------           -------
      Operating costs and expenses -
      Selling, general and administrative               8,412             9,922
      Product development and engineering               7,524             8,048
      One-time costs                                     -                  951
                                                      -------           -------
      Total operating costs and expenses               15,936            18,921
                                                      -------           -------
      Operating income                                 12,144            16,165
      Interest and other income, net                    1,179             2,451
                                                      -------           -------
      Income before provision for taxes                13,323            18,616
      Provision for taxes                               3,331             5,399
                                                      -------           -------
      Net income                                      $ 9,992           $13,217
                                                      =======           =======
      Earnings per share:
      Earnings per share -
         Basic                                        $  0.14           $  0.19
         Diluted                                      $  0.13           $  0.17
      Weighted average number of shares -
           Basic                                       72,681            68,467
           Diluted                                     78,997            77,120
</TABLE>

                                        3

<PAGE>



                      SEMTECH CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                        (in thousands, except share data)
<TABLE>
<CAPTION>
                                                                                April 28,         January 27,
                                                                                  2002               2002
                                                                              (Unaudited)
- -------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>                 <C>
ASSETS
Current assets:
Cash and cash equivalents                                                        $ 55,869           $ 46,300
Temporary investments                                                             360,956            324,870
Receivables, less allowances                                                       25,575             19,181
Inventories                                                                        20,854             22,728
Income taxes refundable                                                             -                  2,019
Deferred income taxes                                                              11,878             11,786
Other current assets                                                                4,018              3,372
                                                                                 --------           --------
Total current assets                                                              479,150            430,256
Property, plant and equipment, net                                                 50,793             51,516
Investments with maturities in excess of 1 year                                   125,704            172,332
Deferred income taxes                                                              26,755             27,659
Other assets                                                                        8,023              8,638
                                                                                 --------           --------
TOTAL ASSETS                                                                     $690,425           $690,401
                                                                                 ========           ========


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable                                                                 $  8,001             $7,341
Accrued liabilities                                                                11,042             16,845
Deferred revenue                                                                    1,690              1,936
Income taxes payable                                                                1,241              1,099
Other current liabilities                                                              74                 65
                                                                                 --------           --------
Total current liabilities                                                          22,048             27,286
Convertible subordinated notes                                                    354,170            364,320
Commitments and contingencies
Stockholders' equity:
Common stock, $0.01 par value, 250,000,000 authorized,
73,039,993 issued and outstanding on April 28, 2002 and 72,148,573
issued and outstanding on January 27, 2002                                            731                722
Additional paid-in capital                                                        170,341            162,856
Retained earnings                                                                 141,451            131,459
Accumulated other comprehensive income                                              1,684              3,758
                                                                                 --------           --------
Total stockholders' equity                                                        314,207            298,795
                                                                                 --------           --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                       $690,425           $690,401
                                                                                 ========           ========
</TABLE>

                                        4

<PAGE>

                      SEMTECH CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                         Three Months Ended
                                                                                         ------------------
                                                                                     April 28,           April 29,
                                                                                       2002                2001
- ------------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>                 <C>
Cash flows from operating activities:
  Net income                                                                         $  9,992           $  13,217
  Adjustments to reconcile net income to net cash provided by operating
  activities:
    Depreciation and amortization                                                       2,825               1,981
    Deferred income taxes                                                                 812              (8,428)
    Tax benefit of stock option exercises                                               1,997              11,317
    Loss (gain) on repurchase of long-term debt                                            50                (372)
    Loss on disposition of property, plant and equipment                                  324                   -
  Changes in assets and liabilities, net of acquisition:
    Receivables                                                                        (6,394)              4,479
    Inventories                                                                         1,874              (4,692)
    Other assets                                                                         (592)               (473)
    Accounts payable and accrued liabilities                                           (5,143)            (10,098)
    Deferred revenue                                                                     (246)                  -
    Income taxes refundable/payable                                                     2,161               2,098
    Other liabilities                                                                       9                 576
                                                                                     --------           ---------
  Net cash provided by operating activities                                             7,669               9,605
                                                                                     --------           ---------
Cash flows from investing activities:
  Temporary investments, net                                                          (37,537)            (97,877)
  Purchase of long-term investments                                                    46,008            (112,690)
  Proceeds on sale of assets                                                                -               1,174
  Additions to property, plant and equipment                                           (2,084)             (3,940)
                                                                                     --------           ---------
  Net cash provided (used) in investing activities                                      6,387            (213,333)
                                                                                     --------           ---------

Cash flows from financing activities:
  Exercise of stock options                                                             5,497               4,373
  Cost of buyback of convertible subordinated notes                                    (9,981)             (2,290)
  Reissuance of treasury stock                                                              -               1,283
  Stock repurchase                                                                          -              (9,692)
                                                                                     --------           ---------
  Net cash used in financing activities                                                (4,484)             (6,326)
                                                                                     --------           ---------
Effect of exchange rate changes on cash and cash equivalents                               (3)                (83)

Net increase (decrease) in cash and cash equivalents                                    9,569            (210,137)

Cash and cash equivalents at beginning of period                                       46,300             323,182
                                                                                     --------           ---------

Cash and cash equivalents at end of period                                           $ 55,869           $ 113,045
                                                                                     ========           =========
</TABLE>

                                        5

<PAGE>

                      SEMTECH CORPORATION AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)

1.  Earnings Per Share

     Basic earnings per common share are computed using the weighted average
number of common shares outstanding during the period. Diluted earnings per
common share incorporates the incremental shares issuable upon the assumed
exercise of stock options. The weighted average number of shares used to compute
basic earnings per share in the first quarters of fiscal years 2003 and 2002
were 72,681,000 and 68,467,000, respectively. Diluted earnings per share is
computed by dividing net income for the period by the weighted average number of
common shares outstanding plus the dilutive effect of its outstanding stock
options ("common stock equivalents"), or 78,997,000 and 77,120,000 in the first
quarters of fiscal years 2003 and 2002, respectively.

     Options to purchase approximately 76,000 and 257,000 shares, respectively,
were not included in the computation of first quarter of fiscal years 2003 and
2002 diluted net income per share because such options were considered
anti-dilutive. Shares associated with the Company's outstanding convertible
subordinated notes are not included in the computation of net income per share
as they are anti-dilutive.

2.  Business Segments and Concentrations of Risk

     The Company operates in three reportable segments: Standard Semiconductor
Products, Rectifier and Assembly Products, and Other Products. Included in the
Standard Semiconductor Products segment are the Power Management, Protection,
High Performance, Advanced Communications, Human Interface/System Management
product lines. The Rectifier and Assembly Products segment includes the
Company's line of assembly and rectifier products. The Other Products segment is
made up of other custom integrated circuit (IC) and foundry sales.

     The accounting policies of the segments are the same as those described in
the summary of significant accounting policies in the Form 10-K for the year
ended January 27, 2002. The Company evaluates segment performance based on net
sales and operating income of each segment. Management does not track segment
data or evaluate segment performance on additional financial information. As
such, there are no separately identifiable segment assets nor is there any
separately identifiable statements of income data (below operating income).

     The Company does not track or assign assets to individual reportable
segments. Likewise, depreciation expense and capital additions are also not
tracked by reportable segments.
<TABLE>
<CAPTION>
                                              Three Months Ended
                  Net Sales                April 28,     April 29,
                  ---------                   2002          2001
                                          --------------------------
<S>                                       <C>            <C>

     Standard Semiconductor Products ......   $46,382       $54,300
     Rectifier and Assembly Products ......     2,603         3,313
     Other Products .......................       203         2,915
                                              -------       -------
        Total Net Sales ...................   $49,188       $60,528
                                              =======       =======
</TABLE>

<TABLE>
<CAPTION>


                                              Three Months Ended
               Operating Income            April 28,     April 29,
               ----------------               2002          2001
                                          ---------------------------
<S>                                          <C>           <C>
     Standard Semiconductor Products ......   $11,201       $15,462
     Rectifier and Assembly Products ......       827         1,090
     Other Products .......................       116           564
     Non-segment specific one-time costs ..        -           (951)
                                              -------       -------
        Total Operating Income ............   $12,144       $16,165
                                              =======       =======
</TABLE>

                                       6

<PAGE>

      Operating income for the first quarter of fiscal year 2002 includes
one-time costs of $951,000 for the reduction in workforce at the Company's Santa
Clara, California wafer fab and the consolidation of the Company's New York, New
York location into the Newbury Park, California location.

      No end customer accounted for 10% or greater of net sales in the first
quarter of fiscal year 2003. In the first quarter of fiscal year 2003, one of
the Company's Asian distributors accounted for approximately 14% of net sales.
During the first quarter of fiscal year 2002, one automated test equipment (ATE)
end customer, including its subcontractors, accounted for greater than 10% of
net sales.

      A summary of net external sales by region follows. The Company does not
track customer sales by region for each individual reporting segment.

                                            Three Months Ended
               Net Sales                 April 28,     April 29,
               ---------                   2002          2001
                                        -------------------------
     Domestic .........................    $14,461      $29,538
     Asia-Pacific .....................     29,808       24,211
     European .........................      4,919        6,779
                                           -------      -------
        Total Net Sales ...............    $49,188      $60,528
                                           =======      =======


     Long lived assets located outside the United States as of the end of the
first quarter of fiscal years 2003 and 2002 were approximately $8.1 million and
$6.3 million, respectively.

     The Company relies on a limited number of outside subcontractors and
suppliers for silicon wafers, packaging and certain other tasks. Disruption or
termination of supply sources or subcontractors could delay shipments and could
have a material adverse effect on the Company. Several of the Company's outside
subcontractors and suppliers, including third-party foundries that supply
silicon wafers, are located in foreign countries, including China, Malaysia, the
Philippines and Germany.

3.   Temporary and Long-Term Investments

     Temporary and long-term investments consist of government, bank and
corporate obligations. Temporary investments have original maturities in excess
of three months, but mature within twelve months of the balance sheet date.
Long-term investments have maturities in excess of one year from the date of the
balance sheet.

     The Company changed its method of classifying investments from "held to
maturity" to "available for sale" in the fourth quarter of fiscal year 2002,
because it expects to sell some securities prior to maturity. The Company
includes any unrealized gain or loss, net of tax, in the comprehensive income
portion of the equity section.

     The Company realized interest income of $5.7 million and $9.6 million
during the first quarters of fiscal years 2003 and 2002, respectively.

4.   Inventories

     Inventories consisted of the following:

                                 April 28,      January 27,
                                    2002            2002
                                 -----------------------------
     Raw materials .............     $   627         $   854
     Work in process ...........      14,222          14,648
     Finished goods ............       6,005           7,226
                                     -------         -------
        Total inventories ......     $20,854         $22,728
                                     =======         =======

                                       7

<PAGE>

5.  Comprehensive Income

    Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income", requires that net income and all other non-owner changes
in equity be displayed in a financial statement with the same prominence as
other consolidated financial statements. In addition, the statement requires
companies to display the components of comprehensive loss, which were as follows
(in thousands):
<TABLE>
<CAPTION>

                                              Three Months Ended
                                       --------------------------------
                                       April 28, 2002    April 29, 2001
                                       --------------------------------
<S>                                     <C>             <C>
Unrealized losses on investments         $                $
                                           (2,071)                 -

Translation adjustment                         (3)               (83)
                                                -
      Comprehensive Income               $ (2,074)        $      (83)
                                         ========         ==========
</TABLE>


6.  Stock and Convertible Subordinated Debt Repurchase Programs

    On January 4, 2001, the Company announced that its Board of Directors had
approved a program to repurchase up to $50.0 million of its common stock and
registered convertible subordinated notes. On September 20, 2001, the Company
indicated that its Board had authorized an additional $50.0 million in buybacks,
increasing the total amount authorized under the buyback program to $100.0
million. As of April 28, 2002, the Company had repurchased 1,230,000 shares of
its common stock at a cost $33.2 million under this program. Repurchased shares
of common stock have been reissued as a result of stock options exercises. As of
April 28, 2002, the Company had repurchased 45,830 of its convertible
subordinated notes (face value of $1,000 each) at a cost of $42.6 million in
open market transactions and recognized a net gain on the repurchase of these
convertible subordinated notes of $2.2 million. The Company has retired these
repurchased notes.

7.  One-Time Costs

    Operating results in the first quarter of fiscal year 2003 include two
one-time items. First, $229,000 of product that had been previously written down
were included in net sales, therefore, there was no cost of goods sold
associated with these shipments. Second, one-time costs of $247,000 were
recorded for the write-off of certain excess test capacity and other assets at
the Company's former Newbury Park and New York facilities. The net impact of
these two one-time items on first quarter results was costs of approximately
$18,000.

    Operating income for the first quarter of fiscal year 2002 includes
one-time costs of $951,000 for the reduction in workforce at the Company's Santa
Clara, California wafer fab and the consolidation of the Company's New York, New
York location into the Newbury Park, California location. Total headcount was
reduced by 17 percent in the first quarter of fiscal year 2002, including the
reduction of employees associated with the Company's sale of the Santa Clara,
California wafer fab. The sale was completed on April 24, 2001 and a majority of
the one-time costs have been paid out in cash.

8.  Disposition of Assets

    On April 23, 2001, the Company sold its Santa Clara, California wafer fab
facility to STI Foundry, Inc. In exchange for approximately $1.5 million of
assets associated with the facility, the Company received $1.0 million in cash
and approximately a $1.4 million receivable for either future inventory or cash
from the new owners. The Company expects to eventually recognize a gain of
approximately $900,000 on the sale of the wafer fab. As of April 28, 2002,
$486,000 of the gain was still unrecognized. The sale of the Santa Clara wafer
fab is consistent with the Company's long-term strategy to utilize already
installed process technologies at third-party foundries.

                                       8

<PAGE>

9.   Convertible Subordinated Notes

     On February 14, 2000, the Company completed a private offering of $400.0
million principal amount of convertible subordinated notes that pay interest
semiannually at a rate of 4 1/2 percent and are convertible into common stock at
a conversion price of $42.23 per share. The notes are due in February 1, 2007
and callable by the Company on or after February 6, 2003. In connection with
these convertible subordinated notes, the Company incurred $11.5 million in
underwriter fees and other costs, which are amortized as interest expense using
the effective interest method. The Company has used the net proceeds of the
offering for general corporate purposes, including working capital, expansion of
sales, marketing and customer service capabilities, and product development. In
addition, the Company may use a portion of the net proceeds to acquire or invest
in complementary businesses, technologies, services or products.

     For the three months ended April 28, 2002 and April 29, 2001, the Company
incurred $4.4 million and $4.9 million, respectively, in interest expense
associated with these convertible subordinated notes included in the
accompanying consolidated statements of income. As of April 28, 2002, $354.2
million of the convertible subordinated notes were still outstanding, reflecting
the Company's repurchase of 45,830 notes (face value of $1,000 each) at a cost
of $42.6 million in open market transactions and recognized a net gain on the
repurchase of these convertible subordinated notes of $2.2 million.

10.  Commitments and Contingencies

     On February 7, 2000, the Company was notified by the United States
Environmental Protection Agency with respect to the Casmalia Disposal Site in
Santa Barbara, California. The Company has been included in the Superfund
program to clean up this disposal site, because it used this site for waste
disposal. During the second quarter of fiscal year 2002, the Company recorded a
one-time cost of $765,000 for the pending settlement of this matter with federal
and state agencies.

     On June 22, 2001, the Company was notified by the California Department of
Toxic Substances Control ("State") that it may have liability associated with
the clean up of the one-third acre Davis Chemical Company site in Los Angeles,
California. The Company has been included in the clean-up program, because it is
one of the companies believed to have used the Davis Chemical Company site for
waste recycling and/or disposal between 1949 and 1990. Investigation into this
matter is in its early stages. At this time there is not a specific proposal or
budget with respect to the clean-up of the site. Thus, no reserve has been
established for this matter.

     The Company uses an environmental consulting firm, specializing in
hydrogeology, to perform periodic monitoring of the groundwater at its
previously leased facility in Newbury Park, California. Certain contaminants
have been found in the groundwater. Monitoring results over a number of years
indicate that contaminants are coming from an adjacent facility. It is currently
not possible to determine the ultimate amount of possible future clean-up costs,
if any, that may be required of the Company at this site. Accordingly, no
reserve for clean-up has been provided at this time.

     Effective June 11, 1998, the Company's Board of Directors approved a
Stockholder Protection Agreement to issue a Right for each share of common stock
outstanding on July 31, 1998 and each share issued thereafter (subject to
certain limitations). These Rights, if not cancelled by the Board of Directors,
can be exercised into a certain number of Series X Junior Participating
Preferred Stock after a person or group of affiliated persons acquire 25% or
more of the Company's common stock and subsequently allow the holder to receive
certain additional Company or acquirer common stock if the Company is acquired
in a hostile takeover.

      In December 2000, the Company purchased a parcel of land in San Diego,
California for approximately $7.9 million and began exploring plans to build a
facility to support its High Performance product line. The Company deferred the
project due to the significant downturn in the product line's business. Early in
calendar year 2002, the staff of the San Diego Unified Public School District
recommend to the Board of Education that a school be built on




                                       9

<PAGE>

the Company's parcel. In April 2002, the Board of Education rejected that
proposal and selected another site for the school.

      From time to time, the Company is a defendant in lawsuits involving
matters which are routine to the nature of its business. Management is of the
opinion that the ultimate resolution of all such matters will not have a
material adverse effect on the accompanying consolidated financial statements.

11.  Recently Issued Accounting Standards

    In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 143, "Accounting for
Asset Retirement Obligations." SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. The Company plans to adopt
this statement effective January 26, 2003. The Company does not expect that the
adoption of SFAS No. 143 will have a material impact on its results of
operations or financial position.

     In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment of Disposal of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of" and the accounting and reporting provision of Accounting Principles
Board (APB) Opinion 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 business
(as previously defined in that Opinion). SFAS No. 144 also resolves significant
implementation issues related to SFAS No. 121. The Company adopted these
standards effective with the fiscal year beginning January 28, 2002. The Company
is currently reviewing these standards to determine the impact on its results of
operations and financial position, however, for the first quarter ended April
28, 2002, the adoption of these standards has not had a material impact.

     In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections". This statement is effective for fiscal years beginning after May
15, 2002. For certain provisions, including the rescission of Statement No. 4,
early application is encouraged. The Company has applied this statement to the
three months ended April 28, 2002, and the impact of its application was the
reclassification of the gains or losses on the extinguishment of debt from an
extraordinary item to other income.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
        ----------------------------------------------------------------
        RESULTS OF OPERATIONS
        ---------------------


     You should read the following discussion of our financial condition and
results of operations together with the condensed financial statements and the
notes to condensed financial statements included elsewhere in this Form 10-Q.
This discussion contains forward-looking statements based on our current
expectations, assumptions, estimates and projections about us and our industry.
These forward-looking statements involve risks and uncertainties. Our actual
results could differ materially from those anticipated in these forward-looking
statements, due to factors including but not limited to those set forth in the
"Risk Factors and Forward Looking Statements" and "Quantitative and Qualitative
Disclosure About Market Risk" sections of this Form 10-Q and the "Risk Factors"
section of the Company's annual report on Form 10-K for the year ended January
27, 2002. We undertake no obligation to update any forward-looking statements
after the date of this Form 10-Q.

Overview

         We design, produce and market a broad range of products that are sold
principally to customers in the computer, communications and industrial markets.
Our products are designed into a wide variety of end applications, including
notebook and desktop computers, computer gaming systems, personal digital
assistants




                                       10

<PAGE>

(PDAs), cellular phones, wireline networks, wireless base stations and automated
test equipment (ATE). Products within the communications market include products
for local area networks, metro and wide area networks, cellular phones and
base-stations. Industrial applications include ATE, medical devices and factory
automation systems. Our end customers are primarily original equipment
manufacturers and their suppliers, including Acer, Agilent, Cisco, Compaq, Dell,
First International, IBM, Intel, Microstar, Motorola, Samsung and Sony.

         We recognize product revenue when persuasive evidence of an arrangement
exists, delivery has occurred, receipt by the customer has been confirmed, the
fee is fixed or determinable and collectibility is probable. Product design and
engineering revenue is recognized during the period in which services are
performed. We defer revenue recognition on shipment of certain products to
distributors where return privileges exist until the products are sold through
to end users. Gross profit is equal to our net sales less our cost of sales. Our
cost of sales includes materials, direct labor and overhead. We determine the
cost of inventory by the first-in, first-out method. Our operating costs and
expenses generally consist of selling, general and administrative (SG&A),
product development and engineering costs (R&D), costs associated with
acquisitions, and other operating related charges.

         Most of our sales to customers are made on the basis of individual
customer purchase orders. Many large commercial customers include terms in their
purchase orders, which provide liberal cancellation provisions. Trends within
the industry toward shorter lead-times and "just-in-time" deliveries have
resulted in our reduced ability to predict future shipments. As a result we rely
on orders received and shipped within the same quarter. Sales made directly to
original equipment manufacturers are approximately 60% of net sales. The
remaining 40% of net sales are through independent distributors.

         We divide and operate our business based on three reportable segments:
Standard Semiconductor Products, Rectifier and Assembly Products, and Other
Products. We evaluate segment performance based on net sales and operating
income of each segment. We do not track segment data or evaluate segment
performance on additional financial information. As such, there are no
separately identifiable segment assets nor are there any separately identifiable
statements of income data (below operating income). The Standard Semiconductor
Products segment makes up the vast majority of overall sales and includes our
Power Management, Protection, High Performance, Advanced Communications and
Human Input/System Management product lines. The Rectifier and Assembly Products
segment includes our line of assembly and rectifier devices, which are the
remaining products from our original founding as a supplier into the military
and aerospace market. The Other Products segment is made up of other custom
integrated circuit (IC) and foundry sales.

         Our business involves reliance on foreign-based entities. Several of
our outside subcontractors and suppliers, including third-party foundries that
supply silicon wafers, are located in foreign countries, including China,
Malaysia, the Philippines and Germany. For the fiscal year ended January 27,
2002, approximately 28% of our silicon was manufactured in China. Foreign sales
for the first quarter of fiscal year 2003 constitute approximately 71% of our
net sales. Approximately four-fifths of foreign sales are to customers located
in the Asia-Pacific region. The remaining are to customers in Europe.

         One of our strategies is to expand our business through strategic
acquisitions. Over the past several years, we have made several small
acquisitions in order to increase our pool of skilled technical personnel and
penetrate new market segments, such as high performance, advanced communications
and system management devices. These acquisitions include: USAR Systems
Incorporated; Practical Sciences, Inc.; Acapella Limited; and Edge
Semiconductor. The acquisitions of USAR, Acapella and Edge were accounted for as
poolings of interests.

RESULTS OF OPERATIONS

Comparison Of The Three Months Ended April 28, 2002 And April 29, 2001

         Net Sales. Net sales for the first quarter of fiscal year 2003 were
$49.2 million, compared to $60.5 million for the first quarter of fiscal year
2002, a 19% decrease. Standard Semiconductor Products (Standard Products)
declined by 15%. Rectifier and Assembly Products' sales declined 21% and our
Other Products segment declined 93% in the first quarter of fiscal year 2003.
The decline in sales was due in part to weakness in the overall semiconductor

                                       11

<PAGE>

industry caused by poor economic conditions and lower spending in the capital
equipment end-markets of communications infrastructure and test systems.

     Standard Products represented about 94% of net sales in the first quarter
of fiscal year 2003, up from 90% in the prior year period. Standard Product
sales in the first quarter of fiscal year 2003 reflected year-over-year growth
in the Power Management product line, but that was more than offset by large
declines in the Protection and High Performance product lines.

     Sales of our Rectifier and Assembly Products segment declined due to weak
industry conditions and a strategic focus on proprietary products. Other
Products declined as a result of a strategic de-emphasis of custom and foundry
services. We plan to eventually exit the custom and foundry product offerings.

     In the first quarter of fiscal year 2002, favorable market conditions
benefited all three of our reportable segments. The Standard Products segment
was most benefited by strength in sales of our High Performance product line
used in test systems and Power Management products used in a wide variety of
applications. Our Protection product line saw a large decline in sales during
the first quarter of fiscal year 2002 as the communications end-market rapidly
deteriorated.

     Gross Profit. Gross profit for the first quarter of fiscal year 2003 was
$28.1 million, compared to $35.1 million for the comparable period in the prior
year, a 20% decline. Our gross margin was 57% for the first quarter of fiscal
year 2003, down from 58% for the first quarter of fiscal year 2002. The decline
is due to lower utilization and weaker industry conditions, as reflected in our
year-over-year decline in net sales.

     Operating Costs and Expenses. Operating costs and expenses were $15.9
million, or 32% of net sales, for the first quarter ended April 28, 2002.
Operating costs and expenses for the prior year first quarter were $18.9
million, or 31% of net sales.

     Operating results in the first quarter of fiscal year 2003 include two
one-time items. First, $229,000 of products that had been previously written
down were included in net sales, therefore, there was no cost of goods sold
associated with these shipments. Second, one-time costs of $247,000 were
recorded for the write-off of certain excess test capacity and other assets at
the Company's former Newbury Park and New York facilities. The net impact of
these two one-time items on first quarter results was costs of approximately
$18,000.

     Operating costs and expenses for the first quarter of fiscal year 2002
include one-time costs of $951,000 to cover the expense of reducing headcount at
our Santa Clara, California wafer fab and relocating our New York, New York
office to our Newbury Park, California office. Before one-time costs, operating
costs and expenses so far in fiscal year 2003, as a percentage of net sales, are
higher than previous levels due to lower shipment rates and lower efficiencies.
Absolute operating costs and expenses, before one-time items, is lower in the
first quarter of fiscal year 2003 compared to the prior year due to cost cutting
measures taken during the prior year.

     Operating Income. Operating income was $12.1 million in the first quarter
of fiscal year 2003, down from operating income of $16.2 million in the first
quarter of fiscal year 2002. Operating income was impacted by a 19% decline in
net sales and the drop to a 57% gross margin. The drop in operating income was
partially offset by one-time costs of $951,000 that reduced fiscal year 2002
first quarter operating income.

     We evaluate segment performance based on net sales and operating income of
each segment. Operating income for the Standard Semiconductor Products segment
declined 28% in the first quarter of fiscal year 2003. Operating income in the
Standard segment was hurt by a decline in all product lines, with the exception
of the Power Management product line, which had sales increases and an improved
profit margin. High Performance products, which have operating margins above our
corporate average, represented the largest product line decline compared to the
prior year period.

                                       12

<PAGE>

     Operating income for the Rectifier and Assembly Products segment declined
by 24%, while the Other Products segment decreased 80% in first quarter of
fiscal year 2003. Both segments' operating margins were impacted by poor
efficiencies associated with a lower sales level.

     Operating income for the Standard Semiconductor Products segment in the
first quarter of fiscal year 2002 was most benefited by a significant increase
in High Performance product line sales, which had above corporate average
operating margins. Operating income for the Rectifier and Assembly Products
segment for the first quarter of fiscal year 2002 increased due to a shift in
manufacturing to our lower-cost facility in Mexico and reduced overhead. Other
Products operating income decreased due to lower gross margins and underutilized
overhead.

Interest and Other Income. Net interest and other income of $1.2 million was
realized in the first quarter of fiscal year 2003. For the first quarter of
fiscal year 2002, interest and other income was $2.5 million. Other income and
expenses is primarily interest income from investments and interest expense
associated with our outstanding convertible subordinated notes. The decline in
interest and other income so far in fiscal year 2003 is mostly due to lower
rates of return on our investments as compared to the prior year.

Provision for Taxes. Provision for income taxes for the first three months of
fiscal year 2003 was $3.3 million, compared to $5.4 million in the prior year
period. The effective tax rate so far in fiscal year 2003 is 25%, compared to
29% in the prior year period. The decline in the effective tax rate is due to
increased sales through foreign-based subsidiaries that are in lower tax
jurisdictions.

Liquidity and Capital Resources

     We evaluate segment performance based on net sales and operating income of
each segment. We do not track segment data or evaluate segment performance on
additional financial information. As such, there are no separately identifiable
segment assets and liabilities.

     On February 14, 2000, we completed a private offering of $400.0 million
principal amount of convertible subordinated notes that bear interest at the
rate of 4 1/2% per annum and are convertible into our common stock at a
conversion price of $42.23 per share. The notes are due in 2007 and redeemable
in 2003. We have used the net proceeds of the notes offering, in part, for
general corporate purposes, including working capital, expansion of sales,
marketing and customer service capabilities, and product development. In
addition, we may use a portion of the net proceeds from the notes offering to
acquire or invest in complementary businesses, technologies, services or
products.

     As of April 28, 2002, we had working capital of $457.1 million, compared
with $403.0 million as of January 27, 2002. The ratio of current assets to
current liabilities as of April 28, 2002 was 21.7 to 1, compared to 15.8 to 1 as
of January 27, 2002. The increase in working capital as of April 28, 2002 was
mostly the result of an increase in cash and temporary investments.

     Cash provided by operating activities was $7.9 million for the first
quarter of fiscal year 2003, compared to $9.6 million for the first quarter of
fiscal year 2002. Net operating cash flows were impacted by non-cash charges for
depreciation and amortization of $2.5 million and $2.0 million in the first
quarters of fiscal years 2003 and 2002, respectively.

     Net operating cash flows in the first three months of fiscal year 2003 were
positively impacted by net income of $10.0 million and by a decrease in
inventories, tax benefit from stock option exercises, income taxes payable and
other assets. These were partially offset by increases in receivables, deferred
income taxes, accounts payable and accrued liabilities, and other assets and
liabilities.

     Investing activities provided $8.5 million in the first quarter of fiscal
year 2003 compared to $213.3 million used in the prior year first quarter.
Investing activities for both periods consist of increases in temporary
investments, purchases and redemptions of long-term investments, and capital
expenditures. Investing activities for first quarter of fiscal year 2002
included proceeds of $1.2 million from the sale of assets.

    Our financing activities used $4.7 million during the first three months of
fiscal year 2003 and $6.3 million in the prior year period. Financing activities
so far in fiscal year 2003 reflect the proceeds from stock option exercises,



                                       13

<PAGE>

which were more than offset by cash used to repurchase long-term debt. Financing
activities for the first quarter of fiscal year 2002 reflect the proceeds from
stock options exercises and the reissuance of treasury stock, more than offset
by cash used to repurchase long-term debt and common stock.

     We do not have any off balance sheet financing activities and do not have
any special purpose entities. As of April 28, 2002, we have approximately $8.2
million in operating lease commitments that extend over a six year period. The
portion of these operating lease payments due during the coming fiscal year is
less than $1.3 million.

    In order to develop, design and manufacture new products, we have incurred
significant expenditures during the past five years. These investments aimed at
developing new products, including the hiring of many design and applications
engineers and related purchase of equipment, will continue. We intend to
continue to invest in those areas that have shown potential for viable and
profitable market opportunities. Certain of these expenditures, particularly the
addition of design engineers, do not generate significant payback in the
short-term. We plan to finance these expenditures with cash generated by
operations and investments.

    Purchases of new capital equipment were made primarily to improve internal
computer systems and expand manufacturing capacity. Funding for these purchases
was made from our operating cash flows and cash reserves. We have made
significant investments in product and process technology. We believe that sales
generating cash flows, together with the proceeds of the notes offering and cash
reserves, are sufficient to fund operations and capital expenditures for the
foreseeable future.

Inflation

     Inflationary factors have not had a significant effect on our performance
over the past several years. A significant increase in inflation would affect
our future performance.

Critical Accounting Policies

     In response to the SEC's Release No. 33-8040, "Cautionary Advice Regarding
Disclosure About Critical Accounting Policy," we identified the most critical
accounting policies upon which our financial status depends. We determined the
critical principles by considering accounting policies that involve the most
complex or objective decisions or assessments. We identified our most critical
accounting policies to be related to revenue recognition, inventory valuation
and use of estimates. We state these accounting policies in the notes to the
consolidated financials statements in our Form 10-K and at relevant sections in
this management's discussion and analysis.

Recently Issued Accounting Standards

     In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 143, "Accounting for
Asset Retirement Obligations." SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. We plan to adopt this
statement effective January 26, 2003. We do not expect that the adoption of SFAS
No. 143 will have a material impact on our results of operations or financial
position.

     In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment of Disposal of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of" and the accounting and reporting provision of Accounting Principles
Board (APB) Opinion 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 business
(as previously defined in that Opinion). SFAS No. 144 also resolves significant
implementation issues related to Statement No. 121. We have adopted these
standards effective with the fiscal year beginning January 28, 2002. We are
currently reviewing these standards to determine the impact on our results of
operations and financial position, however, for the first quarter ended April
28, 2002, the adoption of these standards has not had a material impact.



                                       14

<PAGE>

     In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections". This statement is effective for fiscal years beginning after May
15, 2002. For certain provisions, including the rescission of Statement 4, early
application is encouraged. We have applied this statement to the three months
ended April 28, 2002, and the impact of its application was the reclassification
of the gains or losses on the extinguishment of debt from an extraordinary item
to other income.

RISK FACTORS AND FORWARD LOOKING STATEMENTS

     In addition to historical information, this Form 10-Q contains statements
relating to our future results. These statements include certain projections and
business trends, which are "forward-looking" within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements are
made only as of the date of this Form 10-Q. We do not undertake to update or
revise the forward-looking statements after the date of this Form 10-Q.

     Actual results may differ materially from projected results as a result of
certain risks and uncertainties. These risks and uncertainties include, without
limitation, those described under "Risk Factors" in the Form 10-K for the year
ended January 27, 2002, as filed with the Securities and Exchange Commission,
those set forth below and elsewhere in this Form 10-Q and those detailed from
time to time in press releases, conference calls and other filings with the SEC:

...  Economic declines may have adverse consequences for our business

...  The cyclical nature of the electronics and semiconductor industries may
   limit our ability to maintain or increase revenue and profit levels during
   industry downturns

...  Fluctuations and seasonality in the personal computer industry and economic
   downturns in our end-markets may have adverse consequences for our business

...  Reductions in communications infrastructure investments could adversely
   affect our business

...  We may be unsuccessful in developing and selling new products required to
   maintain or expand our business

...  Our products may be found to be defective, product liability claims may be
   asserted against us and we may not have sufficient liability insurance

...  Our share price could be subject to extreme price fluctuations, and
   shareholders could have difficulty trading shares

...  We obtain certain essential components and materials and certain
   manufacturing services from a limited number of suppliers and
   subcontractors, including foreign-based entities

...  We sell and trade with foreign customers, which subjects our business to
   increased risks applicable to international sales

...  Our foreign currency exposures may change over time as the level of
   activity in foreign markets grows and could have an adverse impact upon
   financial results

...  Our future operating results may fluctuate, fail to match past performance
   or fail to meet expectations

...  We receive a significant portion of our revenues from a small number of
   customers and the loss of any one of these customers could adversely affect
   our operations

...  We have acquired and may continue to acquire other companies and may be
   unable to successfully integrate these companies into our operations

...  We compete against larger, more established entities and our market share
   may be reduced if we are unable to respond to our competitors effectively

...  We must commit resources to product production prior to receipt of purchase
   commitments and could lose some or all of the associated investment

                                       15

<PAGE>

 .   The loss of any of our key personnel or the failure to attract or retain
     the specialized technical and management personnel could impair our ability
     to grow our business

 .   We are subject to environmental regulations, which may require us to incur
     significant expenditures

 .   Major earthquakes may cause us significant losses

 .   Terrorist attacks, such as the attacks that occurred on September 11, 2001,
     and other acts of violence or war may negatively affect our operations and
     your investment

 .   We may be unable to adequately protect our intellectual property rights

 .   We could be required to register as an investment company and become
     subject to substantial regulation that would interfere with our ability to
     conduct our business

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
        ----------------------------------------------------------

Foreign Currency Risk

     As a global enterprise, we face exposure to adverse movements in foreign
currency exchange rates. Because of the relatively small size of each individual
currency exposure, we do not employ hedging techniques designed to mitigate
foreign currency exposures. Likewise, we could experience unanticipated currency
gains or losses. Our foreign currency exposures may change over time as the
level of activity in foreign markets grows and could have an adverse impact upon
our financial results.

     Certain of our assets, including certain bank accounts and accounts
receivable, exist in nondollar-denominated currencies, which are sensitive to
foreign currency exchange rate fluctuations. The nondollar-denominated
currencies are principally Euro and British Pounds Sterling. Additionally,
certain of our current and long-term liabilities are denominated principally in
British Pounds Sterling currency, which are also sensitive to foreign currency
exchange rate fluctuations.

     Substantially all of our foreign sales are denominated in U.S. dollars.
Currency exchange fluctuations in countries where we do business could harm our
business by resulting in pricing that is not competitive with prices denominated
in local currencies.

Interest Rate Risk

     As of April 28, 2002, we had $354.2 million in long-term debt outstanding
at a fixed interest rate of 4 1/2 % per annum. We do not currently hedge any
potential interest rate exposure. Interest rates affect our return on excess
cash and investments. A significant decline in interest rates would reduce the
amount of interest income generated from our excess cash and investments.

                                       16

<PAGE>

                           PART II - OTHER INFORMATION
                           ---------------------------

ITEM 1. LEGAL PROCEEDINGS
        -----------------

          The Company periodically becomes subject to legal proceedings in the
          ordinary course of our business. The Company is not currently involved
          in any proceeding, which is reasonably expected to ultimately result
          in a material and adverse effect on the Company's financial position.

          On February 7, 2000, the Company was notified by the United States
          Environmental Protection Agency with respect to the Casmalia Disposal
          Site in Santa Barbara, California. The Company has been included in
          the Superfund program to clean up this disposal site because it used
          this site for waste disposal. During the second quarter of fiscal year
          2002, the Company recorded one-time a cost of $765,000 for the pending
          settlement of this matter with federal and state agencies.

          On June 22, 2001, the Company was notified by the California
          Department of Toxic Substances Control that it may have liability
          associated with the clean up of the one-third acre Davis Chemical
          Company site in Los Angeles, California. The Company has been included
          in the clean-up program because it is one of the companies believed to
          have used the Davis Chemical Company site for waste recycling and/or
          disposal between 1949 and 1990. Investigation into this matter is in
          its early stages. At this time there is not a specific proposal or
          budget with respect to the clean-up of the site. Thus, no reserve has
          been established for this matter.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
        -----------------------------------------

          Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES
        -------------------------------

          Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
        ---------------------------------------------------

          None.

ITEM 5. OTHER INFORMATION
        -----------------

          Not applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
        --------------------------------

          (a) Exhibits

          10.1 - The Company's Long-Term Stock Incentive Plan, as Amended.

          11.1 - Computation of per share earnings - See Note 1 of Notes to
                 Unaudited Consolidated Condensed Financial Statements.

          (b) Reports on Form 8-K

               The Company filed the following reports on Form 8-K during the
               period covered by this report:

                   January 28, 2002    To file press release dated January 25,
                                       2002 regarding expectations for the
                                       fourth quarter

                   February 28, 2002   To report change of address of corporate
                                       headquarters

                   April 24, 2002      To file press release dated April 24,
                                       2002 regarding expectations for the
                                       first quarter

                                       17

<PAGE>

                                   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.

                                    SEMTECH CORPORATION
                                    -------------------
                                    Registrant

Date: June 11, 2002                 /S/ John D. Poe
                                    --------------------------------
                                    John D. Poe
                                    Chairman of the Board
                                    and Chief Executive Officer

Date:  June 11, 2002                /S/ David G. Franz, Jr.
                                    --------------------------------
                                    David G. Franz, Jr.
                                    Vice President Finance, Chief
                                    Financial Officer, and
                                    Secretary





                                       18

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>dex101.txt
<DESCRIPTION>LONG TERM STOCK INCENTIVE PLAN AS AMENDED
<TEXT>
<PAGE>



                                  Exhibit 10.1
                                  ------------

                               SEMTECH CORPORATION
                         LONG-TERM STOCK INCENTIVE PLAN
                            (As Amended and Restated)

1. THE PLAN

   (a) Purpose. The purpose of this Long-Term Stock Incentive Plan (the "Plan")
is to promote the longer-term financial success of Semtech Corporation (the
"Company") by providing a means to attract, retain and award individuals who can
and do contribute to such success. By using stock-based compensation, the
recipients of awards under the Plan will further identify their interests with
those of the Company's stockholders.

   (b) Effective Date. To serve this purpose, the Plan will become effective
upon its approval by the affirmative vote of a majority of the shares present or
represented by proxy at the Company's 1998 Annual Meeting of Stockholders.

2. ADMINISTRATION

   (a) Committee. The Plan shall be administered by a Committee, appointed by
the Board of Directors of the Company. So long as the Company's common stock,
par value $.01 per share ("Common Stock") remain registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and Section 16
Participants may receive awards, any committee authorized by the Board to
administer the Plan shall be comprised solely of two or more directors of the
Company who are Non-Employee Directors within the meaning of Rule 16b-3(b)(3)(i)
promulgated under the Exchange Act. Notwithstanding the foregoing, the Board of
Directors of the Company (the "Board") may assume, at its sole discretion,
administration of the Plan. The administrator of the Plan, whether a committee
of the Board or the full Board, is referred to herein as the "Plan
Administrator."

   (b) Powers and Authority. The Plan Administrator's powers and authority
include, but are not limited to, selecting individuals who are (1) employees of
the Company or any subsidiary of the Company or other entity in which the
Company has a significant equity or other interest as determined by the Plan
Administrator, or (2) members of the Board; determining the types and terms and
conditions of all awards granted, including performance and other earnout and/or
vesting contingencies; permitting transferability of awards to third parties;
interpreting the Plan's provisions; and administering the Plan in a manner that
is consistent with its purpose.

   (c) Award Prices. For Plan purposes, all stock options and stock appreciation
rights shall have an exercise price which shall reflect the average traded price
of a share of Common Stock, on the date as determined by the Plan Administrator,
or if the Common Stock is not traded on such date, the average price on the next
preceding day on which such Common Stock is traded. The applicable date shall be
the date on which the award is granted.

3. SHARES SUBJECT TO THE PLAN

  (a) Maximum Shares Available for Delivery. Subject to Section 3(c), the
maximum number of shares of Common Stock that may be delivered to participants
and their beneficiaries under the Plan shall be equal to the sum of (i)
2,000,000 shares of Common Stock; (ii) any shares of Common Stock available for
future awards under the Company's 1994 Long-Term Stock Incentive Plan as of the
effective date of this Plan; (iii) any shares of Common Stock available for
future awards under the Company's 1994 Non-Employee Directors Stock Option Plan
as of the effective date of this Plan; (iv) any shares of Common Stock that are
represented by awards granted under any prior plan of the Company, which are
forfeited, expire or are canceled without the delivery of shares of Common Stock
or which result in the forfeiture of shares of Common Stock back to the Company;
and (v) up to 2,000,000 additional shares of Common Stock, if authorized by the
Board, which are reacquired in the open market or in a private transaction after
the effective date of this Plan. Collectively the shares of Common Stock subject

                                       19

<PAGE>

to this Plan are referred to herein as "Shares." In addition, any Shares granted
under the Plan which are forfeited back to the Company because of the failure to
meet an award contingency or condition shall again be available for delivery
pursuant to new awards granted under the Plan. Any Shares covered by an award
(or portion of an award) granted under the Plan, which is forfeited or canceled,
expires or is settled in cash, shall be deemed not to have been delivered for
purposes of determining the maximum number of Shares available for delivery
under the Plan. Likewise, if any stock option is exercised by tendering Shares,
either actually or by attestation, to the Company as full or partial payment in
connection with the exercise of a stock option under this Plan or any prior plan
of the Company, only the number of Shares issued net of the Shares tendered
shall be deemed delivered for purposes of determining the maximum number of
Shares available for delivery under the Plan. Further, Shares issued under the
Plan through the settlement, assumption or substitution of outstanding awards or
obligations to grant future awards as a condition of the Company acquiring
another entity shall not reduce the maximum number of Shares available for
delivery under the Plan.

  (b) Other Plan Limits. Subject to Section 3(c), the following additional
maximums are imposed under the Plan. The maximum number of Shares that may be
covered by stock options intended to comply with Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), ("Incentive Stock Options") shall
be 2,000,000. The maximum number of Shares that may be issued in conjunction
with awards granted pursuant to Section 4(d) shall be 600,000 plus up to an
additional 600,000 to the extent that such Shares are reacquired by the Company
pursuant to Section 3(a). The maximum number of Shares that may be covered by
awards granted to any one individual pursuant to Sections 4(b) and 4(c) shall be
500,000 during any consecutive three calendar years. The maximum payment that
can be made for awards granted to any one individual pursuant to Sections 4(d)
and 4(e) shall be $2,500,000 for any single or combined performance goals
established for a specified performance period. If a payment under Sections 4(d)
or 4(e) is made in Shares, the value of such Shares for determining this maximum
individual payment amount will be the closing price of a Share on the first day
of the applicable performance period. A specified performance period for
purposes of this performance goal payment limit shall not exceed a sixty (60)
consecutive month period.

  (c) Payment Shares. Subject to the overall limitation on the number of Shares
that may be delivered under the Plan, the Plan Administrator may use available
Shares as the form of payment for compensation, grants or rights earned or due
under any other compensation plans or arrangements of the Company, including the
plan of any entity acquired by the Company.

  (d) Adjustments for Corporate Transactions. The Plan Administrator may
determine that:

  (i) In the event that the outstanding shares of Common Stock of the Company
are changed into or exchanged for a different number or kind of shares or other
securities of the Company by reason of any recapitalization, reclassification,
stock split, stock dividend, combination or subdivision, appropriate adjustment
shall be made in the number of shares available under the Plan and under any
stock awards granted under the Plan. Such adjustment to outstanding stock awards
shall be made without change in the total price applicable to the unexercised
portion of such awards, and a corresponding adjustment in the applicable option
price per share shall be made. No such adjustment shall be made which would,
within the meaning of any applicable provisions of the Code, constitute a
modification, extension or renewal of any award or a grant of additional
benefits to the holder of an award.

  (ii) In case (A) the Company is merged or consolidated with another
corporation or other entity and the Company is not the surviving corporation,
(B) all or substantially all of the assets or more than 50% of the outstanding
voting stock of the Company is acquired by any other corporation or other entity
or (C) of a reorganization or liquidation of the Company, the Plan Administrator
or the governing body of any entity assuming the obligations of the Company,
shall, as to outstanding awards, either (x) make appropriate provision for the
protection of any such outstanding awards by the substitution on an equitable
basis of appropriate stock of the Company, or of the merged, consolidated or
otherwise reorganized corporation which will be issuable in respect of the
shares of Common Stock of the Company, provided that no additional benefits
shall be conferred upon participants as a result of such substitution, and the
excess of the aggregate fair market value of the shares subject to the awards
immediately after such substitution over the purchase price thereof is not more
than the excess of the aggregate fair market value of the shares subject to the
award immediately before such substitution over the purchase price thereof, or

                                       20

<PAGE>

(y) upon written notice to the participants, provide that all unexercised awards
must be exercised within a specified number of days of the date of such notice
or they will be terminated. In any such case, the Plan Administrator may, in its
discretion, accelerate the exercise dates of outstanding awards; provided,
however, that subsections (iii) and (iv) of this paragraph (d) shall govern
acceleration of awards with respect to the events described therein. (iii) In
case of (A) any consolidation or merger involving the Company if the
shareholders of the Company immediately before such merger or consolidation do
not own, directly or indirectly, immediately following such merger or
consolidation, more than fifty percent (50%) of the combined voting power of the
outstanding voting securities or interests of the corporation (or its parent
corporation) or other entity resulting from such merger or consolidation in
substantially the same proportion as their ownership of the shares of Common
Stock immediately before such merger or consolidation; (B) any sale, lease,
license, exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the business and/or assets of the
Company or assets representing over 50% of the operating revenue of the Company;
or (C) any person (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act who is not, on April 16, 1998, a "controlling person" (as defined
in Rule 405 promulgated under the Securities Act of 1933, as amended) (a
"Controlling Person") of the Company shall become (x) the beneficial owner
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of over
50% of the Company's outstanding Common Stock or the combined voting power of
the Company's then outstanding voting securities entitled to vote generally or
(y) a Controlling Person of the Company, all outstanding awards, regardless of
the date of grant of such awards, shall immediately become exercisable with
respect to 100% of the Shares subject to such awards. This paragraph 3(d)(iii)
shall apply only to awards granted prior to October 3, 2001 and to awards
granted on or after October 3, 2001 to participants who are non-employee
directors on the date of grant.

  (iv) In the event of the termination without cause of a participant within one
year following a Change in Control (as defined below) or a Constructive
Termination (as defined below) of a participant, all outstanding awards,
regardless of the date of grant of such awards, shall immediately become
exercisable with respect to 100% of the Shares subject to such awards.

For purposes of this paragraph 3(d)(iv), "Constructive Termination" shall mean
participant's voluntary termination within one year following participant's
knowledge of the occurrence of any of the following: (A) a reduction in
participant's base salary after a "Change in Control" (as defined below) from
that in effect immediately prior to the Change in Control; or (B) a material or
substantial reduction or change in job duties, responsibilities and requirements
after a Change in Control from participant's prior duties, responsibilities and
requirements immediately prior to the Change in Control. Notwithstanding the
foregoing, a termination shall not be treated as a Constructive Termination if
the participant shall have specifically consented in writing to the occurrence
of the event giving rise to the claim of Constructive Termination.

For purposes of this paragraph 3(d)(iv), "Change in Control" shall mean the
occurrence of any of the following events with respect to the Company: (A) any
consolidation or merger involving the Company if the shareholders of the Company
immediately before such merger or consolidation do not own, directly or
indirectly, immediately following such merger or consolidation, more than fifty
percent (50%) of the combined voting power of the outstanding voting securities
or interests of the corporation (or its parent corporation) or other entity
resulting from such merger or consolidation in substantially the same proportion
as their ownership of the shares of Common Stock immediately before such merger
or consolidation; (B) any sale, lease, license, exchange or other transfer (in
one transaction or a series of related transactions) of all, or substantially
all, of the business and/or assets of the Company or assets representing over
50% of the operating revenue of the Company; or (C) any person (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act) who is not, on October 3,
2001, a Controlling Person of the Company shall become (x) the beneficial owner
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of over
50% of the Company's outstanding Common Stock or the combined voting power of
the Company's then outstanding voting securities entitled to vote generally or
(y) a Controlling Person of the Company.

This paragraph 3(d)(iv) shall apply only to awards granted on or after October
3, 2001 to participants who on the date of grant are other than non-employee
directors.

4. TYPES OF AWARDS


                                       21

<PAGE>

  (a) General. An award may be granted singularly, in combination with another
award(s) or in tandem whereby exercise or vesting of one award held by a
participant cancels another award held by the participant. Any award granted
under the Plan shall be evidenced by a written agreement in form and substance
satisfactory to the Plan Administrator. These agreements must conform to the
Plan. The Plan Administrator may include such terms, consistent with the Plan,
as it determines in its discretion. Subject to Section 2(c), an award may be
granted as an alternative to or replacement of an existing award under the Plan
or under any other compensation plans or arrangements of the Company, including
the plan of any entity acquired by the Company. The types of awards that may be
granted under the Plan include:

  (b) Stock Option. A stock option represents a right to purchase a specified
number of Shares during a specified period at a price per Share which is no less
than that required by Section 2(c). A stock option may be in the form of an
incentive stock option or in a form which does not qualify for favorable federal
tax treatment. The Shares covered by a stock option may be purchased by means of
a cash payment or such other means as the Plan Administrator may from time to
time permit, including without limitation (i) tendering (either actually or by
attestation) Shares valued using the market price at the time of exercise, (ii)
authorizing a third party to sell Shares (or a sufficient portion thereof)
acquired upon exercise of a stock option and to remit to the Company a
sufficient portion of the sale proceeds to pay for all the Shares acquired
through such exercise and any tax withholding obligations resulting from such
exercise; (iii) crediting toward the purchase price amounts from individuals'
deferred compensation account balances, including accrued dividend equivalent
balances; or (iv) any combination of the above.

 (c) Stock Appreciation Right. A stock appreciation right is a right to receive
a payment in cash, Shares or a combination, equal to the excess of the aggregate
market price at time of exercise of a specified number of Shares over the
aggregate exercise price of the stock appreciation rights being exercised.

  (d) Stock Award. A stock award is a grant of Shares or of a right to receive
Shares (or their cash equivalent or a combination of both) in the future. Each
stock award shall be subject to such conditions, restrictions and contingencies
as the Plan Administrator shall determine. These may include continuous service
and/or the achievement of performance goals. The performance goals that may be
used by the Plan Administrator for such awards shall consist of cash generation
targets, profit, revenue and market share targets, profitability targets as
measured by return ratios, and shareholder returns. The Plan Administrator may
designate a single goal criterion or multiple goal criteria for performance
measurement purposes with the measurement based on absolute Company or business
unit performances and/or on performance as compared with that of other
publicly-traded companies.

  (e) Cash Award. A cash award is a right denominated in cash or cash units to
receive a payment, which may be in the form of cash, Shares or a combination,
based on the attainment of pre-established performance goals and such other
conditions, restrictions and contingencies as the Plan Administrator shall
determine. The performance goals that may be used by the Plan Administrator for
such awards shall consist of cash generation targets, profits, revenue and
market share targets, profitability targets as measured by return ratios and
shareholder returns. The Plan Administrator may designate a single goal
criterion or multiple goal criteria for performance measurement purposes with
the measurement based on absolute Company or business unit performance and/or on
performance as compared with that of other publicly-traded companies.

  (f) Special Provisions for Incentive Stock Options. Stock Options granted
under the Plan which are intended to be Incentive Stock Options shall be
specifically designated as Incentive Stock Options and shall be subject to the
following additional terms and conditions: (i) Dollar Limitation. The aggregate
fair market value (determined as of the respective date or dates of the grant)
of the Shares with respect to which Incentive Stock Options granted to any
employee under the Plan (and under any other incentive stock option plans of the
Company and any parent corporation and subsidiary) are exercisable for the first
time shall not exceed $100,000 in any one calendar year. In the event that
Section 422 of the Code is amended to alter the limitation set forth therein so
that following such amendment such limitation shall differ from the limitation
set forth in this paragraph (i), the limitation of this paragraph (i) shall be
automatically adjusted accordingly.

  (ii) 10% Stockholder. If any employee to whom an Incentive Stock Option is
to be granted under the Plan is at the time of the grant of such option the
owner


                                       22

<PAGE>

of stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or of any parent corporation or any subsidiary,
then the following special provisions shall be applicable to the Incentive Stock
Option granted to such individual:

   (A) The purchase price per Share subject to such Incentive Stock Options
shall not be less than 110% of the fair market value of one share of Common
Stock at the time of grant; and

   (B) The option exercise period shall not exceed five years from the date of
grant.

  (iii) Section 422. All Incentive Stock Options shall otherwise comply with the
provisions of Section 422 of the Code, as the same shall be amended from time to
time.

5. AWARD SETTLEMENT AND PAYMENTS

  (a) Dividends and Dividend Equivalents. An award may contain the right to
receive dividends or dividend equivalent payments which may be paid currently
credited to a participant's account. Any such crediting of dividends or dividend
equivalents or reinvestment in Shares may be subject to such conditions,
restrictions and contingencies as the Plan Administrator shall establish,
including the reinvestment of such credited amounts in Share equivalents.

  (b) Payments. Awards may be settled through cash payments, the delivery of
Shares, the granting of awards or combination thereof as the Plan Administrator
shall determine. Any award settlement, including payment deferrals, may be
subject to such conditions, restrictions and contingencies as the Plan
Administrator shall determine. The Plan Administrator may permit or require the
deferral of any award payment, subject to such rules and procedures as it may
establish, which may include provisions for the payment or crediting of
interest, or dividend equivalents, including converting such credits into
deferred Share equivalents.

6. PLAN AMENDMENT AND TERMINATION

  (a) Amendments. The Company's Board of Directors may amend this Plan as it
deems necessary and appropriate to better achieve the Plan's purpose; provided
however, that any amendment to the Plan which would require approval of the
Company's stockholders under applicable law, or under the rules or guidelines of
any exchange or automatic quotation system on which the Shares are traded or
included, then, in any of such events, such stockholder approval of any such
amendment shall also be obtained.

  (b) Plan Suspensions and Termination. The Board of Directors of the Company
may suspend or terminate this Plan at any time. Any such suspension or
termination shall not of itself impair any outstanding award granted under the
Plan or the applicable participant's rights regarding such award. If not earlier
terminated, this Plan shall terminate upon the tenth anniversary of the
effective date of the Plan. Unless an earlier termination is specified, awards
granted under the Plan shall terminate upon the tenth anniversary of their date
of grant.

7. MISCELLANEOUS

  (a) No Individual Rights. No person shall have any claim or right to be
granted an award under the Plan. Neither the Plan nor any action taken hereunder
shall be construed as giving any employee or other person any right to continue
to be employed by or to perform services for the Company, any subsidiary or
related entity. The right to terminate the employment of or performance of
services by any Plan participant at any time and for any reason is specifically
reserved to the employing entity.

  (b) Binding Arbitration. Any dispute or disagreement regarding participation
and/or an award recipient's rights under the Plan shall be settled solely by
binding arbitration in accordance with the applicable rules of the American
Arbitration Association.

  (c) Unfunded Plan. The Plan shall be unfunded and shall not create (or be
construed to create) a trust or a separate fund or funds. The Plan shall not
establish any fiduciary relationship between the Company and any participant or

                                       23

<PAGE>

beneficiary of a participant. To the extent any person holds any obligation of
the Company by virtue of an award granted under the Plan, such obligation shall
merely constitute a general unsecured liability of the Company and accordingly
shall not confer upon such person any right, title or interest in any assets of
the Company.

  (d) Other Benefit and Compensation Programs. Unless otherwise specifically
determined by the Plan Administrator, settlements of awards received by
participants under the Plan shall not be deemed a part of a participant's
regular, recurring compensation for purposes of calculating payments or benefits
from any Company benefit plan or severance program. Further, the Company may
adopt other compensation programs, plans or arrangements as it deems
appropriate.

  (e) No Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Plan or any award, and the Plan Administrator shall determine
whether cash shall be paid or transferred in lieu of any fractional Shares, or
whether such fractional Shares or any rights thereto shall be canceled.

  (f) Special Provision Regarding Termination of Directorship. If a participant
that is a member of the Board terminates his or her services as a member of the
Board by reason of death, disability or retirement (as defined by the Plan
Administrator in the written agreement evidencing the award to such Board
member), an award granted hereunder held by such person shall be automatically
accelerated with respect to its exercisability and shall become immediately
exercisable in full for the remaining number of Shares subject to such award for
three years after the date of such termination or until the expiration of the
stated term of such award, whichever period is shorter, and thereafter such
award shall terminate; provided, however, that if such person dies or suffers a
disability during said three-year period after retirement such award shall
remain exercisable in full for a period of three years after the date of such
death or disability or until the expiration of the stated term of such award,
whichever period is shorter, and thereafter such award shall terminate. If a
participant that is a member of the Board terminates his or her services as a
member of the Board for any other reason, any portion of an award granted
hereunder held by such person which is not then exercisable shall terminate and
any portion of such award which is then exercisable may be exercised for three
months after the date of such termination or until the expiration of the stated
term of such award, whichever period is shorter, and thereafter such award shall
terminate; provided, however, that if such person dies or suffers a disability
during such three month period, such award may be exercised for a period of one
year after the date of such person's death or disability or until the expiration
of the stated term of such award, whichever period is shorter, in accordance
with its terms, but only to the extent exercisable on the date of such person's
death or disability.

                                                            01-03-02


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</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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