|UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-K


(Mark One)
|--------------------------------------------------------------------------------------------

|[X] |  | Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Fiscal Year Ended September 30, 2001.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------

|OR
|--

|[_] |  | Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the
Transition Period from __________ to __________.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------

|Commission
File Number 000-26690


ELANTEC SEMICONDUCTOR,
INC.(Exact name of registrant as specified in its charter)
|--------------------------------------------------------------------------------------------------------------------

|Delaware(State or other jurisdiction ofincorporation or organization) | 77-0408929(I.R.S. EmployerIdentification No.)
|--------------------------------------------------------------------- | ---------------------------------------------

|675 Trade Zone
Boulevard, Milpitas, California 95035
(Address of principal executive offices)                (zip code)


Registrants telephone
number, including area code: (408) 945-1323


Securities registered
pursuant to Section 12(b) of the Act:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|None(Title of each class) | None(Name of each exchange on which registered)
|------------------------- | -----------------------------------------------

|Securities registered pursuant to Section 12(g) of the Act:Common Stock, par value $0.01 per sharePreferred Stock Purchase Rights
(Title of class)


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

| | YES [X] | NO [_] | 
| | ------- | ------ | 

|Indicate by check mark if
disclosure of delinquent filer pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
[  ]


Aggregate market value of
the voting stock held by non-affiliates of the registrant, based upon the
closing sale price of the common stock on November 30, 2001 as reported on the
Nasdaq National Market: $778,428,260. This calculation does not include a
determination that persons are affiliates for any other purpose.


Number of shares outstanding of the
registrants common stock as of November 30, 2001: 22,888,217.


Documents
Incorporated By Reference


Items 10, 11, 12 and 13 of
Part III incorporate information by reference to portions of the
registrants definitive proxy statement to be delivered to stockholders in
connection with the annual meeting of stockholders to be held February 15, 2002.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ELANTEC SEMICONDUCTOR, INC.FORM 10-K


For the Fiscal Year
Ended September 30, 2001.


Table of Contents


PART I
|-----------------------------------------------------------------------------------------------------------------

| |  | Page
| |  | ----

|Item 1. | Business | 3
|------- | -------- | -

|Item 2. | Properties | 13
|------- | ---------- | --

|Item 3. | Legal Proceedings | 13
|------- | ----------------- | --

|Item 4. | Submission of Matters to a Vote of Security Holders | 13
|------- | --------------------------------------------------- | --

|PART II
|-------

|Item 5. | Market for Registrants Common Equity and Related Stockholder Matters | 14
|------- | --------------------------------------------------------------------- | --

|Item 6. | Selected Financial Data | 15
|------- | ----------------------- | --

|Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations | 16
|------- | ------------------------------------------------------------------------------------- | --

|Item 7A. | Quantitative and Qualitative Disclosures about Market Risk | 30
|-------- | ---------------------------------------------------------- | --

|Item 8. | Financial Statements and Supplementary Data | 31
|------- | ------------------------------------------- | --

|Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosures | 31
|------- | ------------------------------------------------------------------------------------- | --

|PART III
|--------

|Item 10. | Directors and Executive Officers of the Registrant | 32
|-------- | -------------------------------------------------- | --

|Item 11. | Executive Compensation | 32
|-------- | ---------------------- | --

|Item 12. | Security Ownership of Certain Beneficial Owners and Management | 32
|-------- | -------------------------------------------------------------- | --

|Item 13. | Certain Relationships and Related Transactions | 32
|-------- | ---------------------------------------------- | --

|PART IV
|-------

|Item 14. | Exhibits, Financial Statement Schedules and Reports on Form 8-K | 33
|-------- | --------------------------------------------------------------- | --

|Signatures |  | 56
|---------- |  | --

|2
|-

|PART 1


The following discussion
contains forward looking statements that involve risks and uncertainties. Our
actual results could differ materially from those discussed here. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed in the section entitled Business and in the section
entitled Managements Discussion and Analysis of Financial Condition
and Results of Operations.


ITEM 1:
BUSINESS


We are a leading designer,
manufacturer and marketer of high performance analog integrated circuits, which
provide specific analog solutions to manufacturers in the high growth markets
for video, optical storage, communications and power management products. The
rapid advances in digital technology and increasing demand for digital
integrated circuits are driving the need for high speed, high precision, low
distortion and power efficient analog circuits. Electronic systems manufacturers
in these high growth markets require analog circuits with precision, linearity,
speed, power and signal amplification capabilities specific to their
applications. We believe we fulfill these circuit requirements with our standard
line of products and with our application specific standard products, or ASSPs,
which are designed to satisfy the needs of specific applications within our
targeted markets.


We presently offer
approximately 170 products, including amplifiers, drivers, faders, transceivers
and multiplexers. We manufacture our products at our facilities in Milpitas,
California and utilize third party wafer foundries. We sell our proprietary
products to leading original equipment manufacturers, or OEMs, such as, Cisco,
Fujitsu, Hitachi, Lucent, Lucky Goldstar (LG), NEC, Olympus, Philips, Ricoh,
Samsung, Sanyo, Sony, Toshiba and Yamaha, either directly or through our
distributors, such as Microtek International, Inc. and Insight Electronics, Inc.


Industry
Overview


Semiconductors, also known
as integrated circuits, can be divided into two broad categories: digital and
analog. Digital circuits, such as memory devices and microprocessors, function
as on and off switches expressed in binary code as 1s and
0s. In contrast, analog semiconductors monitor, regulate,
amplify or transform signals associated with physical properties, such as
temperature, pressure, weight, speed, sound and electrical current. Analog
circuits play an important role in bridging the real world phenomena with a
variety of electronic systems. The analog integrated circuit represents these
real world properties by generating continuously varying voltages and currents
that better reflect the items measured. There is a wide variation in the
performance characteristics of analog integrated circuits generally. High
performance analog integrated circuits are characterized by their high speed,
high precision, low distortion and power efficiency.


Demand for analog
integrated circuits has increased in recent years as the use of embedded digital
circuits in a wide variety of communications, consumer and industrial products
has accelerated. In turn, this has created the need for high performance analog
products that enable digital circuits, such as computers, microprocessors,
microcontrollers and signal processors, to interact with electronic signals
derived from physical or analog phenomena. For example, flat panel displays, CD
recordable devices, optical camcorders and digital subscriber line transceivers
use both digital and high performance analog circuits.


The market for analog
integrated circuits differs from the digital circuit market in several
significant ways. Analog applications involve more complex signals than digital
applications, with analog signals having continuous variations in resolution,
speed, power, signal amplitude and other specifications. Competition in analog
integrated circuit markets is based primarily on performance, functionality,
quality, reliability and power consumption. Analog circuits generally have
longer life cycles than digital circuits because customers typically design the
analog function block of their systems to span multiple generations of product.
This is because switching analog components may cause unexpected problems with
the rest of the products circuitry. As a result, the critical point of
competition for analog integrated circuit manufacturers is at the design-in
stage when a systems designer evaluates various alternative components for
implementing the system architecture.


Designers of analog
circuits must typically take into account complex interrelationships among the
physical layout of the circuit elements, the manufacturing process and the
finished products packaging, all of which can significantly affect
performance. The high performance characteristics required by new and emerging
applications for analog circuits involve increasingly advanced designs, which
require highly skilled engineers, innovative design strategies and rigorous
design methodologies. The number of design engineers who have the training,
creativity and experience to design complex analog circuits is very limited, and
the available computer-aided design tools for analog circuit design typically
require substantial customization in order to provide adequate utility for
complex analog circuit design.


3
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|The Elantec
Solution


We design, manufacture and
sell high performance analog integrated circuits primarily to designers and
manufacturers of systems and subsystems in our targeted markets. We believe our
products provide the precision, linearity, speed, power and signal amplification
capabilities required by OEMs in these high growth markets. We provide ASSPs to
satisfy the needs of a broad range of customers within our target markets and
standard products to meet the needs of our broad customer base. The key elements
of our solution include:


High
Performance Analog Expertise.Over the past 18 years, we have accumulated
significant design and process technology expertise in producing high speed,
high precision, low distortion and power efficient analog integrated circuits.
We utilize our expertise to deliver high performance solutions that are
cost-efficient and adhere to our customers demands.


System
Level Expertise.In addition to our design and process technology expertise
in analog integrated circuits, we have developed system level expertise in our
targeted markets whereby we can approach ASSP projects with an advanced
understanding of the system requirements and constraints. This understanding
facilitates the design process, allowing us to design optimal ASSP solutions
that our customers can easily integrate into their products, thereby reducing
their time-to-market cycle. Once our integrated circuits are designed into our
customers products, we maintain a strong position to be considered for our
customers next generation products.


Manufacturing
Process Technology. We manufacture all of our digital subscriber line, or
DSL, line drivers using our proprietary silicon-on-insulator, or SOI,
technology. We believe our SOI process technology provides an optimal solution
for satisfying the requirements of DSL equipment by reducing power consumption,
while maintaining low distortion transmission quality. We also use leadership
analog / mixed signal complementary metal-oxide-semiconductor (CMOS) and bipolar
technologies for other products. These technologies, which sometimes are
customized to provide differentiated products, are available through our foundry
partners.


ASSP
Design Capability. We develop ASSPs that are designed as solutions to the
requirements of particular applications, and because these solutions are not
custom designed for a specific customer, they potentially can be used by
multiple customers in their products. They can therefore be easily integrated
into multiple customers products with the same or similar application
requirements. As a result, we believe our ASSPs are highly scalable and
cost-efficient and meet the needs of a broad customer base, resulting in high
volume.


The Elantec
Strategy


Our goal is to be the
leading provider of analog integrated circuits for the high growth video,
optical storage, communications and power management markets. In order to
achieve this goal, we are pursuing the following strategies:


Offer
Market Driven Proprietary Products. We will continue to supply market driven
proprietary products to our target markets and develop general purpose standard
products that are performance driven and address multiple markets with broad
customer bases. Additionally, we will continue to develop ASSPs for specific
high growth applications used in products, such as, flat panel displays, optical
storage devices and asymmetrical digital subscriber line, or ADSL, modems.


Strengthen
Position in Selected High Growth Commercial Markets. We focus our design
expertise on specific functions within our four target markets. As a result, we
believe we have acquired a greater expertise in these areas and have developed a
reputation for high performance products. We intend to leverage our existing
customer relationships to supply them with successive generations of products
for their systems and to identify new product opportunities within their
systems. In addition, we believe there is significant growth potential within
our target markets and we plan to leverage our systems expertise to penetrate
new customer opportunities within these markets.


4
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|Work
Closely with Leading OEMs. We plan to continue to work closely with leading
OEMs by developing products to address their specific applications. We plan to
apply our systems level expertise and our relationships with the engineering
teams of our OEMs to anticipate opportunities during the design of their
products. We believe that by continuing to achieve reference design
relationships with industry leaders we will further validate our products and
will enhance our ability to accelerate acceptance of our product standards
within the specific markets we target.


Expand
Design Team and Continue to Improve Design Productivity.To capitalize on
the growth of our target markets and expand our position with existing
customers, we plan to continue our investment in research and development. We
intend to hire more engineers with experience in the design of analog integrated
circuits and continue to make significant investments in design tools and other
research and development equipment and applications that will support the needs
of our design teams. This commitment should allow us to increase the number of
new products introduced per year.


Enhance
Manufacturing Process Technology Roadmap.We will continue to enhance our
manufacturing process technology roadmap to improve product performance,
functionality and reduce cost. Superior modeling and characterization
capabilities will continue to be introduced to fine tune product specifications
and improve time to market.


Markets and
Applications


We design and manufacture
our products for four high growth commercial markets that we believe are
increasingly demanding high performance and low power consumption analog
solutions: video, optical storage, communications and power management. In each
of our target markets, we offer a suite of standard products and ASSPs that are
designed to provide effective solutions for electronic systems designers by
addressing a number of common component requirements. Most of our standard
products are used in more than one of these markets, while in general each ASSP
is used in only one specific market.


The following table sets
forth examples of typical applications of our products in each of our target
commercial markets:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Market           |  | Typical Applications                                                                                                                                            | 
| | ---------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
| |                  | 
| | Video            |  | Cathode Ray Tube
Flat Panel Displays
TFT-LCD Displays
Overhead Displays
Set Top Converters
Special Effects Generators
Video Cameras
Video Distribution Networks | 
| | Optical Storage  |  | CD Rewritable Drives
DVD Rewritable Drives
DVD Read-Only Drives
Optical Camcorders
Video Digital Recorders                                                      | 
| | Communications   |  | ADSL TransceiversVDSL/HDSL Transceivers                                                                                                                         | 
| | Power Management |  | DSP-based Portable Devices
TFT-LCD Displays
Networking Boards
Portable Instruments
Test Equipment
Video Boards                                                  | 

|5
|-

|Video.
Video images are incorporated into electronic applications, such as multimedia
computing and communications. This trend has increased demand for high-speed
amplifiers and specialty analog circuits for the processing and display of video
signals. In addition, the use of TFT-LCD flat panel display technology in
desktop monitors, notebooks and other consumer applications continues to grow.
We focus on manufacturing components for several segments of the video market,
including displays, such as, cathode ray tubes and TFT-LCD flat panels, set top
converters, special effects generators, studio equipment and video distribution
networks.


Optical
Storage.Optical storage, in the form of CD-ROM, has become the medium of
choice for software and music. More recently, optical recordable devices, such
as, CD read/write, and DVD read/write, are being adopted in the marketplace. We
currently provide products that control the laser diode contained in the optical
pick-up unit of optical disk drives. The use of writeable optical drives in
personal computers and consumer equipment is driving growth in the demand for
laser diode drivers.


Communications.
Higher data transmission rates are important for emerging communications
applications related to Internet access. The convergence of communications and
computers has created opportunities for high performance analog circuits. For
example, electronic communications through telephone lines increasingly include
both digital and analog information, such as audio, video and data and require
digital and analog circuits to transmit and process that information. In this
market, we supply transceivers, line drivers, and high-speed amplifiers for
ADSL, HDSL, and VDSL for increasing the data transmission rate over conventional
telephone lines. The demand for broadband equipment continues to grow and drive
the need for DSL line drivers.


Power
Management. The proliferation of high density, small, digital integrated
circuits has increased demand for DC:DC converters which adjust the input
voltages to meet the needs of the various components within the system. Current
solutions for DC:DC converters are mostly comprised of stand alone components.
We believe that the demand for more highly integrated converter solutions will
increase, as smaller portable devices become more prevalent. Our strategy is to
provide these highly integrated DC:DC converters in a single chip design that is
cost competitive with competitors multiple chip implementation. Our
integrated DC:DC products are used in products, such as printed circuit boards,
test and measurement equipment, and other devices.


Products


We offer both ASSPs for our
four target markets and general purpose standard products that are used in many
markets and applications. Our portfolio of approximately 170 high performance
analog products, most of which are available in multiple pin-out configurations,
provide our customers with a comprehensive choice of products in our targeted
high growth markets.


Application
Specific Standard Products. For the video market we offer a variety of ASSPs
that can be used as standard building blocks to provide solutions to the video
system designer for many common video circuit designs. Our ASSPs include sync
separators, DC restoration circuits, video multiplexers, faders, laser diode
drivers, and DC:DC converter circuits. Sync separators are timing circuits that
control the position and stability of the video image on a video display. DC
restoration circuits restore to the correct voltage level a video signal that
has been amplified and processed in order to ensure accurate transfer of video
information. Video multiplexers allow multiple video inputs to be connected to a
single output. Faders combine separate signals in different ratios for special
effects, such as, the fading of one video image into another. For the optical
storage market, we offer laser diode drivers that control the performance of the
laser diode used in the read/write mode in optical storage pick-up heads. In the
communications market, we offer line drivers, receive amplifiers and
transceivers that are used to transmit and receive high-speed analog signals
containing encoded digital information over conventional telephone lines. Our
integrated DC:DC converter circuits convert supply voltages to either a lower or
a higher voltage level required by modern microprocessors and digital signal
processors.


Standard
Products. Our standard products consist of amplifiers, buffers, comparators
and metal-oxide-semiconductor field effect transistor, or MOSFET, drivers.
Amplifiers and buffers are used to amplify or reproduce analog electrical
signals, either voltage or current, with minimal distortion. High power
amplifiers provide a large electrical output current or voltage and are
particularly useful in video transmission and communications applications. High
speed amplifiers and buffers are designed specifically to process high frequency
signals, such as, video information with minimal distortion. Comparators are
circuits that accurately measure an electrical signal level in comparison with a
predetermined value and indicate the result. MOSFET drivers are circuits that
control the switching functions of metal-oxide-semiconductor field effect
transistors.


6
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|Sales,
Distribution and Marketing


Sales and
Distribution. We sell our products directly with the assistance of
independent sales representatives, and indirectly through independent
distributors. Our direct sales force consists of sales managers and field
application engineers who support customers, sales representatives and
distributors in major markets. The sales staff and field application engineers
are located at our Milpitas, California headquarters and in field offices in
Massachusetts, New Hampshire, Texas, United Kingdom, South Korea, and Japan.


In North America, we sell
our products through our direct sales force, approximately 19 independent sales
representative organizations and four distributors. These distributors are
entitled to price rebates on unsold inventory if we lower the prices of our
products. In addition, on a semi-annual basis, these distributors are permitted
to return for credit against purchases of an equivalent dollar value of products
up to five percent of their total product purchases during the most recent
six-month period.


Outside North America, we
sell our products through our direct sales force and approximately 22
international distributors. These distributors are primarily located in Japan,
South Korea, Taiwan and Europe. Our international distributors, on a semi-annual
basis, are permitted to return for credit against purchases of an equivalent
dollar value of products up to five percent of their total product purchases
during the most recent six-month period. International sales have typically
represented over half of our net revenues.


Marketing. Our
marketing strategy is focused on building market awareness and acceptance of
current and future products. Our marketing activities include advertising in
print and Internet media and marketing programs to support our direct sales
force, distributors and independent sales representatives.


Our sales force has a high
level of product knowledge and industry background. Our technical support team
is available to provide our distributors and independent representatives with
ongoing technical support through help desks, detailed technical information on
our website, application notes and technical briefs. We also employ a team of
field application engineers to assist our customers in defining their needs,
proposing Elantec solutions and qualifying our products as part of their product
definition.


Design
Methodology and Process Technology


Design Methodology.
Our designers apply a rigorous, standardized design methodology intended to
accelerate the development and introduction of new products, maintain consistent
quality and promote the development and sharing of design expertise among the
engineering staff. Each designer utilizes a common set of customized
computer-aided design tools on a network of computer workstations and applies
standardized design rules in order to facilitate the integration of different
designs or design elements. We promote design integrity and sharing of expertise
by requiring each designer to subject designs to a series of peer reviews and
simulation and verification tests at different stages of design development. We
have developed proprietary computer models of circuit elements to assist in the
modeling, simulation, layout and verification of circuit designs.


Our approach to new product
development is driven by specific market requirements and by advances in
technology and design methodology. We have adopted a systematic approach of
using our field application engineers and strategic marketing personnel to
identify new market opportunities for ASSPs applicable to a broad range of
customers within our targeted markets. We then consult with our circuit
designers to determine whether it is technically feasible to develop such ASSPs.


Manufacturing
Process Technology.We use a variety of semiconductor process technologies for our
products in order to meet the particular requirements of different customers and
applications. Our manufacturing process technologies include:


Dielectric
Isolation (DI) Complementary Bipolar Technology. Dielectric isolation is a
manufacturing technique that uses insulating oxide to isolate transistors from
each other electrically. This technique has the inherent advantages of low
electrical capacitance, which allows high speed signal processing and minimizes
cross-talk or unwanted interference from other signals, and higher voltage
operation, which is useful for communications and many other analog
applications. We fabricate wafers for our products using our DI technology at
our own facilities. Our dielectric isolation wafers are also fabricated at a
third party foundry.


7
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|Junction
Isolation Complementary Bipolar Technology. We use junction isolation
complementary bipolar technologies primarily for high-speed applications, such
as, video amplifiers and video ASSPs. Junction isolation complementary bipolar
technology uses two different types of transistors to process high speed analog
signals efficiently in either positive or negative polarity, which substantially
simplifies the design process by allowing symmetrical design architectures,
permits improved speed and requires less power. We fabricate wafers for our
products using junction isolation complementary bipolar technology at a third
party foundry.


Complementary
Metal-Oxide-Semiconductor (CMOS) Technology. Since 1992, we have pursued a
strategy to provide a wider range of products using analog/mixed-signal CMOS
technology. This type of CMOS technology enables the design of circuits with
lower power consumption than bipolar circuits, but with relatively lower speed,
and is well suited for analog switching and mixed signal applications. We use
several third party foundries to supply wafers for our CMOS products.


Silicon-On-Insulator
(SOI) Technology. We recently introduced a silicon-on-insulator technology
called bonded wafer. Bonded wafer technology uses two flat oxidized silicon
wafers that are thermally bonded to one another. After the bonding process, one
wafer is precisely ground and polished to form a thin silicon layer supported by
the insulating oxide and the remaining silicon wafer. This thin silicon layer is
suitable for making individual elements of the semiconductor circuits that are
electrically isolated from each other by insulating oxide to provide performance
characteristics superior to those achievable with most other technologies. We
fabricate wafers for our products using SOI technology at our own facilities.


Manufacturing


Fabrication. We
manufacture wafers for our DI and SOI products in our own facilities at
Milpitas, California. We supplement our manufacturing capabilities by using
third party foundries to produce junction isolation complementary bipolar
wafers, CMOS and DI wafers. Using third party foundries enables us to focus on
our design strengths and minimize fixed costs and capital expenditures while
providing access to diverse manufacturing technologies without bearing the full
risk of obsolescence.


Testing and
Assembly. We initially test each integrated circuit on the wafers produced
by us and our foundries for compliance with performance specifications before
assembly. Our products are then assembled by a variety of subcontractors in
Asia. Following assembly, the packaged units are sent to us for final testing
and inspection prior to shipment to customers. During final test, we perform
extensive testing on all circuits using advanced automated test equipment to
ensure that the circuits satisfy specified performance levels. All testing is
performed on standard test equipment using proprietary test programs developed
by our test engineers.


Quality Assurance.
We prequalify each third party foundry and subcontractor prior to entering into
full production. We also participate in quality monitoring of our wafer
manufacturing and assembly subcontractors. We closely monitor wafer
manufacturing production to enhance product quality and yield levels.


Reliability.Prior
to full scale production of new products, we perform a number of tests to
determine the reliability of the production units. For example, we perform
burn-in, scanning electron microscope examination, and environmental and motion
stress tests. During full scale production, we also audit our products to ensure
that they continue to meet our reliability standards.


Research and
Development


Our ability to compete
depends, in part, upon our continued introduction of technologically innovative
products on a timely basis. Our product development strategy emphasizes a family
of products for our target markets. Our research and development efforts are
directed primarily at designing and introducing new products and technologies
and, to a lesser extent, developing new testing and packaging techniques. We
continually upgrade our internal technology while also utilizing the technology
from third party foundries to develop new generations of products. In addition,
we continually refine our manufacturing practices and technology to improve the
yields of our products.


We have assembled a team of
highly skilled analog design engineers. The majority of our design engineers
work in our Milpitas facilities, while additional engineers work in our European
design facility in the United Kingdom. As performance demands have increased the
complexity of analog circuits, the design and development process has become a
multi-disciplinary effort, requiring expertise ranging from detailed knowledge
of device physics to expertise in device placement and packaging. We support our
design engineers with an infrastructure of process engineers, product engineers
and test engineers.


8
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---------------------------------

|Our research and
development expenses were $22.8 million or 20.3% of net revenues for fiscal
2001, $14.9 million or 14.7% of net revenues for fiscal 2000 and $7.8 million or
15.4% of net revenues for fiscal 1999. These expenses consisted primarily of
salaries and related personnel costs, fees paid to consultants and outside
service providers, prototype costs and depreciation associated with development
tools.


Patents and
Licenses


We seek to protect our
proprietary technology through patents and trade secret protection. Currently,
we hold forty-seven United States patents and five foreign patents, expiring
between the years 2006 and 2018. We also have nine pending United States patent
applications, although we cannot be certain that any patents will result from
these applications. While we intend to continue seeking patent coverage for our
products and manufacturing technology where appropriate, we believe that our
success depends more heavily on the technical expertise and innovative abilities
of our personnel. Accordingly, we also rely on trade secrets and confidential
technological know-how in the conduct of our business. We generally enter into
confidentiality agreements with our employees, consultants and other parties. We
cannot be certain that our patents or applicable trade secret laws provide
adequate protection for our technology against competitors who may develop or
patent similar technology or reverse engineer our products. In addition, the
laws of certain territories in which our products are or may be developed,
manufactured or sold, including Africa, Asia, Europe and Latin America, may not
protect our products and intellectual property rights to the same extent as the
laws of the United States.


Customers


We sell our products
worldwide to OEMs such as Cisco, Fujitsu, Hitachi, Lucent, Lucky Goldstar (LG),
NEC, Olympus, Philips, Ricoh, Samsung, Sanyo, Sony, Toshiba and Yamaha, both
directly and through distributors, such as, Microtek and Insight. Our products
are used in applications, such as, CD recordable devices, flat panel displays,
digital camcorders and digital subscriber line products.


We sell our products
worldwide through direct sales efforts and independent distributors. In some
countries, it is customary for OEMs to purchase our products through
distributors even though our sales office maintains the customer relationship.
We have direct business relationships with all major original equipment
manufacturers using our products.


Historically, a small
number of our customers have accounted for a significant portion of our net
revenues. In fiscal 2001, Microtek (our distributor for our products to
customers in Japan), Solectron and Samsung accounted for 24%, 13% and 11%,
respectively, of our net revenues. In fiscal 2000, Microtek accounted for 32% of
our net revenues and Samsung accounted for 12% of our net revenues. Microtek and
Insight accounted for 30% and 10% of our net revenues in the year ended
September 30, 1999. We have no long-term purchase contracts with these or any of
our other important customers, other than Microtek.


Competition


The semiconductor industry
is intensely competitive and is characterized by rapid technological change,
product obsolescence and price erosion. The analog integrated circuit segment of
the semiconductor industry is also intensely competitive, and many major
semiconductor companies presently compete or could compete in some segments of
our markets.


Competition within our
industry is based on a variety of factors, including:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | product
features, including product functionality and performance;
| | - |  | ------------------------------------------------------------------

| |  |  | product
quality and reliability;
| | - |  | --------------------------------

| |  |  | price;
| | - |  | ------

| |  |  | technical
support and customer service; and
| | - |  | -------------------------------------------

| |  |  | manufacturing
efficiency and capacity.
| | - |  | --------------------------------------

|We believe that we compete favorably
with respect to each of these factors. We intend to continue to address these competitive
factors by working to introduce product enhancements and new products, seeking to
establish our products as industry standards in their respective markets, and working to
reduce the manufacturing cost of our products.


9
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Competition among analog
semiconductor providers is intense at the design-in stage, when a manufacturer
is selecting a component provider for potential generations of future products.
We believe that, by virtue of our design expertise, manufacturing process
technology expertise and specialized application knowledge, we compete favorably
in the areas of rapid product introduction, product innovation, quality,
reliability and performance.


Our primary competitors are
Analog Devices, Inc., Texas Instruments Inc., Linear Technology Corporation,
National Semiconductor Corporation and Maxim Integrated Products, Inc. We also
compete indirectly with the in-house design staffs of some of our customers,
which often provide alternative solutions for individual analog systems
requirements. As we expand our product lines, we expect that competition will
increase with these and other domestic and foreign companies. Although foreign
companies traditionally have not focused on the high performance analog market,
many foreign companies, particularly Asian companies, have the financial and
other resources to participate successfully in these markets.


Employees


As of September 30, 2001,
we had 311 full-time employees. Of the total, 48 are in sales and marketing, 163
in manufacturing, 71 in engineering and product development, and 29 in finance
and administration. Geographically, 293 employees are located in the United
States and 18 are located overseas. None of our employees are represented by any
collective bargaining agreement, and we have never experienced a work stoppage.
We consider our relations with our employees to be good.


Executive
Officers and Directors of the Company


The following table sets
forth information regarding our executive officers and directors.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Name                 | Age |  | Position                                                                           
|-------------------- | --- |  | -----------------------------------------------------------------------------------
|                    
|Richard Beyer        | 53  |  | President, Chief Executive Officer and Director                                    
|                    
|Brian McDonald       | 45  |  | Vice President of Finance and Administration, Chief Financial Officer and Secretary
|                    
|Rajeeva Lahri        | 46  |  | Senior Vice President of Technology and Operations                                 
|                    
|Alden J. Chauvin, Jr | 55  |  | Vice President of Worldwide Sales                                                  
|                    
|Mohan Maheswaran     | 38  |  | Vice President of Marketing and Business Development                               
|                    
|James V. Diller      | 66  |  | Chairman of the Board and Director                                                 
|                    
|Chuck K. Chan (1,2)  | 51  |  | Director                                                                           
|                    
|Alan V. King (1,2)   | 66  |  | Director                                                                           
|                    
|Umesh Padval (1)     | 44  |  | Director                                                                           

|(1) Member of the Audit Committee
(2) Member of the Compensation Committee


Richard
Beyer has been the President, Chief Executive Officer and Director since July 2000.
From January 1999 through July 2000, Mr. Beyer served as President, Chief Executive
Officer and Director at FVC.COM, Inc. From July 1996 through August 1998, Mr. Beyer
served as President, Chief Operating Officer, and director of VLSI Technology,
Incorporated. From June 1995 through June 1996, Mr. Beyer served as Executive Vice
President and Chief Operating Officer at National Semiconductor Corporation, and from
February 1993 through May 1995 he held the position of President of the Communications
and Computing Group of National Semiconductor Corporation. Prior to this, Mr. Beyer
served in a number of senior managerial positions in the telecommunications and computer
industries. Richard Beyer served three years as an officer in the United States Marine
Corps. In addition, Mr. Beyer serves on the Board of a privately held company. He holds a
B.S. degree and a M.S. degree in Russian from Georgetown University as well as an M.B.A.
degree in marketing and international business from Columbia University.


10
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Brian
McDonald has served as Vice President of Finance and Administration and
Chief Financial Officer since January 2001. From April 1999 through December
2000, Mr. McDonald served as Vice President and Chief Financial Officer at
Mattson Technology Inc. From August 1998 through March 1999, Mr. McDonald served
as an independent financial consultant working with various Silicon Valley high
technology companies. From August 1996 through July 1998, Mr. McDonald served as
Vice President of Finance for the Central Technology and Manufacturing Division
of National Semiconductor Corporation, and from September 1993 through July
1996, he held the position of Vice President of Finance of the Data Management
Division (now Fairchild Semiconductor). Prior to this Mr. McDonald held senior
finance positions at Read-Rite Corporation, Micro Linear Corporation and
National Semiconductor Corporation. Mr. McDonald holds a BA degree from the
University of Santa Clara.


Alden
Chauvin has served as Vice President of Worldwide Sales since April 1999.
Mr. Chauvins professional experience has included the position of Vice
President of Worldwide Sales, based in Singapore, of Tritech Microelectronics, a
division of Singapore Technologies, from July 1997 through August 1998. In June
1986 he joined Sierra Semiconductor Corporation (now PMC-Sierra) as Vice
President of North America Sales and served as Vice President of Worldwide Sales
from 1995 through June 1997. Prior to Sierra Semiconductor, Mr. Chauvin served
in various sales and marketing management positions over a 17-year period at
Texas Instruments, Inc. Mr. Chauvin holds a Bachelors degree in industrial
technology from Louisiana State University.


Mohan
Maheswaran was appointed to Vice President of Marketing and Business
Development in July 2001; and prior to this, Mr. Maheswaran served as Vice
President of Corporate Strategy and Business Development since January 2001.
From January 2000 through December 2000, Mr. Maheswaran served as Vice President
of Marketing and Business Development at Allayer Communications, a company that
was recently acquired by Broadcom. Prior to this, Mr. Maheswaran was Vice
President of Strategy for IBM Microelectronics from January 1998 to January
2000. Previously, Mr. Maheswaran worked for Texas Instruments in the United
Kingdom and then in Dallas, Texas. At Texas Instruments, he held various
positions in marketing, sales, applications and business unit management from
1989 to 1998. Prior to this, Mr. Maheswaran was the Mass Storage Project Manager
at Hewlett-Packard from 1986 to 1989 and subsequent to this began his career as
a Systems Design Engineer at Nortel from 1984 to 1986. Mr. Maheswaran holds an
M.B.A from Henley Executive Management College in the UK and a B.S. degree in
electrical engineering from Surrey University in the UK.


Dr.
Rajeeva Lahri has served as Senior Vice President of Technology and Operations since
April 2001. Prior to this, Dr. Lahri served as Senior Vice President and Chief Operating
Officer for Tessera Inc., a company that provides intellectual property for chip-scale
packaging. Prior to Tessera, Dr. Lahri served as Senior Vice President and Deputy Chief
Technology Officer for Philips Semiconductor. Previously; Dr. Lahri was the Senior Vice
President of Corporate Technology and Customer Engineering for VLSI Technology Inc.,
prior to its acquisition by Philips Semiconductor. His prior experience also included the
position of Director of Technology Development at Fairchild/National Semiconductor, and
the position of Member of Technical Staff for the CMOS R&D group at Hewlett Packard
Corporation. Dr. Lahri holds a Master of Science degree in physics and a Master of
Technology degree in solid state electronics, both from the Indian Institute of
Technology in Kanpur, India. In addition, Dr. Lahri holds a Ph.D. in electrical
engineering from State University of New York in Buffalo, New York.


James
Diller has been Chairman of the Board since 1997 and a Director since 1986. From
November 1998 to July 2000, he served as our President and Chief Executive Officer. Mr.
Diller was a Founder of PMC-Sierra, Inc. a communications semiconductor company, was its
President and Chief Executive Officer from 1983 to 1997 and is currently its
Vice-Chairman of the Board. Mr. Diller has been a director of Sierra Wireless, a provider
of wireless data communications hardware and software products, since 1993. In addition,
Mr. Diller serves on the Board of Directors of a privately held company. Mr. Diller holds
a B.S. degree in physics from the University of Rhode Island.


Dr.
Chuck Chan has been a director since January 1992 and also served as a Director from
1983 to 1984. Dr. Chan has been a Partner in Alpine Technology Ventures, a venture
capital firm, since December 1994 and was a Partner in Associated Venture Investors, a
venture capital firm from 1982 to 1996. In addition, Dr. Chan serves on the Board of
Directors of a number of privately held companies. Dr. Chan holds B.S., M.S. and Ph.D.
degrees in physics from the Massachusetts Institute of Technology and a M.B.A. degree
from Harvard University.


11
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Alan
Kinghas been a director since December 1997. Mr. King has been a Director of
Persistence Software, Inc., a publicly traded software company, since June 2001. Mr. King
has been serving as Chairman of IDS Software Systems, a privately held developer of yield
management tools for the semiconductor industry since February 2001. Mr. King has been
Chairman of the Board of Volterra Semiconductor Corporation, a start-up company
developing power management integrated circuits since September 1996. In addition, Mr.
King was previously the Chief Executive Officer of Volterra from September 1996 to August
2000. Mr. King was President and Chief Executive Officer of Silicon Systems, Inc., a
semiconductor company, from September 1991 to November 1994 and was President and Chief
Executive Officer of Precision Monolithics, Inc., a semiconductor company, from September
1987 to September 1991, and from September 1986 to September 1987 he was its Executive
Vice President. In addition, Mr. King serves on the Board of Directors of a number of
privately held companies. Mr. King holds a B.S. degree in engineering from the University
of Washington.


Umesh
Padval has been a director since November 1999. Mr. Padval is currently Senior Vice
President of the Broadband Entertainment Division of LSI Logic Incorporated. Prior to
this, Mr. Padval was the President of C-Cube Microsystems Semiconductor Division since
October 1998 and was named Chief Executive Officer and Director of C-Cube Microsystems
Incorporated from May 2000 to June 2001. Prior to joining C-Cube, Mr. Padval served as
Senior Vice President and General Manager of the Consumer Digital Entertainment Division
at VLSI Technology, Inc. from May 1997 to October 1998, and as Senior Vice President and
General Manager for VLSIs Computing Solution Division from 1987 to April 1997. Before
joining VLSI Technology, Mr. Padval worked for Advanced Micro Devices, where he held a
variety of marketing and engineering positions. Mr. Padval holds a B.S. degree in
engineering from the Indian Institute of Mumbai, India, a M.S. degree in engineering from
Pennsylvania State University, and a M.S. degree in engineering from Stanford University.


Each director holds office
until the next annual meeting of stockholders and until his successor has been
elected and qualified or until his earlier resignation or removal. Each officer
was chosen by our board of directors and serves at the pleasure of our board of
directors until his successor is appointed or until his earlier resignation or
removal.


12
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ITEM 2:
PROPERTIES


Our corporate headquarters,
which serve as our principal administrative, sales, marketing, manufacturing,
and research and development offices, are located in three buildings in
Milpitas, California. We lease approximately 39,000 square feet of space in one
building for our manufacturing and engineering functions pursuant to a lease
that expires on June 30, 2005. We have a seven year lease expiring on October 1,
2003 for a total of approximately 21,500 square feet of space located in another
building adjacent to our manufacturing facility for administrative functions. We
also have a lease expiring on May 15, 2005 for a total of approximately 21,000
square feet of space in a third building adjacent to our manufacturing facility
for testing, quality assurance and product engineering.


In addition to our
headquarters and our manufacturing facilities, we have field offices for some of
our sales staff and field application engineers located in Massachusetts, New
Hampshire, United Kingdom, Germany, South Korea and Japan. We lease
approximately 1,331 square feet of space for our sales office in the Boston,
Massachusetts metropolitan area, approximately 300 square feet for our sales
office in Nashua, New Hampshire, approximately 1,112 square feet for our sales
office in Wokingham, United Kingdom, approximately 403 square feet for our sales
office in Kempen, Germany, approximately 350 square feet for our sales office in
Seoul, South Korea and approximately 1,457 square feet for our technical sales
support center in Yokohama, Japan. We also lease approximately 3,434 square feet
for our design center in Harlow, United Kingdom and approximately 1,580 square
feet for our administrative office in Bridgetown, Barbados. We believe that our
existing facilities are adequate to meet our current needs.


ITEM 3: LEGAL
PROCEEDINGS


The Company is not a party
to any material legal proceedings.


ITEM 4:
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS


No matters were submitted
to a vote of security holders during the quarter ended September 30, 2001.


13
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|PART II
|-------

|ITEM 5: |  | MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
|------- |  | ---------------------------------------------------------------------

|Price Range Of Common
Stock


Our common stock has been
traded on the Nasdaq National Market under the Nasdaq symbol ELNT
since our initial public offering on October 11, 1995. As of
September 30, 2001, there were approximately 184 stockholders of
record, and we believe there are in excess of 13,000 beneficial stockholders of
our common stock. The high and low closing sale prices of Elantecs Common
Stock on the Nasdaq National Market for each fiscal quarter for our last two
fiscal years were as follows:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Common Stock Prices |  | HIGH                             |  | LOW |   |        
| | ------------------- |  | -------------------------------- |  | --- | - | -------
| |                     |  | Quarter ended September 30, 2001 |  |     | $ | 41.000 
| |                     |  | Quarter ended June 30, 2001      |  |     |   | 37.510 
| |                     |  | Quarter ended March 31, 2001     |  |     |   | 56.063 
| |                     |  | Quarter ended December 31, 2000  |  |     |   | 121.750
|
| |                     |  | Quarter ended September 30, 2000 |  |     | $ | 101.688
| |                     |  | Quarter ended June 30, 2000      |  |     |   | 75.625 
| |                     |  | Quarter ended March 31, 2000     |  |     |   | 47.500 
| |                     |  | Quarter ended December 31, 1999  |  |     |   | 16.688 

|Dividend Policy


We have never declared or paid any
cash dividends on our common stock, and do not anticipate paying any cash dividends on
our common stock in the foreseeable future. We currently intend to retain future
earnings, if any, to finance our operations and expand our business. Any future
determination to pay cash dividends will be at the discretion of our board of directors
in light of our earnings, financial condition, operating results, capital requirements
and other factors, as our board of directors may deem relevant.


14
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ITEM 6: SELECTED
FINANCIAL DATA


The following selected consolidated
financial data is qualified by reference to and should be read in conjunction with the
consolidated financial statements and related notes thereto and the section captioned
Managements Discussion and Analysis of Financial Condition and Results of Operations
and other financial information included elsewhere in this Report on Form 10-K.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                           | September 30 (1)                      | 
|------------------------------------------ | ------------------------------------- | 
|                                           | 2001                                  | 
|                                           | (in thousands, except per share data) | 
|Consolidated Statement of Operations Data: |                                       | 
|Net revenues                               |                                       | 
|Gross profit                               |                                       | 
|Income (loss) from operations              |                                       | 
|Income (loss) before taxes                 |                                       | 
|Net income (loss) (2)                      |                                       | 
|Earnings (loss) per basic share (3)        |                                       | 
|Earnings (loss) per diluted share (3)      |                                       | 
|Number of shares used in computing:        |                                      
|Basic per share amounts (3)                |                                       | 
|Diluted per share amounts (3)              |                                       | 

|                                 | 2001           |  | 2000 |         | 1999 |   | 1998    |  | 1997 |       
|-------------------------------- | -------------- |  | ---- | ------- | ---- | - | ------- |  | ---- | ------
|                                 | (in thousands) | 
|Consolidated Balance Sheet Data: |                |  |      |         |      |   |         |  |      |       
|Working capital                  |                |  | $    | 193,168 |      | $ | 176,564 |  | $    | 21,528
|Total assets                     |                |  |      | 240,059 |      |   | 228,926 |  |      | 43,871
|Long-term obligations            |                |  |      | 2,197   |      |   | 3,339   |  |      | 4,585 
|Total stockholders equity       |                |  |      | 219,382 |      |   | 200,650 |  |      | 29,526

|
|

|(1) |  | Our
fiscal periods end on the Sunday closest to the end of the calendar period. For ease of
presentation, each fiscal period has been shown as ending on September 30.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Financial
data for fiscal 2001 include restructuring and impairment pre-tax charges of $15.9
million. In fiscal 2001 we experienced a sudden and significant decrease in the demand on
our internal fabrication facility and we also decided to discontinue new product and
process development in our internal fabrication facility. As a result, we concluded that
the projected production volume and related cash flow from our internal fabrication
facility was not sufficient to recover its carrying value. The company also took pre-tax
excess inventory charges of $1.9 million to cost of sales.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Financial
data for fiscal 1999 include restructuring and impairment pre-tax charges of $12.0
million, resulting from our conclusion that projected production volume and related cash
flow from the our internal fabrication facility were not sufficient to recover its
carrying value. Also in connection with the restructuring the company took pre-tax excess
inventory charges of $1.0 million to cost of sales.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Financial
data for fiscal 1998 includes a reversal of valuation allowance for certain deferred tax
assets resulting in an income tax benefit of $3.9 million.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | See
Note 1 of Notes to Consolidated Financial Statements for an explanation of the
determination of the number of shares used in computing earnings (loss) per share.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

|15
|--

|
|

|ITEM 7: |  | MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|------- |  | --------------------------------------------------------------------------------------

|The following discussion
and analysis of our financial condition and results of operations should be read
in conjunction with the consolidated financial statements and the related notes
included elsewhere in this Form 10-K. This discussion and analysis contains
forward-looking statements that involve risks and uncertainties. Our actual
results may differ from those anticipated in those forward-looking statements as
a result of a number of factors, including those set forth in factors
affecting future operating results and elsewhere in this Form 10-K.


Overview


We are a leading designer,
manufacturer and marketer of high performance analog integrated circuits.
Through our design expertise, process technology expertise and specialized
application knowledge, we have developed and sell approximately 170 innovative
products, including amplifiers, drivers, faders, transceivers and multiplexers,
to a large and diverse group of customers worldwide. We target four high growth
commercial markets: video, optical storage, communications and power management.


We were incorporated in
California in July 1983 as Elantec, Inc. In September 1995, we reincorporated in
Delaware as Elantec Semiconductor, Inc., and in October 1995, we completed our
initial public offering. We introduced our first products in fiscal 1984, and,
during the period from fiscal 1984 to fiscal 1989, military and commercial
hybrid product sales represented the majority of our net revenues. Beginning in
fiscal 1989, we changed our strategy to focus on high growth commercial markets.
We announced the discontinuance of our military and commercial hybrid products
in July 1997, and shipments of these products ended in September 1999. Beginning
in fiscal 1999, we narrowed our product focus, concentrating on our current
markets where we could exploit our design and process technology expertise. We
opened a design center in the United Kingdom in the third quarter of fiscal
2000.


In the first quarter of
fiscal 1999, we took a pre-tax restructuring and impairment charge of $12.0
million for retired and impaired fixed assets associated with our plan to
restructure our manufacturing operations by moving towards a primarily
outsourced model. We restructured our operations in response to a shift in the
mix of products fabricated internally compared to products fabricated by outside
foundries, which caused significant over-capacity in our internal 4-inch
fabrication facility. Also, in connection with the restructuring, we took
pre-tax excess inventory charges of $1.0 million to cost of sales.


In fiscal 2001, we took
pre-tax restructuring and impairment charges of $15.6 million attributable to
the retirement and impairment of existing bipolar process development tools due
to our decision to outsource our future advanced bipolar wafer process
development and related production requirements. Also, we took pre-tax charges
of $1.9 million for excess inventory resulting from the decrease in forecasted
demand in our communications business, as well as severance expenses of $0.3
million. We restructured our operations because we realized that to continue
designing competitive products, we would require access to leading edge
manufacturing technologies.


Our net revenues are
derived from the sale of analog integrated circuits. We have developed a broad
range of high performance application specific standard products, or ASSPs, and
standard products for our four target markets. In fiscal 2001, video represented
35%, communications represented 31%, optical storage represented 30% and power
management and others represented 4% of net revenues.


We sell our products both
domestically and internationally to a large and diverse group of original
equipment manufacturers, or OEMs, through a combination of direct sales offices,
independent sales representatives and distributors. In fiscal 2001, sales to
Microtek International in Japan, Solectron in the US and Samsung Electronics in
South Korea accounted for 24%, 13% and 11%, respectively of our net revenues.
Microtek is a distributor who sells to a diverse base of OEMs, while Solectron
and Samsung are our direct customers.


16
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|We have focused our sales
and marketing efforts in Asia, North America and Europe. During fiscal 2001,
fiscal 2000 and fiscal 1999, 63%, 75% and 57%, respectively, of our net revenues
were derived from customers outside of North America. Our customers are both
distributors and OEMs. The majority of our international net revenues are
derived from sales through our distributors. We work with 14 distributors in
Asia and eight distributors covering Europe, Africa, South America and
Australia, each selling to OEMs within their own territory. We also work with 19
distributors and four independent sales representatives in North America. While
we are continuing to expand our sales organization worldwide, we expect that the
majority of our net revenues will continue to be derived from Asia in the
foreseeable future. Some of our sales in Japan are denominated in Japanese Yen
while our remaining sales worldwide are denominated in United States dollars.


We recognize revenues from
product sales to direct customers and foreign distributors upon shipment. We
defer the recognition of revenue on shipments to domestic distributors that have
certain rights of return and price protection privileges on unsold merchandise
until the merchandise is sold by the distributors.


We work with our customers
to achieve design wins whereby our products will be incorporated into our
customers products. Our customers then complete the design, testing and
evaluation of their products and begin the marketing process. Several months may
elapse between our sales efforts and our realization of revenues, if any, from
volume purchases of our products. The duration of the actual lapse depends upon
the product type and market segment. Our customers are not obligated by
long-term contracts to purchase our products and can generally cancel or
reschedule orders on short notice.


We manufacture
semiconductor wafers using our proprietary dielectric isolation and
silicon-on-insulator technologies. In addition, we utilize a limited number of
third party foundries for the manufacture of our junction isolation
complementary bipolar and complementary metal-oxide semiconductor, or CMOS,
wafers. We use third party subcontractors for assembly and packaging services.
We place purchase orders for specific quantities of wafers, and assembly and
packaging services. We test all wafers produced by us and our third party
foundries. In addition, we perform final testing on all packaged units.
Accordingly, a significant portion of our cost of revenues consists of payments
to our manufacturing subcontractors. Costs of revenues also encompass our
internal manufacturing and operations functions and a portion of our information
systems and facilities costs.


Research and development
expenses consist primarily of salaries and related personnel costs, fees paid to
consultants and outside service providers, prototype costs related to the
fabrication of our integrated circuits, and depreciation associated with
development tools. We expense our research and development costs as they are
incurred. Several components of our research and development initiatives require
significant expenditures, such as prototype expenses, the timing of which can
cause significant quarterly variability in our expenses. Because our research
and development is critical to our future success, we expect to continue to
increase our research and development expenditures.


Marketing, sales, general
and administrative expenses consist primarily of salaries and commissions and
related expenses for executives, finance, accounting, information services,
human resources, recruiting, professional fees and other corporate expenses, and
costs associated with promotional and other marketing activities. We expect to
continue to expand our direct and indirect sales operations in an attempt to
secure more design wins and increase product orders. We expect these expenses
will increase over the next year as we hire additional sales and marketing
personnel, initiate additional marketing programs to support our products,
establish new sales offices, amortize deferred stock compensation, add personnel
and incur additional costs related to the continued growth of our business. We
will continue to expand our use of independent sales representatives. In
addition, the complexity of integrating our products within our customers
systems requires highly trained field application engineers, customer service
and support personnel. We plan to continue to expand our field application
engineering and our customer service and support organization.


Results of
Operations


The following table sets
forth, as a percentage of net revenues, certain consolidated statement of
operations data for the periods indicated.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |      | Year ended September 30, |                                             
| | ---- | ------------------------ | --------------------------------------------
| | 2001 |                          | 2000                                        
| |      |                          | Net revenues                                
| |      |                          | Gross profit                                
| |      |                          | Operating expenses:                         
| |      |                          | Research and development                    
| |      |                          | Marketing, sales, general and administrative
| |      |                          | Restructuring and impairment charges        
| |      |                          | Income (loss) from operations               
| |      |                          | Income (loss) before income taxes           
| |      |                          | Net income (loss)                           

|17
|--

|Years ended September 30, 2001, 2000
and 1999


Net Revenues. In
fiscal 2001, net revenues were $112.5 million, an increase of 11.1% from the
$101.2 million reported in fiscal 2000. This increase over the prior year was
driven largely by strong growth in our communications market segment during the
first six months of fiscal 2001.


In fiscal 2001,
international net revenues were 62.8% compared to 75.1% in fiscal 2000. This
decrease was due primarily to a decline in our sales to Japan as demand for our
optical storage products softened when compared to fiscal 2000. In fiscal 2001,
sales in the optical storage market accounted for 29.5% of our net revenues
compared to 41.6% in fiscal 2000. Sales in the rest of Asia and Europe in fiscal
2001 remained flat from fiscal 2000.


Domestic net revenues in
fiscal 2001 increased to $41.9 million from $25.2 million in fiscal 2000 as a
result of strong demand for our communication product line in the first half of
fiscal 2001. However, in the second half of fiscal 2001, an excessive inventory
build up and weak demand for xDSL products significantly weakened the demand for
our communication products. As a percentage of total net revenues, domestic net
revenues in fiscal 2001 increased to 37.2% compared to 24.9% in fiscal 2000.


In fiscal 2000, net
revenues were $101.2 million, an increase of 100.0% from the $50.7 million
reported in fiscal 1999. This increase over the prior year was due to a
significant increase in total units shipped despite a decline in average selling
prices. Sales increased in all geographic areas, especially in Asia.


In fiscal 2000,
international net revenues were 75.1% compared to 57.4% in fiscal 1999. This
increase was due primarily to strong demand for our video and optical storage
products resulting from improved demand as well as improved conditions in Asia.


Domestic net revenues in
fiscal 2000 increased slightly to $25.2 million from $21.6 million in fiscal
1999 as a result of increased sales of our products despite the discontinuation
of our military and commercial hybrid product line at the end of fiscal 1999.
This product line accounted for $5.0 million or 9.8% of our product revenues in
fiscal 1999. As a percentage of total net revenues, domestic net revenues in
fiscal 2000 decreased from 42.6% in fiscal 1999 to 24.9%.


Inventory
Write-Down. In the third quarter of fiscal 2001, we announced that a
continued softness in our communications business led to a significant reduction
in the demand on our internal fabrication facility, sort and test operations.
During the several quarters preceding the announcement, we had expanded our
internal fabrication facility, sort and test operations in response to forecasts
of significant revenue growth in our communications business. However, we
experienced significant customer deferrals of delivery dates and order
cancellations in the communications business. Due to these customer actions, we
were left in a position of significant excess inventory, which based on current
and forecasted demand, will not be consumed during the products life cycle. As a
result, we took an excess inventory charge due to the sudden and significant
decrease in forecasted revenue in our communications business. Also in the
fourth quarter of fiscal 2001, we announced that we would cease new product and
process development in our internal dielectric isolation fabrication facility
and would outsource all new product and process dielectric isolation
development. As a result of that decision, we concluded that certain quantities
of dielectric inventory in excess of forecasted customer demand were likely
obsolete.


The pretax charge for
excess inventory was $1.9 million to cost of sales in fiscal 2001. We do not
currently anticipate that the excess inventory will be used at a later date. The
inventory write-down consisted of approximately $1.6 million related to work in
process and approximately $0.3 million related to finished goods. The amount of
dielectric inventory on the balance sheet, after the write-down, at September
30, 2001 was $4.2 million in work in process and $1.5 million in finished goods.


Gross Margin. In
fiscal 2001, gross margin was 53.6% compared to 60.8% in fiscal 2000. In fiscal
2001, we expanded our production capacity by adding manufacturing personnel,
capital equipment and leasehold improvements to support higher revenue
forecasts. However, as a result of general weakness in the economy, we were not
able to achieve our revenue targets. Hence the decline in gross margin was due
to absorption of higher fixed manufacturing costs over lower than anticipated
revenues. Also in the second half of fiscal 2001, we wrote down the carrying
value of our inventory by $1.9 million.


Gross margin was 60.8% for
fiscal 2000 compared to 47.1% in the corresponding period in fiscal 1999. The
improvement in gross margin reflects the allocation of fixed manufacturing costs
across a higher revenue base and improvements in manufacturing efficiencies and
yields as well as the write-down of inventory in the first quarter of fiscal
1999.


18
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|During the first quarter of
fiscal 1999, we implemented a plan to restructure our manufacturing operations
by moving towards a primarily outsourced model through a period of several
years. We further decided to discontinue development of future dielectric
process technology in favor of the silicon-on-insulator technology, where volume
production is expected to be outsourced if a suitable foundry is qualified. As a
result of that decision, we concluded that certain quantities of dielectric
inventory in excess of forecasted customer demand might become obsolete. Of the
$1.0 million write-down of inventory in the first quarter of fiscal 1999,
approximately $0.8 million related to work in process and approximately $0.2
million related to finished goods. The amount of dielectric inventory on the
balance sheet, after the write-down, at September 30, 2000 was $4.1 million in
work in process and $0.5 million in finished goods.


While we are working on
programs to continue to improve manufacturing efficiencies, we may encounter
difficulties due to delays with technology introduction, changes in product mix,
unfavorable manufacturing yields or other manufacturing difficulties in the
future. Gross margin may continue to fluctuate from quarter to quarter.


Research and Development
Expenses. Research and development expenses increased by $7.9 million or
53.3% for fiscal 2001 as compared to fiscal 2000. In fiscal 2001, research and
development expenses were 20.3% of net revenue. The increase in research and
development expenses in fiscal 2001 as compared to fiscal 2000 was due primarily
to an increase in prototype costs and depreciation associated with development
tools of $6.4 million and staffing and related compensation of $1.5 million,
particularly for design engineering personnel.


Research and development
expenses increased by $7.1 million or 91.0% for fiscal 2000 as compared to
fiscal 1999. In fiscal 2000, research and development expenses were 14.7% of net
revenue. The increase in research and development expenses in fiscal 2000 as
compared to fiscal 1999 was due primarily to an increase in staffing and related
compensation of $3.4 million, particularly for design engineering personnel,
fees paid to consultants and outside service providers of $1.4 million and
prototype costs and depreciation associated with development tools of $2.3
million. During the third quarter of fiscal 2000, we also opened a design center
in the United Kingdom.


Marketing, Sales,
General and Administrative Expenses. Marketing, sales, general and
administrative expenses increased by $2.7 million or 16.3% for fiscal 2001 as
compared to fiscal 2000. In fiscal 2001, marketing, sales, general and
administrative expenses were 16.9% of net revenue. The increase in these
expenses in fiscal 2001 as compared to fiscal 2000 was due primarily to an
increase in staffing and related compensation of $2.1 million, particularly
sales and marketing personnel, fees paid to consultants of $0.4 million and
other selling expenses of $0.2 million due to the increase in net revenues.


Marketing, sales, general
and administrative expenses increased by $5.5 million or 50.7% for fiscal 2000
as compared to fiscal 1999. In fiscal 2000, marketing, sales, general and
administrative expenses were 16.1% of net revenue. The increase in these
expenses in fiscal 2000 as compared to fiscal 1999 was due primarily to an
increase in staffing and related compensation of $3.1 million, particularly
sales and marketing personnel, fees paid to consultants of $0.2 million and
higher commissions paid to outside manufacturers representatives and other
selling expenses of $2.2 million due to the increase in net revenues.


Restructuring and
Impairment Charges. Our restructuring and impairment charges discussed above
consisted primarily of a write-down of certain equipment and severance costs.
These actions resulted in pretax charges of $15.9 million in fiscal 2001 and
$12.0 million in fiscal 1999. Approximately $15.6 million was utilized in fiscal
2001, $0.3 million was utilized in fiscal 2000 and $11.7 million was utilized in
fiscal 1999.


Interest and Other
Income, Net. Interest and other income, net was $8.6 million in fiscal 2001,
an increase of $7.3 million over fiscal 2000. The increase in interest and other
income was due primarily to higher levels of cash, cash equivalents and
short-term investments that arose from the proceeds of additional stock issued
by us in September 2000.


Interest and other income,
net was $1.6 million in fiscal 2000, an increase of $1.1 million over fiscal
1999. The increase in interest and other income was due primarily to higher
levels of cash, cash equivalents and short-term investments and gains from the
sale of foreign exchange forward contracts.


19
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Provision for (Benefit
from) Income Taxes. Our effective tax rate for fiscal 2001 was 35.0%
compared to 37.0% for fiscal 2000.


Our effective tax rate for
fiscal 2000 was 37.0% compared to (41.7%) for the comparable prior year period.
The fiscal 1999 provision for taxes on income reflected the benefit from the
restructuring and impairment charges we recorded in the first quarter of fiscal
1999. In addition, we reversed the remaining valuation allowance of $0.5 million
due to the conclusion that realization of the remaining deferred tax assets
subject to the valuation allowance was more likely than not. See Note 8 of Notes
to Consolidated Financial Statements.


Recent
Accounting Pronouncements


Business Combinations,
Goodwill and Other Intangible Assets. In June 2001, the Financial Accounting
Standards Board issued SFAS No. 141, Business Combinations and SFAS No.
142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that all
business combinations initiated after June 30, 2001 be accounted for under the
purchase method and addresses the initial recognition and measurement of
goodwill and other intangible assets acquired in a business combination. SFAS
No. 142 addresses the initial recognition and measurement of intangible assets
acquired outside of a business combination and the accounting for goodwill and
other intangible assets subsequent to their acquisition. SFAS No. 142 provides
that intangible assets with indefinite useful lives will not be amortized, but
will rather be tested at least annually for impairment. We are required to adopt
SFAS No. 142 no later than our fiscal year beginning September 30, 2002. We do
not carry any goodwill or other intangibles on our balance sheet as of September
30, 2001 and accordingly do not expect the adoption to have a material impact on
our financial statements.


Long-lived assets.In October
2001, the FASB issued SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived
Assets. SFAS No. 144 supersedes SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and addresses financial
accounting and reporting for the impairment or disposal of long-lived assets. This
statement is effective for fiscal years beginning after December 15, 2001. We will adopt
SFAS No. 144 on October 1, 2002. We do not expect the adoption of SFAS No. 144 to have a
material impact on our financial statements.


Factors
Affecting Future Operating Results


Except for historical
information contained herein, the matters set forth in this Report on Form 10-K,
including the statements in the following paragraphs, are forward-looking
statements that are dependent on certain risks and uncertainties including such
factors as, among others, delays in new product and process technology
announcements and product introductions by us or our competitors, competitive
pricing pressures, fluctuations in manufacturing yields, changes in the mix or
markets in which products are sold, availability and costs of raw materials,
reliance on subcontractors, the cyclical nature of the semiconductor industry,
industry-wide wafer processing capacity, political and economic conditions in
various geographic areas, and costs associated with other events, such as
under-utilization or expansion of production capacity, intellectual property
disputes, litigation, or environmental regulation and other factors described
below.


THE MARKETS IN WHICH WE
PARTICIPATE ARE INTENSELY COMPETITIVE, AND IF WE ARE UNABLE TO COMPETE
EFFECTIVELY, OUR OPERATING RESULTS COULD BE HARMED.


The analog semiconductor
industry is intensely competitive and is characterized by rapid technological
change, product obsolescence and price erosion. Increased competition has in the
past and could in the future result in price reductions, reduced gross margins
or loss of market share, any of which could harm our operating results. In our
primary markets, we compete with Analog Devices, Inc., Linear Technology
Corporation, Maxim Integrated Products, Inc., Texas Instruments Inc., Toshiba
and National Semiconductor Corporation. We also compete indirectly with the
in-house design staffs of some of our customers and end-users, which often
provide alternative solutions to individual analog systems requirements. Many of
our current and potential competitors have greater name recognition, larger
customer bases and greater financial, technical, manufacturing, marketing and
other resources than we do. As a result, they may be able to respond more
quickly to new or emerging technologies and changes in customer requirements,
devote greater resources to the development, promotion, sale and support of
their products, and reduce prices to increase market share. Moreover, there has
been significant merger and acquisition activity among our competitors and
potential competitors. These combinations may provide our competitors and
potential competitors with a competitive advantage over us by enabling them to
expand their product offerings and service capabilities to meet a broader range
of customer needs. In addition, the introduction of new technologies and new
market entrants may increase competitive pressures.


20
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|CYCLICALITY IN THE
SEMICONDUCTOR INDUSTRY HAS HISTORICALLY LED TO SUBSTANTIAL DECREASES IN DEMAND
FOR OUR PRODUCTS AND TECHNOLOGIES AND MAY DO SO IN THE FUTURE.


Our operating results are
subject to significant variation due to the cyclical nature of the semiconductor
industry. The semiconductor industry is currently experiencing a downturn that
is adversely affecting our operating results. Our net revenues for the quarters
ended June 30, 2001 and September 30, 2001 decreased 28% and 44% from the same
periods in fiscal 2000. Our net income decreased from $20.0 million in fiscal
2000 to $7.3 million in fiscal 2001. Our business depends upon the current and
anticipated market demand for analog semiconductors and products using analog
semiconductors. Prolonged downturns in the semiconductor industry will likely
lead to proportionately greater downturns in our net income or we may incur net
losses.


OUR OPERATING RESULTS ARE
LIKELY TO FLUCTUATE, WHICH COULD CAUSE US TO MISS EXPECTATIONS ABOUT THOSE
RESULTS AND CAUSE THE TRADING PRICE OF OUR COMMON STOCK TO DECLINE.


Our quarterly operating
results are likely to fluctuate, and if we fail to meet or exceed the
expectations of securities analysts or investors, the trading price of our
common stock could decline. Some of the important factors that could cause our
net revenues and operating results to fluctuate from period to period include:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | shifts
in demand for, and average selling prices of, our products;
| | - |  | ------------------------------------------------------------------

| |  |  | the
reduction, rescheduling or cancellation of orders by our customers;
| | - |  | -----------------------------------------------------------------------

| |  |  | the
timing and success of product introductions and new technologies by our competitors and
us;
| | - |  | -----------------------------------------------------------------------------------------------

| |  |  | the
quantities of our products which we or third parties can manufacture and deliver in a
quarter;
| | - |  | --------------------------------------------------------------------------------------------------

| |  |  | the
timing of our investments in research and development;
| | - |  | ----------------------------------------------------------

| |  |  | the
timing and provision of pricing protections and returns from our customers;
| | - |  | -------------------------------------------------------------------------------

| |  |  | competitive
pressures on selling prices;
| | - |  | ----------------------------------------

| |  |  | the
length of our sales cycle;
| | - |  | ------------------------------

| |  |  | availability
of manufacturing capacity for our products;
| | - |  | --------------------------------------------------------

| |  |  | fluctuations
in manufacturing yields; and
| | - |  | -----------------------------------------

| |  |  | changes
in product mix
| | - |  | ----------------------

|As a result of these
factors our operating results may vary widely. We believe that period-to-period
comparisons of our net revenues and operating results are not necessarily
meaningful and, should not be relied upon as indications of future performance.


WE DEPEND UPON THE
CONTINUED DEMAND FOR OUR PRODUCTS IN THE COMMUNICATION, VIDEO AND OPTICAL
STORAGE MARKETS FOR A SIGNIFICANT PORTION OF OUR NET REVENUES.


We have derived, and expect
to continue to derive, a significant portion of our net revenues from products
that we sell in the communications, video and optical storage markets.
Therefore, our success depends in part on the continued acceptance of our
products within these markets and our ability to continue to develop and
introduce new products on a timely basis for these markets. In addition,
although the communications, video and optical storage markets have grown
rapidly in the last few years, we have recently experienced a slowdown in these
markets and cannot be certain that these markets will return to growth in the
future. A prolonged downturn in these markets could harm our business and
operating results.


21
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|THE FAILURE TO MANAGE AND
SUSTAIN OUR GROWTH MAY HARM OUR BUSINESS.


Our ability to continue to
grow successfully requires an effective planning and management process. Since
September 30, 1999, we increased our headcount substantially, from 175 employees
to 311 at September 30, 2001. Our growth has placed, and the recruitment and
integration of additional employees will continue to place, a significant strain
on our infrastructure, internal systems and other resources. To manage our
growth effectively, we must continue to improve and expand our operational,
financial and management information systems in a timely and efficient manner
and invest the necessary capital. We cannot assure you that those resources will
be available when we need them or that we will have sufficient capital to
invest. If we are unable to manage and sustain our growth, our operating results
may be harmed.


DIFFICULTIES IN ESTIMATING
THE AMOUNT AND TIMING OF SALES TO OUR CUSTOMERS COULD HARM OUR OPERATING
RESULTS.


It is difficult for us to
forecast accurately the timing and amount of sales to our customers, which
include distributors and original equipment manufacturers, or OEMs. Our
customers generally take a long time to evaluate our products and technologies
before committing to design our products into their systems. Moreover, our
business is characterized by short-term orders and shipment schedules, and
customer orders typically can be canceled or rescheduled on short notice to us
and without significant penalty to our customers. We do not have substantial
noncancellable backlog and often we are forced to obtain inventory and materials
from our manufacturing subcontractors in advance of anticipated customer demand.
Because we incur expenses, many of which are fixed, based in part on our
forecasts of future product sales, our operating results could be harmed if
sales levels are below our expectations.


OUR NET REVENUES MAY
DECREASE IF WE LOSE ANY OF OUR SIGNIFICANT CUSTOMERS, THEREBY HARMING OUR
OPERATING RESULTS.


A relatively small number
of customers have accounted for a significant portion of our net revenues in any
particular period. For the year ended September 30, 2001, Microtek
International, Inc., Solectron and Samsung accounted for 24%, 13% and 11% of our
net revenues. The loss of any significant customer coupled with our inability to
obtain orders from new customers to compensate for such loss could cause our net
revenues to decline, thereby harming our operating results.


We have no long-term
purchase commitments with these or any of our other important customers. These
customers, therefore, could cease purchasing our products with short notice to
us and without significant penalty to our customers. In addition, Microtek is a
distributor of our products to various OEMs. Any of these OEMs could choose to
reduce or eliminate orders that would reduce our distributors orders for
our products.


We anticipate that sales of
our products to a relatively small number of customers will continue to account
for a significant portion of our net revenues. Due to these factors, the
following may reduce our operating results:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | reduction,
delay or cancellation of orders from one or more of our significant distributors or OEMs;
| | - |  | ----------------------------------------------------------------------------------------------------

| |  |  | development
by one or more of our significant distributors or end-user customers of other sources of
supply;
| | - |  | ------------------------------------------------------------------------------------------------------------

| |  |  | selection
by one or more of our significant OEMs of devices manufactured by one or more of our
competitors for inclusion in future product generations;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | sales
of competing products by our distributors; or
| | - |  | ---------------------------------------------------

| |  |  | failure
of one of our significant customers to make timely payment of our invoices.
| | - |  | -----------------------------------------------------------------------------------

|22
|--

|WE MUST ACHIEVE NEW DESIGN
WINS, AND THESE DESIGN WINS MUST TRANSLATE INTO CUSTOMER PURCHASES.


Our success depends in part
upon achieving design wins for our products with current and future customers.
Design wins are indications by existing and potential customers that they intend
to incorporate our products into their new product designs. To achieve design
wins, we must continually increase the performance levels of our products, keep
pace with evolving industry standards and introduce new products in a timely
manner. If we fail to achieve design wins, we may lose potential sales
opportunities. However, customer decisions to use our products can often require
significant expenditures by us without any assurance of success. Design wins
also do not necessarily result in purchase orders for our products. In addition,
it could take up to several months before a design win translates into a
purchase order, if at all. The value of any design win, moreover, will largely
depend upon the commercial success of our customers product and on the
extent to which the design of the customers electronic system accommodates
components manufactured by our competitors.


IF WE FAIL TO DEVELOP AND
INTRODUCE NEW PRODUCTS ON A TIMELY BASIS, WE MAY NOT BE ABLE TO ATTRACT AND
RETAIN CUSTOMERS.


We operate in an industry
that is characterized by rapidly changing technology, frequent product
introductions, product obsolescence, and ongoing demands for greater performance
and functionality. We, therefore, must continually design, develop and introduce
on a timely basis new products with improved features to retain and attract
customers and be competitive. Successful product development and introduction on
a timely basis requires that we:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | design
innovative and performance-enhancing features that differentiate our products from those
of our competitors;
| | - |  | -------------------------------------------------------------------------------------------------------------------

| |  |  | transition
our products to new manufacturing technologies;
| | - |  | ----------------------------------------------------------

| |  |  | identify
emerging technological trends in our target markets, including new standards for our
products;
| | - |  | -------------------------------------------------------------------------------------------------------

| |  |  | accurately
identify and design new products to meet market needs;
| | - |  | -----------------------------------------------------------------

| |  |  | bring
products to market on a timely basis at competitive prices and maintain effective
marketing strategies;
| | - |  | -------------------------------------------------------------------------------------------------------------

| |  |  | maintain
a high level of investment in research and development;
| | - |  | ----------------------------------------------------------------

| |  |  | respond
effectively to technological changes or product announcements by others; and
| | - |  | ------------------------------------------------------------------------------------

| |  |  | adjust
to changing market conditions as quickly and cost-effectively as necessary to compete
successfully.
| | - |  | ----------------------------------------------------------------------------------------------------------

|We cannot assure you that
we will be able to meet the design and market introduction schedules for our new
products or enhancements to our existing products or that these products will
achieve market acceptance.


IN ORDER TO REMAIN
COMPETITIVE IN THE ANALOG SEMICONDUCTOR INDUSTRY, WE MUST DEVELOP AND INTRODUCE
NEW SEMICONDUCTOR DESIGN AND PROCESS TECHNOLOGIES ON A TIMELY BASIS.


Our future success depends
upon our ability to:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | design
and develop products that utilize new process technologies;
| | - |  | ------------------------------------------------------------------

| |  |  | secure
the availability of our new process technologies from our foundry;
| | - |  | -------------------------------------------------------------------------

| |  |  | introduce
new process technologies to the marketplace earlier than our competitors do; and
| | - |  | ------------------------------------------------------------------------------------------

| |  |  | transfer
our product design to multiple foundries efficiently.
| | - |  | --------------------------------------------------------------

|23
|--

|Semiconductor design and
process methodologies are subject to rapid technological change, and require
large expenditures for research and development. We incurred research and
development expenses of $22.8 million in fiscal 2001. We expect that our
expenses for research and development will continue to increase because we
continuously attempt, on a product-by-product basis, to migrate to smaller
geometry process technologies. Other companies in the industry have experienced
difficulty in transitioning to new manufacturing processes and, consequently,
have suffered reduced yields or delays in product deliveries. While we believe
that transitioning our products to smaller geometries will be important for us
to remain competitive, we cannot be certain that we can make these transitions
successfully and on a cost-effective basis.


DUE TO OUR SIGNIFICANT
LEVEL OF INTERNATIONAL SALES AND THE UTILIZATION OF FOREIGN MANUFACTURERS AND
SUBCONTRACTORS, WE ARE SUBJECT TO INTERNATIONAL OPERATIONAL, FINANCIAL AND
POLITICAL RISKS.


Sales of our products to
customers outside the United States have accounted for a significant part of our
net revenues. Our net international sales, as a percentage of our net revenues
were 63% for the year ended September 30, 2001, 75% for the year ended September
30, 2000 and 57% for the year ended September 30, 1999. We expect net
international sales, particularly into Japan, Taiwan and South Korea, to
continue to account for a significant percentage of our net revenues in the
future. In addition, we expect to continue to rely on manufacturers and
subcontractors located in Taiwan, Malaysia and Thailand. Accordingly, we will be
subject to risks and challenges that we would not otherwise face if we conducted
our business only in the United States. These include:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | compliance
with a wide variety of foreign laws and regulations;
| | - |  | ---------------------------------------------------------------

| |  |  | changes
in laws and regulations relating to the import or export of semiconductor products;
| | - |  | -------------------------------------------------------------------------------------------

| |  |  | legal
uncertainties regarding taxes, tariffs, quotas, export controls, export licenses and
other trade barriers;
| | - |  | ----------------------------------------------------------------------------------------------------------------

| |  |  | political
and economic instability in or foreign conflicts involving the countries of our
customers, manufacturers and subcontractors causing delays or reductions in orders for
our products;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | difficulties
in collecting accounts receivable and longer accounts receivable payment cycles;
| | - |  | ---------------------------------------------------------------------------------------------

| |  |  | difficulties
in staffing and managing personnel, distributors and representatives in foreign countries;
| | - |  | -------------------------------------------------------------------------------------------------------

| |  |  | reduced
protection for intellectual property rights in some countries, particularly in Asia;
| | - |  | --------------------------------------------------------------------------------------------

| |  |  | currency
exchange rate fluctuations, which could increase the price of our products in local
currencies and thereby reduce our revenue from these sales;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | seasonal
fluctuations in purchasing patterns in other countries; and
| | - |  | --------------------------------------------------------------------

| |  |  | fluctuations
in freight rates and transportation disruptions.
| | - |  | -------------------------------------------------------------

|Any of these factors could
harm our existing international operations and business or impair our ability to
continue expanding into international markets. To the extent we are unable to
expand our net international sales in a timely and cost-effective manner, our
business could be harmed. We cannot assure you that we will be able to maintain
or increase international market demand for our products.


WE DEPEND ON A LIMITED
NUMBER OF THIRD PARTY FOUNDRIES TO MANUFACTURE MOST OF OUR PRODUCTS, WHICH
REDUCES OUR CONTROL OVER THE PRODUCTION, SUPPLY AND DELIVERY OF OUR PRODUCTS.


We depend on a limited
number of third party foundries for the production of most of our products. In
particular, Agere Systems Inc. (formerly a division of Lucent Technologies)
manufactures all of our junction isolation bipolar wafers, and American
Microsystems, Inc. and UMC manufacture all of our complementary
metal-oxide-semiconductor wafers. Also, we recently entered into a foundry
relationship with Philips Semiconductors Inc. to manufacture junction isolation
bipolar wafers for us. Our dependence on third parties to fabricate our products
has significant risks that could potentially harm our operating results,
including:


24
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|We have no long-term
contracts with any foundry and we do not have a guaranteed level of production
capacity at any foundry. The ability of each foundry to provide wafers to us is
limited by its available capacity and our foundry suppliers could provide that
limited capacity to its other customers. In addition, our foundry suppliers
could reduce or even eliminate the capacity allocated to us on short notice.
Moreover, such a reduction or elimination is possible even after we have
submitted a purchase order.


To obtain foundry capacity,
we may be forced to enter into equity and debt financing arrangements. These
arrangements could result in the dilution of our earnings or in the ownership of
our stockholders.


We provide the foundries
with rolling forecasts of our production requirements, however, our forecasts of
production requirements may prove to be inaccurate.


We have limited control
over product delivery schedules, and we may not receive products within the time
frames and in the volumes required by our customers.


We could face delays in
obtaining, or we might not be able to obtain, access to foundries with key
fabrication process technologies, such as the fabrication process necessary to
manufacture dielectric isolation wafers and silicon-on-insulator wafers.


We have limited control
over quality assurance and production costs.


We have limited control over
manufacturing yields and our foundries occasionally experience lower than
anticipated manufacturing yields, particularly in connection with the
introduction of new products and the design, installation and initiation of new
process technologies.


We cannot be certain that
we will be able to maintain our good relationships with our existing foundries.
In addition, we cannot be certain that we will be able to form relationships
with other foundries as favorable as our current ones. Moreover, transferring
from our internal fabrication facility or our existing foundries to another
foundry, including the transfer to Philips Semiconductor Inc., could require a
significant amount of time and loss of revenue, and we cannot assure you that we
could make a smooth and timely transition. If foundries are unable or unwilling
to continue to supply us with these semiconductor devices in required time
frames and volumes or at commercially acceptable costs, our business may be
harmed.


WE ARE RESPONSIBLE FOR THE
PRODUCTION OF OUR DIELECTRIC ISOLATION AND SILICON-ON-INSULATOR WAFERS AND OUR
RESULTS OF OPERATIONS COULD BE HARMED IF OUR SUPPLY OF THOSE WAFERS DOES NOT
MEET THE DEMAND.


Our fabrication facilities
are the only facilities currently available to us that are capable of
manufacturing dielectric isolation wafers and silicon-on-insulator wafers for
our products. If we experience a reduction or interruption in the supply, or a
degradation in the quality of any of the wafers, we may be forced to discontinue
that product based upon those wafers until we can contract with third party
foundries that are qualified to produce those wafers. As a result, our
relationships with our customers could be harmed if we are unable to deliver
sufficient quantities of wafers.


We intend to outsource the
volume production of silicon-on-insulator wafers upon the stabilization of the
process. Accordingly, we intend to export the process to a suitable foundry for
manufacturing of these wafers. However, we cannot provide any assurance that a
suitable foundry can be qualified for such volume production.


IF OUR USE OF ADVANCED
BIPOLAR AND BI-CMOS TECHNOLOGY FOR OUR PRODUCT DEVELOPMENT IS IMPAIRED, OUR
BUSINESS AND OPERATING RESULTS COULD BE HARMED.


In the fourth quarter of
fiscal 2001, we discontinued the development of an advanced silicon-on-insulator
technology in favor of outsourcing advanced bipolar and bi-cmos technology as
part of our future product development strategy. As with the transition to any
new process technology, we cannot assure you that this new technology can be
successfully implemented for our product development requirements in a timely
manner, that we will have access to this new technology to satisfy our
requirements or that this new technology will provide the desired improvements
over our current technology. Cancellation or significant delays in the
transition to this new process technology or manufacturing problems associated
with transferring our current product line to this technology, or problems
associated with the development and manufacturing of our future products using
this technology could harm our business and results of operations. Cancellation
or significant delays resulting from the transition to and use of this
technology also could harm our new product development program.


25
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|WE RELY ON A LIMITED NUMBER
OF PACKAGING SUBCONTRACTORS THAT MAY NOT HAVE ADEQUATE CAPACITY TO MEET OUR
PRODUCT DELIVERY REQUIREMENTS.


We rely on a limited number
of packaging subcontractors with whom we do not have long-term contracts. In
general, the wafers we manufacture at our fabrication facilities and the wafers
we purchase from our outside foundries are tested at our facilities. The wafers
are then sent to our packaging subcontractors for packaging and assembly. Our
reliance on these subcontractors involves significant risks, including a lack of
adequate capacity, the possibility that necessary process technologies will be
eliminated and reduced control over quality and delivery schedules. These
independent subcontractors may discontinue doing business with us for a variety
of reasons. As a result, we may experience product delivery and quality
assurance problems, which in turn may harm our reputation and operating results.


IF OUR PRODUCTS CONTAIN
DEFECTS OR FAIL TO ACHIEVE INDUSTRY RELIABILITY STANDARDS, OUR REPUTATION MAY BE
HARMED, AND WE MAY INCUR SIGNIFICANT UNEXPECTED EXPENSES AND LOSE SALES
OPPORTUNITIES.


Our products have in the
past contained, and may in the future contain, undetected errors or defects. Any
similar problem in the future may:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | cause
delays in product introductions and shipments;
| | - |  | ----------------------------------------------------

| |  |  | result
in increased costs and diversion of development resources;
| | - |  | -----------------------------------------------------------------

| |  |  | cause
us to incur increased charges due to obsolete or unusable inventory;
| | - |  | --------------------------------------------------------------------------

| |  |  | require
design modifications; or
| | - |  | --------------------------------

| |  |  | decrease
market acceptance or customer satisfaction with these products, which could result in
product returns.
| | - |  | ---------------------------------------------------------------------------------------------------------------

|In addition, we may not
find defects or failures in our products until after commencement of commercial
shipments, which may result in loss or delay in market acceptance and could
significantly harm our operating results. Our current or potential customers
also might seek to recover from us any losses resulting from defects or failures
in our products. Liability claims could require us to spend significant time and
money in litigation or to pay significant damages. Any of these claims, whether
or not successful, could seriously damage our reputation and business.


EARTHQUAKES, OTHER NATURAL
DISASTERS AND ROLLING BLACKOUTS MAY DAMAGE OUR FACILITIES OR THOSE
FOUNDRIES AND OTHERS ON WHICH WE DEPEND.


Our corporate headquarters
and internal foundry are located in California near major earthquake faults,
which have experienced earthquakes in the past. In addition, some of the
foundries, suppliers and other third parties upon which we rely are located near
fault lines. An earthquake or other natural disaster near one or more of the
facilities of third parties upon which we rely, like the earthquake in Taiwan in
September 1999 could disrupt the operations of those parties. Additionally, the
loss of power, such as the temporary loss of power caused by the rolling
blackouts experienced by us at our facility in Northern California, could
disrupt our operations. None of these disruptions would be covered by insurance
and thus, the supply of our products could be limited and our business could be
hampered.



26
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|IF WE FAIL TO ATTRACT AND
RETAIN QUALIFIED PERSONNEL, OUR BUSINESS MAY BE HARMED.


Our future success depends
largely upon the continued service of our key management and technical
personnel, and on our continued ability to hire, integrate and retain qualified
management and technical personnel, particularly engineers. Competition for
these employees in the analog semiconductor industry is intense, and we may not
be successful in attracting or retaining these personnel. In addition, it is
difficult to obtain work visas for foreign professionals trained in the United
States. The loss of any key employee, the failure of any key employee to perform
in his or her current position or our inability to attract and retain skilled
employees as needed could impair our ability to meet customer and technological
demands. The loss of the services of any executive officer or other key
technical or management personnel could harm our business. To help retain the
continued services of some of our key executives, we have entered into
employment agreements with some of them. We do not have key person life
insurance on any of our key personnel.


IF WE FAIL TO PROTECT OUR
INTELLECTUAL PROPERTY, OUR COMPETITORS COULD MARKET PRODUCTS WITH SIMILAR
FEATURES, REDUCING DEMAND FOR OUR PRODUCTS AND HARMING OUR OPERATING RESULTS.


Our success depends in part
on our ability to protect our intellectual property rights covering our products
and technologies. We rely on a combination of patent, copyright, trademark,
trade secret laws and confidentiality procedures to protect our proprietary
rights. Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy aspects of our products or to obtain and use
information that we regard as proprietary. In addition, the laws of some foreign
countries, and the enforcement of those laws, do not protect proprietary rights
to as great an extent as do the laws of the United States. We also cannot assure
you that:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | our
means of protecting our proprietary rights will be adequate;
| | - |  | ----------------------------------------------------------------

| |  |  | patents
will be issued from our currently pending or future applications;
| | - |  | -------------------------------------------------------------------------

| |  |  | our
existing patents or any new patents will be sufficient in scope or strength to provide
any meaningful protection or commercial advantage to us;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | any
patent or registered trademark owned by us will not be invalidated, circumvented or
challenged in the United States or foreign countries; or
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | others
will not misappropriate our proprietary technologies or independently develop similar
technology, duplicate our products or design around any patent issued to us or other
intellectual property rights of ours.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|In addition, we may
initiate claims or litigation against third parties for infringement of our
proprietary rights to establish the validity of our proprietary rights. This
litigation, whether or not it is resolved in our favor, could result in
significant expense to us and divert the efforts of our technical and management
personnel.


WE MAY FROM TIME TO TIME BE
SUBJECT TO CLAIMS OF INFRINGEMENT OF OTHER PARTIES PROPRIETARY RIGHTS OR
TO CLAIMS THAT OUR INTELLECTUAL PROPERTY RIGHTS ARE INVALID, WHICH COULD RESULT
IN SIGNIFICANT EXPENSE AND LOSS OF INTELLECTUAL PROPERTY RIGHTS.


From time to time we have
received and may receive in the future claims that we are infringing third
parties intellectual property rights or claims that our trademarks,
patents or other intellectual property rights are invalid. The semiconductor
industry is characterized by uncertain and conflicting intellectual property
claims and vigorous protection and pursuit of these rights. The resolution of
any claims of this nature, with or without merit, could be time consuming,
result in costly litigation or cause product shipment delays. In the event of an
adverse ruling, we might be required to discontinue the use of certain
processes, cease the manufacture and sale of infringing products, expend
significant resources to develop non-infringing technology or enter into royalty
or licensing agreements. Royalty or licensing agreements, if required, might not
be available on terms acceptable to us or at all. The loss of access to any
intellectual property could harm our business.



27
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|OUR FAILURE TO COMPLY WITH
ENVIRONMENTAL LAWS AND REGULATIONS COULD SUBJECT US TO SIGNIFICANT FINES AND
LIABILITIES, AND NEW LAWS AND REGULATIONS OR CHANGES IN REGULATORY
INTERPRETATION OR ENFORCEMENT COULD MAKE COMPLIANCE MORE DIFFICULT AND COSTLY.


We are subject to a variety
of federal, state, local and foreign governmental laws and regulations related
to the use, storage, discharge and disposal of toxic, volatile or otherwise
hazardous chemicals used in our manufacturing of semiconductor wafers. Our
failure to comply with present or future environmental laws and regulations
could result in fines being imposed on us, suspension of our production or a
cessation of our operations. Any failure by us to comply with these laws and
regulations could subject us to significant liabilities, thereby harming our
business and operating results. In addition, new environmental laws and
regulations or changes in regulatory interpretation and enforcement could render
compliance more difficult and costly and require significant capital
expenditures.


WE MAY REQUIRE ADDITIONAL
CAPITAL TO FUND OUR CAPITAL EXPENDITURES OR OUR OPERATIONS, HOWEVER, SUCH
CAPITAL MAY NOT BE AVAILABLE.


The operation of our
fabrication facility requires the continued investment of substantial capital.
We intend to make capital investments to support business growth and achieve
manufacturing cost reductions and improved yields. We may need equity or debt
financing to fund improvements in our wafer fabrication facility or to fund
other projects. The timing and amount of these capital requirements cannot be
precisely determined at this time and will depend on a number of factors,
including demand for our products, our product mix, changes in semiconductor
industry conditions and competitive factors. Debt or equity financing may not be
available when needed or, if available, may not be available on terms
satisfactory to us.


WE MAY ENGAGE IN FUTURE
ACQUISITIONS, WHICH COULD HARM OUR PROFITABILITY OR PUT A STRAIN ON OUR
RESOURCES, OR CAUSE DILUTION TO OUR STOCKHOLDERS.


We may make acquisitions of
complementary businesses, products or technologies. Integrating newly acquired
organizations, products or technologies into our business could be expensive,
time consuming and may not be successful. Future acquisitions could divert our
managements attention from other business concerns and expose our business
to unforeseen liabilities or risks associated with entering new markets. In
addition, we may lose key employees while integrating these new organizations.
Consequently, we may not be successful in integrating any acquired business,
products or technologies and may not achieve anticipated revenue and cost
benefits. In addition, future acquisitions could result in customer
dissatisfaction, performance problems with an acquired company, potentially
dilutive issuances of equity securities, the incurrence of debt, contingent
liabilities, amortization expenses related to goodwill and other intangible
assets or other unanticipated events or circumstances, any of which could harm
our business.


OUR TRADING PRICE MAY BE
VOLATILE.


The market for securities
of technology companies in general, and of companies in the semiconductor
industry, including us, in particular, has been highly volatile. It is likely
that the trading price of our common stock will continue to fluctuate in the
future. Factors affecting the trading price of our common stock include:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | responses
to fluctuations in our operating results;
| | - |  | ---------------------------------------------------

| |  |  | announcements
of technological innovations, new products or product enhancements, joint ventures or
significant agreements by us or our competitors;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | our
sales of common stock or other securities in the future;
| | - |  | ------------------------------------------------------------

| |  |  | general
conditions in the video, optical storage, communications and power management markets; and
| | - |  | --------------------------------------------------------------------------------------------------

| |  |  | changes
in financial estimates or recommendations by market analysts regarding us and our
competitors.
| | - |  | ------------------------------------------------------------------------------------------------------

|In addition, the stock
market has experienced substantial price and volume volatility that has
particularly affected the trading prices of equity securities of many technology
companies and that often has been unrelated or disproportionate to the operating
results of these companies. As a result, any broad market fluctuations may
adversely affect the trading price of our common stock.




28
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|PROVISIONS OF OUR
CERTIFICATE OF INCORPORATION, BYLAWS AND STOCKHOLDER RIGHTS PLAN OR DELAWARE LAW
MAY DELAY OR PREVENT A CHANGE OF CONTROL OF ELANTEC OR CHANGES IN OUR MANAGEMENT
AND THEREFORE, DEPRESS THE TRADING PRICE OF OUR COMMON STOCK.


Delaware corporate law and
our certificate of incorporation and bylaws contain provisions that could delay,
defer or prevent a change in control of our company or changes in our management
that you may deem advantageous. These provisions could also limit the price that
investors might be willing to pay in the future for shares of our common stock.
These provisions:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | authorize
the issuance of blank check preferred stock, which is preferred stock that our board of
directors can create and issue without prior stockholder approval with rights senior to
those of common stock;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | limit
the ability of stockholders to call special meetings of stockholders;
| | - |  | ---------------------------------------------------------------------------

| |  |  | prohibit
cumulative voting in the election of directors, which would allow less than a majority of
stockholders to elect director candidates; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | establish
advance notice requirements for submitting nominations for election to the board of
directors and for proposing matters that can be acted upon by stockholders at a meeting.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|In addition, our board of
directors declared a dividend of one preferred share purchase right for each
share of our common stock outstanding, subject to limitations stated in the
stockholder rights plan. These rights may delay, defer or prevent a change of
control of our company.


Liquidity and
Capital Resources


Our primary sources of liquidity
are cash, cash equivalents and short-term investments of $184.1 million at
September 30, 2001.


Cash and cash equivalents
were $129.2 million at September 30, 2001, representing a decrease of $30.3
million from September 30, 2000. The decrease is due to an increase in
investments in short-term securities of $53.9 million, capital expenditures of
approximately $13.3 million primarily for new process development, assembly and
test, purchase of treasury stock of $5.1 million and payments on capital leases
of approximately $1.6 million. These cash outflows were offset by cash generated
from operations of $38.0 million and proceeds from the exercise of employee
stock options and issuance of stock under our employee stock purchase plan of
$5.0 million.


Cash and cash equivalents
were $159.5 million at September 30, 2000, representing an increase of $142.1
million from September 30, 1999. The increase is primarily a result of net
proceeds of $135.1 million from a secondary stock offering in September 2000,
cash generated from operations of $20.3 million and proceeds from the exercise
of employee stock options and issuance of stock under our employee stock
purchase plan of $3.5 million. These cash inflows were offset by capital
expenditures of approximately $15.7 million primarily for new process
development, assembly and test facilities and payments on capital leases of
approximately $1.4 million.


We believe that our
existing cash and cash equivalents, our short-term Investments and cash from
operations will be sufficient to support our operating and capital needs for at
least the next 12 months. Any major change in the nature of our business, such
as the acquisition of products, the design of products not currently under
development or the need for significant unplanned capital expenditures, could
change our capital requirements. To the extent we require additional cash, we
cannot assure you that we will be able to obtain financing on favorable terms,
or at all.


29
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ITEM 7A:
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


Interest Rate
Sensitivity


We maintain a short-term
investment portfolio consisting mainly of income securities with an average
maturity of less than one year. These securities are subject to interest rate
risk and will fall in value if market interest rates increase. If market
interest rates were to increase immediately and uniformly by 10.0% from levels
at September 30, 2001, the fair value of the portfolio would decline by an
immaterial amount.


At September 30, 2001, we
had approximately $1.4 million of outstanding obligations under capital lease
arrangements. As the lease payments associated with these arrangements do not
have variable interest rates, an increase of 10.0% in short-term interest rates
would not have a material impact on our net income or cash flows. We do not
hedge any interest rate exposures.


Since we do not have any
significant exposure to changing interest rates because of the low levels of
marketable securities with maturities more than one year, we did not undertake
any specific actions to cover exposure to interest rate risk and we are not a
party to any interest rate risk management transactions. We did not purchase or
hold any derivative financial instruments for trading purposes.


Foreign
Currency Exchange Risk


The Japanese Yen and
British Pound are the functional currencies of our subsidiaries in Japan and the
United Kingdom, respectively. We also denominate certain sales transactions in
Yen. We have established a foreign currency-hedging program, utilizing foreign
currency forward exchange contracts or forward contracts of various durations to
hedge trade receivables denominated in Yen. Under this program, gains and losses
on the forward contracts mitigate the risk of material foreign currency
transaction gains and losses and offset increases or decreases in our foreign
currency receivables. We do not use forward contracts for trading purposes. We
believe that the use of foreign currency financial instruments should reduce the
risks that arise from conducting business in international markets.


We do not currently enter
into foreign exchange forward contracts to hedge balance sheet exposures of our
subsidiaries in Japan and the United Kingdom, and intercompany balances against
future movements in foreign exchange rates. However, we do maintain cash
balances denominated in Yen and Pound Sterling. If foreign exchange rates were
to weaken against the United States Dollar immediately and uniformly by 10.0%
from the exchange rate at September 30, 2001, the fair value of these foreign
currency amounts would decline by an immaterial amount.


At September 30, 2001, we
had foreign currency forward contracts outstanding to hedge foreign currency
trade receivables. These contracts have maturities typically ranging from 35 to
90 days and are intended to reduce exposure to foreign currency exchange risk.
The aggregate notional amount of foreign exchange contracts at September 30,
2001 was $944,000 and the fair value of these contracts was insignificant. At
September 30, 2000, the aggregate notional amount and the unfavorable change in
fair value of foreign exchange contracts were $8.7 million and $116,000,
respectively.


30
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ITEM 8: FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
|---------------------------------------------------

|1. |  | INDEX TO CONSOLIDATED FINANCIAL STATEMENTS |  | 
|-- |  | ------------------------------------------ |  | 

| |  | The following Consolidated Financial Statements are filed as part of this Report. |  | 
| |  | --------------------------------------------------------------------------------- |  | 

| |  |  |  | Page No.
| |  |  |  | --------

| |  | Independent Auditors Report |  | 36
| |  | ---------------------------- |  | --

| |  | Consolidated Balance Sheets as of September 30, 2001 and 2000 |  | 37
| |  | ------------------------------------------------------------- |  | --

| |  | Consolidated Statements of Operations for each of the
three fiscal years in the period ended September 30, 2001 |  | 38
| |  | --------------------------------------------------------------------------------------------------------------- |  | --

| |  | Consolidated Statements of Stockholders Equity and Comprehensive Income (Loss) for each of the
three fiscal years in the period ended September 30, 2001 |  | 39
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --

| |  | Consolidated Statements of Cash Flows for each of the three fiscal
years in the period ended September 30, 2001 |  | 40
| |  | --------------------------------------------------------------------------------------------------------------- |  | --

| |  | Notes to Consolidated Financial Statements |  | 41
| |  | ------------------------------------------ |  | --

|2. |  | INDEX TO SUPPLEMENTAL FINANCIAL INFORMATION |  | 
|-- |  | ------------------------------------------- |  | 

| |  | Unaudited Interim Financial Information |  | 54
| |  | --------------------------------------- |  | --

|3. |  | INDEX TO FINANCIAL STATEMENT SCHEDULE |  | 
|-- |  | ------------------------------------- |  | 

| |  | The following financial statement schedule of Elantec Semiconductor, Inc. for the
years ended September 30, 2001, 2000 and 1999 is filed as part of this report and
should be read in conjunction with the Consolidated Financial Statements of Elantec
Semiconductor, Inc. |  | 
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 

| |  | Schedule II - Valuation and Qualifying Accounts for each of the
three fiscal years in the period ended September 30, 2001 |  | 55
| |  | ------------------------------------------------------------------------------------------------------------------------- |  | --

---

| |  | Schedules  other than that  listed  above have been  omitted  since they are either not
required, not applicable, or the information is otherwise included. |  | 
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 

|
|

|ITEM 9: |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
|------- |  | -------------------------------------------------------------------------------------

| |  | Not applicable |  | 
| |  | -------------- |  | 

|31
|--

|PART III


ITEM 10:
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


Information required by
this Item with respect to Directors and Executive Officers may be found in Part
I hereof in the section captioned Executive Officers and Directors of
the Company. Information required by this Item with respect to filings
under Section 16 of the Securities Exchange Act of 1934 may be found in the
section captioned Section 16(a) Beneficial Ownership Reporting
Compliance appearing in the definitive Proxy Statement to be delivered to
stockholders in connection with the Annual Meeting of Stockholders to be held on
February 15, 2002. Such information is incorporated herein by reference.


ITEM 11:
EXECUTIVE COMPENSATION


Information with respect to
this Item may be found in the section captioned Proposal No. 1 
Election of Directors  Directors Compensation, Executive
Compensation, Agreements with Executive Officers and
Compensation Committee Interlocks and Insider Participation
appearing in the definitive Proxy Statement to be delivered to stockholders in
connection with the Annual Meeting of Stockholders to be held on February 15,
2002. Such information is incorporated herein by reference.


ITEM 12:
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


Information with respect to
this Item may be found in the section captioned Security Ownership of
Certain Beneficial Owners and Management appearing in the definitive Proxy
Statement to be delivered to stockholders in connection with the Annual Meeting
of Stockholders to be held on February 15, 2002. Such information is
incorporated herein by reference.


ITEM 13:
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


Information with respect to
this Item may be found in the section captioned Certain Transactions
appearing in the definitive Proxy Statement to be delivered to stockholders in
connection with the Annual Meeting of Stockholders to be held on February 15,
2002. Such information is incorporated herein by reference.


32
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|PART IV


ITEM 14:
EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K


(a) The following documents are
filed as part of this report:


1. Financial
Statements and Financial Statement Schedule.  See Index to Consolidated Financial
Statements, Index to Supplemental Financial Information and Index to Financial Statement
Schedule at Item 6 of this Report.


2. Exhibits.  The
following exhibits are filed as part of, or incorporated by reference into, this Report:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|              |                     | Incorporated by Reference |                                         
|------------- | ------------------- | ------------------------- | ----------------------------------------
|ExhibitNumber | Exhibit Description |                           |                                         
|3.01          |                     |                           | Registrants Certificate of             
|              |                     |                           | Incorporation.                          
|3.02          |                     |                           | Registrants Certificate of Amendment   
|              |                     |                           | to its Certificate of Incorporation.    
|3.03          |                     |                           | Registrants Certificate of Amendment   
|              |                     |                           | to its Certificate of Incorporation.    
|3.04          |                     |                           | Registrants Certificate of Designation.
|3.05          |                     |                           | Amended and Restated Bylaws of          
|              |                     |                           | Registrant.                             
|3.06          |                     |                           | Specimen Certificate for Registrants   
|              |                     |                           | Common Stock.                           
|4.01          |                     |                           | Rights Agreement dated September 14,    
|              |                     |                           | 1998 between Registrant, Bank Boston,   
|              |                     |                           | N.A., as Rights Agent, which includes   
|              |                     |                           | as Exhibit A the form of Certificate of 
|              |                     |                           | Designations of Series A Junior         
|              |                     |                           | Participating Preferred Stock, as       
|              |                     |                           | Exhibit B the Form of Rights            
|              |                     |                           | Certificate and as Exhibit C the        
|              |                     |                           | Summary of Rights to Purchase Preferred 
|              |                     |                           | Shares.                                 
|10.01         |                     |                           | Registrants 1983 Stock Option Plan, as 
|              |                     |                           | amended, and related documents.         
|10.02         |                     |                           | Registrants 1994 Equity Incentive Plan 
|              |                     |                           | and related documents.                  
|10.03         |                     |                           | Form of Registrants 1995 Equity        
|              |                     |                           | Incentive Plan, as amended, and related 
|              |                     |                           | documents.                              
|10.04         |                     |                           | Form of Registrants 1995 Directors     
|              |                     |                           | Stock Option, as amended, Plan and      
|              |                     |                           | related documents.                      
|10.05         |                     |                           | Form of Registrants 1995 Employee      
|              |                     |                           | Stock Purchase Plan and related         
|              |                     |                           | documents.                              
|10.06         |                     |                           | Form of Registrants 2001 Equity        
|              |                     |                           | Incentive Plan, as amended and related  
|              |                     |                           | documents.                              
|10.07         |                     |                           | Form of Indemnification Agreement       
|              |                     |                           | entered into by the Registrant with     
|              |                     |                           | each of its directors and executive     
|              |                     |                           | officers.                               
|10.08         |                     |                           | Employment Agreement between the        
|              |                     |                           | Registrant and Richard Beyer dated July 
|              |                     |                           | 12, 2000.                               
|10.09         |                     |                           | Executive Change in Control Severance   
|              |                     |                           | Benefits Agreement between Registrant   
|              |                     |                           | and Richard Beyer, as amended.          
|10.10         |                     |                           | Form of Executive Change in Control     
|              |                     |                           | Severance Benefits Agreement for        
|              |                     |                           | Executive Officers.                     

|33
|--

|
|

|              |                     | Incorporated by Reference |                                        
|------------- | ------------------- | ------------------------- | ---------------------------------------
|ExhibitNumber | Exhibit Description |                           |                                        
|10.11         |                     |                           | Standard Industrial/Commercial Single  
|              |                     |                           | Tenant Lease dated June 23, 1993, by   
|              |                     |                           | and between Registrant and Robert      
|              |                     |                           | Ruggles, including amendments one      
|              |                     |                           | through five thereto.                  
|10.12         |                     |                           | First Amendment to Standard            
|              |                     |                           | Industrial/Commercial Single-Tenant    
|              |                     |                           | Lease dated June 23, 1993.             
|10.13         |                     |                           | Standard Industrial/Commercial         
|              |                     |                           | Single-Tenant Lease dated February 20, 
|              |                     |                           | 1996.                                  
|10.14         |                     |                           | Addendum to Standard                   
|              |                     |                           | Industrial/Commercial Single-Tenant    
|              |                     |                           | Lease dated February 20, 1996.         
|10.15         |                     |                           | Distributor Agreement dated October 1, 
|              |                     |                           | 1989, between the Registrant and       
|              |                     |                           | Insight.                               
|10.16         |                     |                           | Distributor Agreement between the      
|              |                     |                           | Registrant and Microtek Inc., dated    
|              |                     |                           | August 1, 1996.                        
|21.01         |                     |                           | Subsidiaries of the Registrant.        
|23.01         |                     |                           | Consent of Deloitte & Touche LLP,      
|              |                     |                           | Independent Auditors.                  
|24.01         |                     |                           | Powers of Attorney (see page 61 of this
|              |                     |                           | Report).                               

|(b) |  | Reports
on Form 8-K:No reports were filed in the fourth quarter of fiscal 2001.
|--- |  | -------------------------------------------------------------------------------

|(c) |  | Exhibits:The
Registrant hereby files as part of this Report the exhibits listed in Item 14(a)(2), as
set forth above.
|--- |  | ---------------------------------------------------------------------------------------------------------------------

|34
|--

|Independent Auditors Report


To the Board of Directors and Stockholders of
Elantec Semiconductor, Inc.
Milpitas, California:


We have audited the
accompanying consolidated balance sheets of Elantec Semiconductor, Inc. and
subsidiaries as of September 30, 2001 and 2000, and the related consolidated
statements of operations, stockholders equity and comprehensive income
(loss), and cash flows for each of the three years in the period ended September
30, 2001. Our audits also included the consolidated financial statement schedule
listed in Item 8(3). These financial statements and the financial statement
schedule are the responsibility of the Companys management. Our
responsibility is to express an opinion on the financial statements and the
financial statement schedule based on our audits.


We conducted our audits in
accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.


In our opinion, such
consolidated financial statements present fairly, in all material respects, the
financial position of Elantec Semiconductor, Inc. and subsidiaries at
September 30, 2001 and 2000, and the results of their operations and their
cash flows for each of the three years in the period ended September 30, 2001,
in conformity with accounting principles generally accepted in the United States
of America. Also, in our opinion, the consolidated financial statement schedule
listed in Item 8(3), when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.


/s/ Deloitte &Touche LLP


San Jose, CaliforniaOctober 22, 2001


35
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Elantec Semiconductor, Inc.
and Subsidiaries
Consolidated Balance Sheets(in thousands, except share and per share amounts)
|--------------------------------------------------------------------------------------------------------------------------

|                                                                 | September 30, | 
|---------------------------------------------------------------- | ------------- | 
|                                                                 | 2001          | 
|Assets                                                           |               | 
|Current assets:                                                  |               | 
|Cash and cash equivalents                                        |               | 
|Short-term investments                                           |               | 
|Accounts receivable, net of allowances of $1,910 in 2001         |               | 
|and $3,121 in 2000                                               |               | 
|Inventories                                                      |               | 
|Deferred income taxes                                            |               | 
|Prepaid expenses and other current assets                        |               | 
|                                                                 |               | 
|Total current assets                                             |               | 
|Property and equipment:                                          |               | 
|Machinery and equipment                                          |               | 
|Furniture and fixtures                                           |               | 
|Leasehold improvements                                           |               | 
|                                                                 |               | 
|                                                                 |               | 
|Accumulated depreciation and amortization                        |               | 
|                                                                 |               | 
|                                                                 |               | 
|Other assets, net                                                |               | 
|Non-current deferred income taxes                                |               | 
|                                                                 |               | 
|Total assets                                                     |               | 
|                                                                 |               | 
|Liabilities and stockholders equity                             |               | 
|Current liabilities:                                             |               | 
|Accounts payable                                                 |               | 
|Accrued salaries and benefits                                    |               | 
|Income taxes payable                                             |               | 
|Other accrued liabilities                                        |               | 
|Deferred revenue                                                 |               | 
|Current portion of capital lease obligations                     |               | 
|                                                                 |               | 
|Total current liabilities                                        |               | 
|Long-term capital lease obligations                              |               | 
|Other long-term liabilities                                      |               | 
|Commitments and contingencies (Note 5)                           |               | 
|Stockholders equity:                                            |               | 
|Preferred stock, $.01 par value:                                 |               | 
|Authorized shares - 5,000,000 in 2001 and 2000                   |               | 
|Issued and outstanding shares - none                             |               | 
|Common stock, $.01 par value:                                    |               | 
|Authorized shares - 50,000,000 in 2001 and 2000                  |               | 
|Issued and outstanding shares - 23,036,000 in 2001               |               | 
|and 21,930,000 in 2000                                           |               | 
|Additional paid-in capital                                       |               | 
|Deferred stock compensation                                      |               | 
|Retained earnings                                                |               | 
|Accumulated other comprehensive income (loss)                    |               | 
|Treasury stock, at cost - 233,000 shares of common stock in 2001 |               | 
|                                                                 |               | 
|Total stockholders equity                                       |               | 
|                                                                 |               | 
|Total liabilities and stockholders equity                       |               | 
|                                                                 |               | 

|See accompanying
notes to consolidated financial statements.


36
|-----------------------------------------------------------------

|Elantec Semiconductor, Inc.
and Subsidiaries
Consolidated Statements of Operations(in thousands, except per share amounts)
|--------------------------------------------------------------------------------------------------------------------------

|                                              | Year ended September 30, | 
|--------------------------------------------- | ------------------------ | 
|                                              | 2001                     | 
|Net revenues                                  |                          | 
|                                             
|Cost of revenues                              |                          | 
|Cost of revenues - inventory write-down       |                          | 
|                                              |                          | 
|Gross profit                                  |                          | 
|                                             
|Operating expenses:                           |                          | 
|Research and development                      |                          | 
|Marketing, sales, general, and administrative |                          | 
|Restructuring and impairment charges          |                          | 
|                                              |                          | 
|Total operating expenses                      |                          | 
|                                              |                          | 
|Income (loss) from operations                 |                          | 
|Interest and other income, net                |                          | 
|Interest expense                              |                          | 
|                                              |                          | 
|Income (loss) before taxes                    |                          | 
|Provision for (benefit from) income taxes     |                          | 
|                                              |                          | 
|Net income (loss)                             |                          | 
|                                              |                          | 
|Earnings (loss) per share:                    |                          | 
|Basic                                         |                          | 
|Diluted                                       |                          | 
|                                             
|Shares used in computing per share amounts:   |                          | 
|Basic                                         |                          | 
|Diluted                                       |                          | 

|See accompanying
notes to consolidated financial statements.


37
|-----------------------------------------------------------------

|Elantec Semiconductor, Inc.
and SubsidiariesConsolidated Statements of Stockholders Equity and
Comprehensive Income (Loss)(in thousands)
|-----------------------------------------------------------------------------------------------------------------------------------------

|                              | CommonShares | StockAmount | Addi-tionalPaid-inCapital | DeferredStockCompen-sation | RetainedEarnings(Accum-ulated)(Deficit) | Accum-ulatedOtherCompre-hensiveLoss | TreasuryStock(Common) | TotalStock-holdersEquity | TotalCompre-hensiveIncome(Loss)
|----------------------------- | ------------ | ----------- | ------------------------- | -------------------------- | --------------------------------------- | ----------------------------------- | --------------------- | ------------------------- | -------------------------------
|                              |              |            
|Balance at October 1, 1998    |              |             |                           | 18,376                     |                                         | $                                   | 184                   |                           | $                              
|Exercise of stock options     |              |             |                           | 394                        |                                         |                                     | 4                     |                           |                                
|Tax benefit of stock          |              |            
|option transactions           |              |             |                           |                           |                                         |                                     |                      |                           |                                
|Net loss                      |              |             |                           |                           |                                         |                                     |                      |                           |                                
|Foreign currency              |              |            
|translation adjustment        |              |             |                           |                           |                                         |                                     |                      |                           |                                
|                              |              |            
|Total comprehensive loss      |              |             |                           |                            |                                         |                                     |                       |                           |                                
|                              |              |            
|Balance at September 30, 1999 |              |             |                           | 18,770                     |                                         | $                                   | 188                   |                           | $                              
|Exercise of stock options     |              |             |                           | 1,277                      |                                         |                                     | 13                    |                           |                                
|Tax benefit of stock option   |              |            
|transactions                  |              |             |                           |                           |                                         |                                     |                      |                           |                                
|Proceeds from secondary       |              |            
|stock offering                |              |             |                           | 1,760                      |                                         |                                     | 18                    |                           |                                
|Employee stock purchase       |              |             |                           | 36                         |                                         |                                     |                      |                           |                                
|Deferred stock compensation   |              |             |                           | 87                         |                                         |                                     | 1                     |                           |                                
|Amortization of deferred      |              |            
|stock compensation            |              |             |                           |                            |                                         |                                     |                       |                           |                                
|Net Income                    |              |             |                           |                           |                                         |                                     |                      |                           |                                
|Unrealized loss on available  |              |            
|for sale Investments,         |              |            
|net of tax                    |              |             |                           |                            |                                         |                                     |                       |                           |                                
|Foreign currency translation  |              |            
|adjustment                    |              |             |                           |                           |                                         |                                     |                      |                           |                                
|                              |              |            
|Total comprehensive income    |              |             |                           |                            |                                         |                                     |                       |                           |                                
|                              |              |            
|Balance at September 30, 2000 |              |             |                           | 21,930                     |                                         | $                                   | 220                   |                           | $                              
|Exercise of stock options     |              |             |                           | 1,066                      |                                         |                                     | 11                    |                           |                                
|Tax benefit of stock option   |              |            
|transactions                  |              |             |                           |                           |                                         |                                     |                      |                           |                                
|Purchase of treasury stock    |              |             |                           |                           |                                         |                                     |                      |                           |                                
|Employee stock purchase       |              |             |                           | 40                         |                                         |                                     |                      |                           |                                
|Amortization of deferred      |              |            
|stock compensation            |              |             |                           |                            |                                         |                                     |                       |                           |                                
|Net income                    |              |             |                           |                            |                                         |                                     |                       |                           |                                
|Unrealized gain on available  |              |            
|for sale Investments,         |              |            
|net of tax                    |              |             |                           |                            |                                         |                                     |                       |                           |                                
|Foreign currency translation  |              |            
|adjustment                    |              |             |                           |                            |                                         |                                     |                       |                           |                                
|                              |              |            
|Total comprehensive income    |              |             |                           |                            |                                         |                                     |                       |                           |                                
|                              |              |            
|Balance at September 30, 2001 |              |             |                           | 23,036                     |                                         | $                                   | 231                   |                           | $                              
|                              |              |            

|See accompanying
notes to consolidated financial statements.


38
|-----------------------------------------------------------------

|Elantec Semiconductor, Inc.
and Subsidiaries
Consolidated Statements of Cash Flows(in thousands)
|------------------------------------------------------------------------------------------------

|                                                             | Year ended September 30, | 
|------------------------------------------------------------ | ------------------------ | 
|                                                             | 2001                     | 
|Operating activities                                         |                          | 
|Net income (loss)                                            |                          | 
|Reconciliation of net income (loss) to net cash provided by  |                          | 
|operating activities:                                        |                          | 
|Depreciation and amortization                                |                          | 
|Amortization of deferred stock compensation                  |                          | 
|Tax benefit of stock option transactions                     |                          | 
|Deferred income taxes                                        |                          | 
|Gain on disposition of property and equipment                |                          | 
|Inventory write-down                                         |                          | 
|Property and equipment impairment charges                    |                          | 
|Changes in operating assets and liabilities:                 |                          | 
|Accounts receivable                                          |                          | 
|Inventories                                                  |                          | 
|Prepaid expenses and other current assets                    |                          | 
|Payables and other accrued liabilities                       |                          | 
|Deferred revenue                                             |                          | 
|                                                             |                          | 
|Net cash provided by operating activities                    |                          | 
|                                                             |                          | 
|Investing activities                                         |                          | 
|Purchase of available for sale investments                   |                          | 
|Sale and maturity of available for sale investments          |                          | 
|Purchase of property and equipment                           |                          | 
|Disposal of property and equipment                           |                          | 
|Decrease (increase) in other assets                          |                          | 
|                                                             |                          | 
|Net cash used in investing activities                        |                          | 
|                                                             |                          | 
|Financing activities                                         |                          | 
|Payments on capital lease obligations                        |                          | 
|Payments on long-term debt                                   |                          | 
|Increase in other long-term liabilities                      |                          | 
|Proceeds from issuance of common stock                       |                          | 
|Purchase of treasury stock                                   |                          | 
|Proceeds from exercise of stock options and employee stock   |                          | 
|purchase plan                                                |                          | 
|                                                             |                          | 
|Net cash provided by (used in) financing activities          |                          | 
|                                                             |                          | 
|Effect of exchange rate changes on cash and cash equivalents |                          | 
|                                                             |                          | 
|Increase (decrease) in cash and cash equivalents             |                          | 
|Cash and cash equivalents at beginning of period             |                          | 
|                                                             |                          | 
|Cash and cash equivalents at end of period                   |                          | 
|                                                             |                          | 
|Supplemental disclosures of cash flow information            |                          | 
|Taxes paid (refunded)                                        |                          | 
|                                                             |                          | 
|Interest paid                                                |                          | 
|                                                             |                          | 

|See accompanying
notes to consolidated financial statements.


39
|-----------------------------------------------------------------

|ELANTEC
SEMICONDUCTOR, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL
STATEMENTS


1. Significant
Accounting Policies


Nature of Business.Elantec
Semiconductor, Inc. (the Company) designs, manufactures and markets high performance
analog integrated circuits used in the video, optical storage, communications and power
management markets. The Companys principal markets include North America, Asia and
Europe.


Fiscal
Year.The Companys fiscal year ends on the Sunday
closest to September 30. Fiscal years 2001, 2000, and 1999 ended on September
30, October 1, and October 3, respectively. For convenience, the accompanying
consolidated financial statements have been shown as ending on September 30 for
each fiscal year. Fiscal year 1999 included 53 weeks while fiscal years 2001 and
2000 included 52 weeks per year.


Use of Estimates.The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses during the reporting period.
Significant estimates include asset impairment charges, allowance for
potentially uncollectible accounts receivable, inventory reserves, warranty
costs, sales returns and accrued liabilities. Actual results could differ from
those estimates.


Consolidation.The
accompanying consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation.


Cash and Cash
Equivalents.The Company considers all highly liquid investments with
an original maturity (at the date of purchase) of three months or less to be
cash equivalents.


Short-Term
Investments.The Companys policy is to invest in various
short-term instruments with investment grade credit ratings. In accordance with
Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for
Certain Investments in Debt and Equity Securities, the Company classifies
its short-term investments as available-for-sale securities and the
cost of securities sold is based on the specific identification method.


Significant Risks and
Uncertainties.The Company participates in a dynamic high technology
industry and believes that changes in any of the following areas could have a
material adverse effect on the Companys future financial position or
results of operations: delays in new product and process technology
announcements and product introductions by the Company or its competitors,
competitive pricing pressures, fluctuations in manufacturing yields, changes in
the mix or markets in which products are sold, availability and costs of raw
materials, reliance on subcontractors, the cyclical nature of the semiconductor
industry, industry-wide wafer processing capacity, political and economic
conditions in various geographic areas, and costs associated with other events,
such as under-utilization or expansion of production capacity, intellectual
property disputes, litigation, or environmental regulation among other
factors.


Concentration of Credit
Risk.Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash, cash equivalents and
short-term investments, trade receivables and foreign exchange forward
contracts.


The Companys policy
is to place its cash, cash equivalents and short-term investments with high
credit quality institutions and limit the amount invested with any one
institution or in any type of financial instrument. The Company does not hold or
issue financial instruments for trading purposes.


The Companys products
are sold to a wide variety of original equipment manufacturers through a direct
sales force and to a network of distributors. The Company generally does not
require collateral for its accounts receivable. However, the Company performs
ongoing credit evaluations of its customers financial condition and
requires collateral, primarily letters of credit, if necessary.


40
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ELANTEC
SEMICONDUCTOR, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)


Derivatives.
Effective October 1, 2000, the Company adopted Statement of Financial Accounting
Standards (SFAS) 133, Accounting for Derivative Instruments and Hedging
Activities, as amended. The statement requires that all derivatives,
whether designated in hedging relationships or not, are required to be recorded
on the balance sheet at fair value. If the derivative is designated as a fair
value hedge, the changes in the fair value of the derivative and of the hedged
item attributable to the hedged risk are recognized in earnings. If the
derivative is designated as a cash flow hedge, the effective portions of the
changes in the fair value of the derivative are recorded in other comprehensive
income and are recognized in the income statement when the hedged item affects
earnings. Ineffective portions of changes in the fair value of cash flow hedges
are recognized in earnings. The adoption of SFAS 133 did not result in a
transition adjustment at October 1, 2000. The Company uses derivative
instruments, primarily forward exchange contracts, to manage the foreign
currency exchange rate risk associated with certain assets and forecasted
transactions which are denominated in currencies other than the U.S. Dollar. The
Company monitors its foreign currency exposures regularly to maximize the
overall effectiveness of its foreign currency hedge positions, with the
principal currency hedged being the Japanese yen. The Company has not designated
any of its forward exchange contracts as hedging instruments under SFAS 133, and
therefore the favorable change in fair value of these forward exchange contracts
of $0.1 million for the year ended September 30, 2001 has been recorded as
interest and other income. The notional amount of these instruments as of
September 30, 2001 was $0.9 million and their fair value was insignificant.


Inventories.Inventories are
stated at the lower of cost or market with cost determined using the first-in, first-out
method.


Property and
Equipment.Machinery and equipment as well as furniture and
fixtures are stated at cost and depreciated over the estimated useful lives of
the assets (three to ten years) using the straight-line method. Leasehold
improvements are stated at cost and amortized on a straight-line basis over the
shorter of the useful lives of the assets or the remaining lease term. Assets
under capital leases are recorded at the present value of the related lease
obligations and amortized on a straight-line basis over the lease term.


Long-lived Assets.The Company
accounts for long-lived assets in accordance with SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. SFAS No.
121 requires long-lived assets to be evaluated for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be recoverable.


Stock-Based
Compensation.The Company accounts for stock-based awards to employees using
the intrinsic value method in accordance with Accounting Principles Board
Opinion (APB) No. 25, Accounting for Stock Issued to
Employees.


Revenue
Recognition.Revenues are stated net of estimated discounts
and allowances. Revenue from product sales direct to customers and foreign
distributors is generally recognized upon shipment. However, the Company defers
the recognition of revenue and the related cost of revenue on shipments to
domestic distributors that have certain rights of return and price protection
privileges on unsold merchandise until the merchandise is sold by the
distributor.


In December 1999, the
Securities and Exchange Commission issued Staff Accounting Bulletin
(SAB) No. 101, Revenue Recognition, which provides
guidance on the recognition, presentation and disclosure of revenue in financial
statements filed with the SEC. SAB No. 101 outlines the basic criteria that must
be met in order to recognize revenue and provides guidance for disclosures
related to revenue recognition policies. The Company adopted SAB No. 101, as
amended, in the fourth quarter of fiscal 2001. The adoption did not have a
material impact on the Companys consolidated financial position, results
of operations or cash flows.


Foreign Currency
Translation.The functional currencies of the Companys foreign
subsidiaries are their respective local currencies. Accordingly, gains and
losses from the translation of the financial statements of the foreign
subsidiaries are reported as a separate component of accumulated other
comprehensive income. Foreign currency transaction gains and losses are included
in net earnings.


41
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ELANTEC
SEMICONDUCTOR, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  (Continued)


Income Taxes.The
Company accounts for income taxes using the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences of
temporary differences between the financial statement carrying amounts and the
tax basis of assets and liabilities. A valuation allowance is established to
reduce the deferred tax asset if it is more likely than not that the related tax
benefits will not be realized in the future.


Advertising Expense.The
Company expenses the costs of advertising as incurred. Advertising expense was $923,000,
$600,000, and $671,000 for the fiscal years ended September 30, 2001, 2000, and 1999,
respectively.


Earnings Per Share
 Basic earnings per share (EPS) is computed by dividing net
income/(loss) by the weighted average number of common shares outstanding during
the period. Diluted EPS gives effect to the number of common equivalent shares
outstanding as a result of the assumed exercise of common stock options, using
the treasury stock method and shares issuable under our employee stock purchase
plan


Comprehensive Income
(Loss)  Comprehensive income (loss) is defined as the change in equity
of a business enterprise during a period from transactions and other events and
circumstances from non-owner sources and is presented in the Companys
Statements of Stockholders Equity.


2. Recently
Issued Accounting Pronouncements


Business Combinations,
Goodwill and Other Intangible Assets. In June 2001, the Financial Accounting
Standards Board issued SFAS No. 141, Business Combinations and SFAS No.
142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that all
business combinations initiated after June 30, 2001 be accounted for under the
purchase method and addresses the initial recognition and measurement of
goodwill and other intangible assets acquired in a business combination. SFAS
No. 142 addresses the initial recognition and measurement of intangible assets
acquired outside of a business combination and the accounting for goodwill and
other intangible assets subsequent to their acquisition. SFAS No. 142 provides
that intangible assets with indefinite useful lives will not be amortized, but
will be tested at least annually for impairment. The Company is required to
adopt SFAS 142 no later than its fiscal year beginning September 30, 2002. The
Company does not carry any goodwill or other intangibles on its balance sheet as
of September 30, 2001 and, accordingly, does not expect the adoption to have a
material impact on its financial statements.


Long-lived assets.In October
2001, the FASB issued SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived
Assets. SFAS No. 144 supersedes SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and addresses financial
accounting and reporting for the impairment or disposal of long-lived assets. This
statement is effective for fiscal years beginning after December 15, 2001. The Company
expects to adopt SFAS No. 144 on October 1, 2002. The Company does not expect the
adoption of SFAS No. 144 to have a material impact on its financial statements.


3. Short-term
Investments


At September 30, 2001, short-term
investments consisted of corporate debt and United States Government Agencies
debt of $30,902,000 and $13,122,000, respectively, all maturing within one year
and corporate debt of $7,767,000 and foreign corporate debt of $3,082,000
respectively, all maturing within two years. At September 30, 2000, short-term
investments consisted of corporate debt of $1,023,000, all maturing within one
year. At September 30, 2001 fair market value, determined by quoted market
prices, exceeded carrying value by $140,000. At September 30, 2000 carrying
value exceeded fair value, determined by quoted market prices, by $9,000.
Realized gains and losses were immaterial.


42
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ELANTEC
SEMICONDUCTOR, INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  (Continued)


4. Inventories


Inventories consisted of
the following (in thousands):
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | September 30, | 
| | ------------- | 
| | 2001          | 
| |               | 
| |               | 
| |               | 
| |               | 
| |               | 
| |               | 

|5. Commitments and
Contingencies


The Company leases its principal
facilities under operating leases that expire at various dates through 2005. The Company
is generally responsible for taxes, assessments, maintenance and insurance under its
leases. In addition, machinery and equipment included $5.1 million and $6.8 million of
equipment acquired under capital leases and $4.5 million and $5.4 million of related
accumulated amortization at September 30, 2001 and 2000, respectively. Amortization of
assets under capital leases is included in depreciation and amortization expense.


The following is a schedule of
future minimum lease payments under capital and operating leases as of September 30 (in
thousands):
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | CapitalLeases |  | OperatingLeases                             | 
| | ------------- |  | ------------------------------------------- | 
| |               |  | 2002                                        | 
| |               |  | 2003                                        | 
| |               |  | 2004                                        | 
| |               |  | 2005                                        | 
| |               |  | 2006                                        | 
| |               |  | Thereafter                                  | 
| |               |  |                                             | 
| |               |  | Total minimum lease payments                | 
| |               |  | Amount representing interest                | 
| |               |  |                                             | 
| |               |  | Present value of net minimum lease payments | 
| |               |  |                                             | 
| |               |  |                                             | 
| |               |  | Current portion                             | 
| |               | 
| |               |  | Long-term capital lease obligations         | 
| |               | 

|Total rental expense on all
operating leases was $1.4 million, $1.0 million, and $1.2 million for the fiscal
years ended September 30, 2001, 2000 and 1999, respectively. At September 30
2001, outstanding commitments to purchase capital equipment totaled
approximately $1.9 million.


The Company is a party to a
number of legal proceedings arising in the normal course of its business. These
actions include employee-related issues. While it is not feasible to predict or
determine the outcome of these matters, the Company believes that the ultimate
resolution of these claims will not have a material adverse effect on its
financial position or results of operations.


6.
Stockholders Equity


Common Stock Repurchase.On December 19, 2000, the Companys Board of Directors authorized
a share repurchase program to purchase up to 1,000,000 shares of the
Companys common stock in the open market, depending on market conditions
and other corporate considerations. As of September 30, 2001, the Company
had repurchased 233,000 shares of its common stock for $5.1 million in
connection with the share repurchase program.


43
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ELANTEC
SEMICONDUCTOR, INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  (Continued)


Stock Split. On
April 21, 2000, the Company effected a two-for-one stock split of the
outstanding shares of common stock. All share and per share amounts in these
consolidated financial statements have been adjusted to give effect to the stock
split.


Stockholder Rights Plan.In September 1998, the Companys Board of Directors adopted a
Stockholder Rights Plan under which the Board of Directors declared a dividend
of one preferred share purchase right for each outstanding share of common
stock, par value $0.01 per share, of the Company stock held as of September 21,
1998. In addition subsequent to September 21, 1998, one right will be issued
with each newly issued and outstanding share of our common stock issued, except
in certain circumstances. Each preferred share purchase right entitles the
registered holder to purchase one four-hundredth of the Companys Series A
Junior Participating Preferred Stock, par value $0.01 per share, at a price of
$12.50. The rights become exercisable ten days following the announcement that
an entity or person has commenced a tender offer to acquire or has acquired 20%
or more of the Companys outstanding common stock (the Distribution
Date). After the Distribution Date, the rights may be exchanged at an
exchange ratio of one common share or one four-hundredth of a preferred share
per right. Otherwise, each holder of a right, other than rights beneficially
owned by the acquiring entity or person (which will thereafter be void), will
have the right to receive upon exercise that number of common shares having a
market value of two times the exercise price of the right. The rights will
expire on September 14, 2008.


Employee Stock Purchase
Plan. The Company has reserved and the stockholders approved 450,000 shares
of common stock for issuance to eligible employees under the 1995 Purchase Plan
(the Purchase Plan). Under the Purchase Plan, eligible employees,
subject to certain restrictions, may purchase shares of common stock at a price
equal to the lesser of 85% of the fair market value at either the beginning of
each six-month offering period or the end of each six-month offering period. As
of September 30, 2001, 75,526 shares have been issued under the Purchase Plan.


Restricted Stock Awards.The compensation committee may grant participants restricted stock awards to
purchase stock either in addition to, or in tandem with, other awards under the
1995 Equity Incentive Plan, under such terms, conditions and restrictions as the
compensation committee may determine. A Restricted Stock Purchase Award for
86,500 shares of common stock was issued to Richard Beyer, the Companys
Chief Executive Officer, in July 2000. The Company has a right of repurchase on
these shares that expires ratably over a five-year period. In accordance with
APB No. 25, the Company recorded $5,017,000 as deferred compensation in the year
ended September 30, 2000. This amount is being amortized on a straight-line
basis over 5 years. During the year ended September 30, 2001 the related
amortization expense amounted to $1,003,000.


Stock Option Plans.
In August 1995, the Board of Directors approved and in September 1995, the
stockholders approved (i) the adoption of the 1995 Equity Incentive Plan (the
1995 Equity Plan) as the successor to the 1994 Equity Incentive Plan
(the Predecessor Plan), pursuant to which 1,100,000 shares of the
Companys common stock, plus the number of shares remaining unissued and
not subject to outstanding options under the Predecessor Plan and any shares
issuable upon exercise of options granted under the Predecessor Plan that expire
or become unexercisable for any reason without having been exercised in full,
have been reserved for future issuance, and (ii) the adoption of the 1995
Directors Stock Option Plan (the 1995 Directors Plan)
pursuant to which 300,000 shares of the Companys common stock have been
reserved for future issuance. Each outstanding option under the Predecessor Plan
will continue to be governed by the terms and conditions of such plan; no
additional options will be granted under the Predecessor Plan.


Pursuant to various
resolutions approved by the Board of Directors and stockholders, the number of
shares of the Companys common stock reserved for issuance under the 1995
Equity Plan has been increased by 5,953,500 shares.


Under the 1995 Equity Plan,
incentive stock options may be granted to employees only at the price per share
that is not less than the fair market value of common stock on the date of
grant. Nonqualified options may be granted to employees or others at a price per
share not less than 85% of fair market value of the common stock on the date of
grant. Options are exercisable to the extent vested. Vesting, as established by
the Board of Directors, generally accrues monthly over four years from the date
of grant. The Company may also grant stock bonuses and issue restricted stock to
employees and others. The Company has made no such grants since the 1995 Equity
Plans inception. The 1995 Equity Plan expires ten years after adoption.


44
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ELANTEC
SEMICONDUCTOR, INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  (Continued)


Under the 1995
Directors Plan, nonqualified options may be granted to nonemployee
directors only at the price per share that is not less than the fair market
value of common stock on the date of grant. Vesting under the 1995
Directors Plan accrues monthly over four years from the date of grant. The
1995 Directors Plan expires ten years after adoption.


In November 2000, the Board
of Directors of the Company adopted the 2001 Equity Incentive Plan (the
2001 Equity Plan) and in January 2001 it was approved by the
stockholders of the Company as the successor to the 1995 Equity Incentive Plan
(the Predecessor Plan), pursuant to which 1,050,000 shares of common
stock, plus the number of shares remaining unissued and not subject to
outstanding options under the Predecessor Plan and any shares issuable upon
exercise of options granted under the Predecessor Plan that expire or become
unexercisable for any reason without having been exercised in full, have been
reserved for future issuance. Each outstanding option under the Predecessor Plan
will continue to be governed by the terms and conditions of such plan.


Under the 2001 Equity Plan,
incentive stock options may be granted to employees only at the price per share
that is not less than the fair market value of common stock on the date of
grant. Nonqualified options may be granted to employees or others at a price per
share not less than 85% of fair market value of the common stock on the date of
grant. Options are exercisable to the extent vested. Vesting, as established by
the Board of Directors, is 25% of the shares on the first anniversary of the
date of grant and 1/48th (or 2.0833%) of the total number of shares
on a monthly basis thereafter with options being fully vested in four years. The
Company may also grant stock bonuses and issue restricted stock to employees and
others. The Company has made no such grants since the 2001 Equity Plans
inception. The 2001 Equity Plan expires ten years after adoption.


In May 2001, the Board of
Directors of the Company approved the following amendments to the 2001 Equity
Incentive Plan: (1) the minimum exercise price will be no less than 100% of fair
market value of the shares on the date of grant, except that the exercise price
may be reduced to no less than 85% of the fair market value of the shares on the
date of grant if the discount is expressly made in lieu of a reasonable amount
of salary or cash bonus; (2) repricing of options will not be approved by the
Board of Directors without prior shareholder approval; (3) Restricted Stock
Awards (RSAs) will have a restriction period of at least three years unless
performance based  in which case the restriction period will be not less
than one year; (4) stock awards (other than stock options and RSAs) will be
granted to officers/directors only in lieu of salary or cash bonus, or they will
be tied to performance standards covering at least one year. The number of such
shares awarded will be reasonable; and (5) the Board of Directors will have the
authority to grant waivers of Plan or Award conditions only under extraordinary
conditions, such as, death, disability, or change of corporate control.


In October 2001, the Board
of Directors approved an amendment to the Equity Incentive Plan to increase the
number of shares reserved for issuance thereunder to 2,050,000.


In December 2001, the Board
of Directors of the Company approved the following amendments to the Equity
Incentive Plan in order to set forth rules governing stock option grants to
non-employee Directors of the Company: (1) the Company will grant to each
person, who is not an employee of the Company or any parent, subsidiary or
affiliate of the Company, who becomes a Director of the Company, an option for
40,000 shares of Common Stock on the date such person joins the Board of
Directors; (2) the Company will grant to each Director of the Company on the
date of the Companys annual stockholders meeting an option for
20,000 shares of Common Stock; (3) Options for shares of Common Stock granted to
a non-employee Director of the Company will be exercisable as the options vest
and will vest as to one forty-eighth (1/48th) of the shares beginning one month
after the initial grant date and will vest an additional one forty-eighth
(1/48th) of the shares each month thereafter, so long as the non-employee
Director continuously remains a member of the Board of Directors; and (4)
Options for shares of Common Stock granted to a non-employee Director of the
Company will accelerate in the event of a dissolution or liquidation of the
Company; a merger or consolidation in which the Company is not the surviving
corporation (other than a merger or consolidation with a wholly owned
subsidiary, a reincorporation of the Company in a different jurisdiction, or
other transaction in which there is no substantial change in the stockholders of
the Company or their relative stock holdings and the options for Common Stock of
the Company granted under the Equity Incentive Plan are assumed, converted or
replaced by the successor corporation, which assumption will be binding on all
non-employee Directors who are optionees); a merger in which the Company is the
surviving corporation but after which the stockholders of the Company (other
than any stockholder which merges (or which owns or controls another corporation
which merges) with the Company in such merger) cease to own their shares or
other equity interests in the Company; the sale of substantially all of the
assets of the Company; or any other transaction which qualifies as a
corporate transaction under Section 424(a) of the Code wherein the
stockholders of the Company give up all of their equity interests in the Company
(except for the acquisition, sale or transfer of all or substantially all of the
outstanding shares of the Company from or by the stockholders of the Company),
the vesting of all options granted pursuant to the Equity Incentive Plan will
accelerate and the options will become exercisable in full prior to the
consummation of such event at such times and on such conditions as the
Compensation Committee determines, and if such options are not exercised prior
to the consummation of the corporate transaction, they will terminate in
accordance with the provisions of the Equity Incentive Plan.


45
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ELANTEC
SEMICONDUCTOR, INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  (Continued)


Additional information with
respect to the Companys stock option plans follows:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                              | Options Outstanding | 
|----------------------------- | ------------------- | 
|                              | SharesAvailable     | 
|Balance at October 1, 1998    |                     | 
|Additional share reservation  |                     | 
|Options granted               |                     | 
|Options exercised             |                     | 
|Options canceled              |                     | 
|Options expired               |                     | 
|                              |                     | 
|Balance at September 30, 1999 |                     | 
|Additional share reservation  |                     | 
|Options granted               |                     | 
|Options exercised             |                     | 
|Options canceled              |                     | 
|                              |                     | 
|Balance at September 30, 2000 |                     | 
|Additional share reservation  |                     | 
|Options granted               |                     | 
|Options exercised             |                     | 
|Options canceled              |                     | 
|Options expired               |                     | 
|                              |                     | 
|Balance at September 30, 2001 |                     | 
|                              |                     | 

|46
|--

|ELANTEC SEMICONDUCTOR,
INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The following table summarizes
information about stock options outstanding at September 30, 2001:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Options Outstanding     |  | Options Exercisable | 
|----------------------- |  | ------------------- | 
|Range ofExercise Prices |  | NumberOutstanding   | 
|$0.10 - $2.53           |  |                     | 
|$2.56 - $13.75          |  |                     | 
|$15.97 - $40.50         |  |                     | 
|$41.06 - $109.50        |  |                     | 
|$121.75 - $121.75       |  |                     | 
|                        |  |                     | 
|$0.10 - $121.75         |  |                     | 
|                        |  |                     | 

|At September 30, 2000 and
1999, 2,037,450 and 1,861,828 options were exercisable at weighted average
exercise prices of $2.99 and $2.24, respectively.


Stock-Based
Compensation. Under APB 25, the Company generally recognizes no compensation
expense with respect to stock-based awards to employees. Pro forma information
regarding net income and earnings per share is required by FAS 123,
Accounting for Stock-Based Compensation, for awards granted in
fiscal years that begin after December 31, 1994, as if the Company had accounted
for its stock-based awards to employees under the fair value method of FAS 123.


The fair value of the
Companys stock-based awards to employees was estimated using a
Black-Scholes option pricing model. The Black-Scholes option valuation model was
developed for use in estimating the fair value of traded options that have no
vesting restrictions and are fully transferable. The Black-Scholes model
requires the input of highly subjective assumptions including the expected stock
price volatility. Because the Companys stock-based awards to employees
have characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in managements opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its
stock-based awards to employees.


The fair value of the
Companys stock-based awards to employees was estimated assuming no
expected dividends and the following weighted-average assumptions:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |      | Year ended September 30, |                        
| | ---- | ------------------------ | -----------------------
| | 2001 |                          | 2000                   
| |      |                          | Expected life (years)  
| |      |                          | Expected volatility    
| |      |                          | Risk-free interest rate

|The weighted-average fair
value of stock options granted during 2001, 2000 and 1999 was $38.61, $28.81 and
$3.25, respectively. For purposes of pro forma disclosures, the estimated fair
value of the options is amortized to pro forma net income (loss) over the
options vesting period. The Companys historical and pro forma
information follows (in thousands, except for per share information):


47
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ELANTEC
SEMICONDUCTOR, INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
|----------------------------------------------------------------------------------------------------

| |      | Year ended September 30, |                                     
| | ---- | ------------------------ | ------------------------------------
| | 2001 |                          | 2000                                
| |      |                          | Net income (loss):                  
| |      |                          | Historical                          
| |      |                          | Pro forma                           
|
| |      |                          | Diluted Net income (loss) per share:
| |      |                          | Historical                          
| |      |                          | Pro forma                           

|7. Earnings (Loss) Per Share



The following table sets forth the
reconciliation of weighted average common shares outstanding used in the computation of
basic and diluted earnings per share computations for the years ended September 30 (in
thousands, except per share amounts):
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |      | Year ended September 30, |                                                                   
| | ---- | ------------------------ | ------------------------------------------------------------------
| | 2001 |                          | 2000                                                              
| |      |                          | Net income (loss) (numerator):                                    
| |      |                          | Net income (loss)                                                 
| |      |                          |                                                                   
| |      |                          | Shares (denominator):                                             
| |      |                          | Weighted average shares of common stock outstanding               
| |      |                          | used in computation of basic earnings (loss) per share            
| |      |                          | Dilutive effect of stock options and employee stock purchase plans
| |      |                          |                                                                   
| |      |                          | Shares used in computation of diluted earnings (loss) per share   
| |      |                          |                                                                   
| |      |                          | Basic earnings (loss) per share                                   
| |      |                          |                                                                   
| |      |                          | Diluted earnings (loss) per share                                 
| |      |                          |                                                                   

|8. Income Taxes


The provision (benefit) for income
taxes consisted of the following (in thousands):
|-----------------------------------------------------------------------------------------------------

| |      | Year ended September 30, |                          
| | ---- | ------------------------ | -------------------------
| | 2001 |                          | 2000                     
| |      |                          | Current:                 
| |      |                          | Federal                  
| |      |                          | State                    
| |      |                          | Foreign                  
| |      |                          |                          
| |      |                          | Total current            
| |      |                          | Deferred:                
| |      |                          | Federal                  
| |      |                          | State                    
| |      |                          |                          
| |      |                          | Total deferred           
| |      |                          |                          
| |      |                          | Total provision (benefit)
| |      |                          |                          

|48
|--

|ELANTEC SEMICONDUCTOR, INC. AND
SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  (Continued)Significant components of
the Companys net deferred tax assets for federal and state income taxes
were as follows (in thousands):
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | September 30,                                       
| | ----------------------------------------------------
|
| | Deferred tax assets                                 
| | Depreciation                                        
| | Restructuring reserves                              
| | Net operating loss carryforwards                    
| | Tax credit carryforwards                            
| | Inventory reserves                                  
| | Deferred revenue                                    
| | Distributor reserves                                
| | Other accruals and reserves not currently deductible
| |                                                     
| |                                                     
| | Deferred tax liabilities                            
| | Taxes on unremitted foreign earnings                
| | State taxes                                         
| | Depreciation                                        
| |                                                     
| |                                                     
| |                                                     
| | Total net deferred tax assets                       
| |                                                     

|The total net deferred tax
asset is classified on the balance sheet as follows (in thousands):
|----------------------------------------------------------------------------------------------

| | September 30,                         
| | --------------------------------------
|
| | Current deferred income tax assets    
| | Non-current deferred income tax assets
| |                                       
| | Net deferred income tax assets        
| |                                       

|The provisions (benefit)
for taxes on income differed from the provisions calculated by applying the
federal statutory rate to income before taxes as follows (in thousands):
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Year ended September 30,              
| | --------------------------------------
|
| | Expected provisions at statutory rates
| | State taxes, net of federal benefit   
| | Foreign taxes                         
| | General business credits              
| | Foreign income taxed at lower rates   
| | Benefit of Foreign Sales Corporation  
| | Foreign losses providing no benefit   
| | Other                                 
| | Reversal of valuation allowance       
| |                                       
| | Total                                 
| |                                       

|49
|--

|ELANTEC
SEMICONDUCTOR, INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  (Continued)


In fiscal 1999, management
determined that realization of the remaining deferred tax assets subject to the
valuation allowance was more likely than not and reversed the related allowance
of $500,000.


The Company has net
operating loss carryforwards available to offset future federal taxable income
and business credit carryforwards of $13 million and $650,000 respectively,
expiring through 2021. In addition, the Company has state business credit
carryforwards of $2.3 million.


9. Employee
Benefit Plan


The Company has a 401(k)
savings plan that covers substantially all full-time employees. Eligible
employees are permitted to make fully vested tax deferred contributions of up to
22.5% of their annual gross compensation, subject to certain Internal Revenue
Service limitations. The plan provides for employer contributions at the
discretion of the Board of Directors. Contributions made by the Company for the
years ended September 30, 2001, 2000, and 1999 were approximately $459,000,
$305,000 and $241,000 respectively.


10. Fair Value
of Financial Instruments


The Company has evaluated
the estimated fair value of its financial instruments, which consist primarily
of cash equivalents, short-term investments, accounts receivable, accounts
payable and long-term obligations, and has determined that the carrying amounts
approximate fair value.


In the normal course of
business, the Company has exposures to foreign currency fluctuations arising
from foreign currency sales. The Company uses foreign exchange forward contracts
to limit its exposure to foreign exchange losses arising from nonfunctional
currency trade receivables. The Company evaluates its net exposure therefrom and
enters into forward contracts to hedge the net exposure over a specified amount.
These contracts are executed with creditworthy financial institutions and are
denominated in Japanese Yen. Gains and losses on these contracts serve as hedges
in that they offset fluctuations that would otherwise impact financial results.
Costs associated with entering into such contracts are generally amortized over
the life of the instruments and are not material to the Companys financial
results.


At September 30, 2001 the
Company had foreign currency forward contracts outstanding to hedge foreign
currency trade receivables. These contracts have maturities, typically ranging
from 35 to 90 days and are intended to reduce exposure to foreign currency
exchange risk. The aggregate notional amount of foreign exchange contracts at
September 30, 2001 was $944,000 and their fair value of these contracts was
insignificant. At September 30, 2000, the aggregate notional amount and the
unfavorable change in fair value of foreign exchange contracts were $8.7 million
and $116,000, respectively.


11. Segment
Information and Significant Customers


The Company operates in one
operating and reportable segment, which is the design, development and marketing
of a variety of analog integrated circuits. The Companys chief operating
decision-maker is the Chief Executive Officer.


The Company markets its
products in the United States and in foreign countries through its sales
personnel, independent sales representatives, and distributors. The
Companys geographic sales, as a percentage of net revenues, were as
follows:


50
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ELANTEC
SEMICONDUCTOR, INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
|----------------------------------------------------------------------------------------------------

| |      | Year ended September 30, |                            
| | ---- | ------------------------ | ---------------------------
| | 2001 |                          | 2000                       
| |      |                          | Domestic                   
| |      |                          | Export:                    
| |      |                          | Europe                     
| |      |                          | Japan                      
| |      |                          | Other Pacific Rim Countries
| |      |                          |                            
| |      |                          |                            
| |      |                          |                            

|The Companys assets located outside
the United States are insignificant.


Customers comprising 10% or greater
of the Companys net revenues are summarized as follows:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|
|

| |      | Year ended September 30, |                                          
| | ---- | ------------------------ | -----------------------------------------
| | 2001 |                          | 2000                                     
| |      |                          | Microtek International, Inc. - Japan     
| |      |                          | Solectron - United States                
| |      |                          | Samsung Electronics - Korea              
| |      |                          | Insight Electronics, Inc. - United States

|* less
than 10%


Microtek International and Insight
Electronics, Inc. are distributors who support the Companys sales to a large number of
customers.


At September 30, 2001,
Microtek International and Samsung Electronics accounted for 14% and 13%,
respectively, of the Companys trade receivables. At September 30, 2000,
Microtek International and Samsung Electronics accounted for 32% and 13%,
respectively, of the Companys trade receivables.


12.
Restructuring and Impairment Charges


Fiscal 2001 Actions


In the third quarter of
2001, the Company announced that a continued softness in its communications
business had led to a significant reduction in the demand on its internal
fabrication facility, sort and test operations. During the several quarters
preceding the announcement, the Company had expanded its internal fabrication
facility, sort and test operations in response to forecasts of significant
revenue growth in its communications business. However, the Company experienced
significant customer order deferrals and cancellations in its communications
business. Due to these customer actions, the Company was left in a position of
significant excess inventory, which, based on current demand, would not be
consumed during the products life cycle.


The Company, in response to
the market situation, took certain actions to restructure its manufacturing
operations. The Company retired and held for disposal certain manufacturing
equipment no longer required for production. The Company adjusted the carrying
value of this equipment down to the estimated net realizable value based on
quotes obtained from an independent equipment broker.


The Company also took an
excess inventory charge due to the sudden and significant decrease in forecasted
revenue in its communications business. The charge was calculated in accordance
with the Companys policy, which is based on inventory
levels in excess of the forecasted demand for each specific part over its
estimated remaining life. The pretax charge for excess inventory was $1.5
million and is included in cost of revenues.


51
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ELANTEC
SEMICONDUCTOR, INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  (Continued)


The restructuring also
included operating initiatives to improve the Companys cost structure
including a reduction of approximately 15% of the Companys work force. The
Company recorded a pretax charge of $0.2 million related to severance.


Also, in the fourth quarter
of 2001, the Company decided to cease new product and process development in its
internal fabrication facility and to outsource all new product and process
development. As a result of the Companys plan to outsource its new product
and process development, the Company determined that an impairment of its
remaining internal fabrication equipment existed under SFAS No. 121. Based on
the significant reduction in the demand on its internal fabrication facility,
the Company estimated the future nondiscounted cash flows relating to the
internal wafer fabrication facility and concluded under SFAS No. 121 that
impairment was indicated. The Company engaged independent valuation consultants
to assist in evaluating the fair value of these assets to be held and used in
the facility. Based on the valuation, the Company wrote down the carrying value
of the equipment by $4.5 million and leasehold improvements by $0.6 million.


The Company also decided to
reclassify certain manufacturing equipment no longer needed for production as
equipment held for resale. The Company also estimated that certain quantities of
dielectric inventory were in excess of current and anticipated customer demand.


The net book value of
assets and estimated resale value of property and equipment reclassified as held
for sale during fiscal 2000 is as follows (in thousands):
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Balances at Sept. 30, 2001 | 
| | -------------------------- | 
| | Before Retirement          | 
| |                            | 
| |                            | 
| |                            | 
| |                            | 
| |                            | 
| |                            | 

|In summary, in fiscal 2001, these
actions resulted in pretax charges of $15.9 million to operating expenses and $1.9
million to cost of revenues in 2001. Remaining cash payments related to these activities
are expected to be $327,000 in fiscal 2002. The following table summarizes the fiscal
2001 restructuring and impairment charges (in thousands):
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Total Restructuringand ImpairmentCharge |  | Utilized throughSept. 30, 2001 |  | Balance atSept. 30, 2001 |  
| | --------------------------------------- |  | ------------------------------ |  | ------------------------ | -
| |                                         |  | Asset retirement               |  |                          | $
| |                                         |  | Asset impairment               |  |                          |  
| |                                         |  | Payments to employees          |  |                          |  
| |                                         |  | involuntarily terminated       |  |                          |  
| |                                         |  | Other                          |  |                          |  
| |                                         |  |                                |  |                          |  
| |                                         |  | Total                          |  |                          | $
| |                                         |  |                                |  |                          |  

|52
|--

|ELANTEC
SEMICONDUCTOR, INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTS  (Continued)


Fiscal 1999 Actions


During the first quarter of
fiscal 1999, the Company implemented a plan to restructure its manufacturing
operations in response to a shift in the mix of products fabricated internally
compared to products fabricated by outside foundries. During the several
quarters preceding the restructuring, production volume and revenue from
products fabricated by outside foundries had generally increased, while the
volume and revenue from internally fabricated products generally declined. As a
result, the Company was in a position of significant over-capacity in its
internal fabrication facility located in Milpitas, California.


In response to the
aforementioned, the Company decided to move gradually toward a primarily
outsourced model through a period of several years. The Company further decided
to discontinue development of future dielectric process technology in favor of
the more state of the art silicon-on-insulator technology, where volume
production will be outsourced. Based on the change in manufacturing strategy,
the Company estimated the future nondiscounted cash flows relating to the
internal wafer fabrication facility and concluded under SFAS No. 121 that
impairment was indicated.


The Company engaged
independent valuation consultants to assist in evaluating the fair value of
these assets to be held and used in the facility. The Company, based on the
valuations wrote-down the carrying value of the equipment by $4.3 million and
leasehold improvements by $6.8 million.


The book values of assets,
by category, before and after the write-down was as follows (in thousands):
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Balances at December 31, 1998 | 
| | ----------------------------- | 
| | BeforeWrite-Down              | 
| |                               | 
| |                               | 
| |                               | 
| |                               | 
| |                               | 
| |                               | 

|The Company also believed
that its decision to discontinue development of future-generation products using
dielectric isolation technology would obsolete certain existing products and
capitalized patents. Accordingly, the Company recorded a pretax charge of $1.0
million related to a write-down of inventory and $0.2 million related to a
write-down of patents.


The restructuring also
included operating initiatives to improve the Companys cost structure
including a reduction of approximately 10% of the Companys work force. The
Company recorded a pretax charge of $0.6 million related to severance and $0.1
million related to a legal settlement with AMP Incorporated.


These actions resulted in
pretax charges of $12.0 million to operating expenses and $1.0 million to cost
of goods sold in the first quarter of fiscal 1999. At September 30, 2001, there
were no remaining cash payments related to these activities.


53
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Elantec Semiconductor, Inc.
and Subsidiaries
Unaudited Interim Financial Information


Selected Quarterly
Financial Data:
|-------------------------------------------------------------------------------------------------------------------------

|2001                                        |                                      | 1st (1) |   | 2nd (1) |  | 3rd (1) |        | 4th (1) |  
|------------------------------------------- | ------------------------------------ | ------- | - | ------- |  | ------- | ------ | ------- | -
|                                            | (in thousands except per share data) |        
|                                            |                                      |        
|Net Revenues                                |                                      |         | $ | 40,712  |  | $       | 30,553 |         | $
|Gross profit                                |                                      |         |   | 24,510  |  |         | 16,527 |         |  
|Income (loss) from operations (2,3)         |                                      |         |   | 12,531  |  |         | 5,379  |         |  
|Net income (loss) (2,3)                     |                                      |         |   | 9,745   |  |         | 4,977  |         |  
|                                           
|Earnings (loss)  per share:                 |                                      |        
|Basic (4)                                   |                                      |         | $ | 0.44    |  | $       | 0.22   |         | $
|Diluted (4)                                 |                                      |         | $ | 0.37    |  | $       | 0.20   |         | $
|                                           
|Shares used in computing per share amounts: |                                      |        
|Basic (4)                                   |                                      |         |   | 22,027  |  |         | 22,294 |         |  
|Diluted (4)                                 |                                      |         |   | 26,036  |  |         | 25,403 |         |  

|2001                                        |                                      | 1st (1) |   | 2nd (1) |  | 3rd (1) |        | 4th (1) |  
|------------------------------------------- | ------------------------------------ | ------- | - | ------- |  | ------- | ------ | ------- | -
|                                            | (in thousands except per share data) |        
|                                            |                                      |        
|Net Revenues                                |                                      |         | $ | 15,712  |  | $       | 20,020 |         | $
|Gross profit                                |                                      |         |   | 9,571   |  |         | 12,326 |         |  
|Income from operations                      |                                      |         |   | 4,109   |  |         | 5,231  |         |  
|Net income                                  |                                      |         |   | 2,760   |  |         | 3,353  |         |  
|                                           
|Earnings  per share:                        |                                      |        
|Basic (4)                                   |                                      |         | $ | 0.15    |  | $       | 0.18   |         | $
|Diluted (4)                                 |                                      |         | $ | 0.13    |  | $       | 0.14   |         | $
|                                           
|Shares used in computing per share amounts: |                                      |        
|Basic (4)                                   |                                      |         |   | 18,864  |  |         | 19,144 |         |  
|Diluted (4)                                 |                                      |         |   | 22,362  |  |         | 23,386 |         |  

|
|

|(1) |  | Our
fiscal year end is the Sunday closest to September 30 and our fiscal quarters end on the
Sunday closest to the end of the calendar quarter. For convenience, we have indicated
that our quarters end on December 31, March 31, June 30 and September 30.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Financial
data for the third quarter of fiscal 2001 include restructuring charges of $1.4 million
resulting from a sudden and significant decrease in the demand on our internal
fabrication facility. The company also took excess inventory charges of $1.5 million to
cost of sales.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Financial
data for the fourth quarter of fiscal 2001 include restructuring and impairment charges
of $14.4 million resulting from our decision to cease all new product and process
development in our internal fabrication facility. The Company also took excess inventory
charges of $0.4 million to cost of sales.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | See
Note 1 of Notes to Consolidated Financial Statements for an explanation of the
determination of the number of shares used in computing earnings (loss) per share.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

|54
|--

|Schedule
II


Elantec Semiconductor, Inc.
and Subsidiaries
Valuation and Qualifying Accounts
Year ended September 30, 2001, 2000, and 1999
|------------------------------------------------------------------------------------------------------------------------------------------

|                                                    | Balance atBeginning ofYear |  | AdditionsCharged to Costand Expense |       | Deductions |   | Balance at Endof Year | 
|--------------------------------------------------- | -------------------------- |  | ----------------------------------- | ----- | ---------- | - | --------------------- | 
|Year ended September 30, 2001                       |                            |  |                                     |       |            |   |                       | 
|Allowance for doubtful accounts and product returns |                            | 
|(deducted from accounts receivable)                 |                            |  | $                                   | 3,121 |            | $ |                      | 
|                                                    |                            |  |                                     |       |            |   |                       | 
|Year ended September 30, 2000                       |                            | 
|Allowance for doubtful accounts and product returns |                            | 
|(deducted from accounts receivable)                 |                            |  | $                                   | 1,384 |            | $ | 1,790                 | 
|                                                    |                            |  |                                     |       |            |   |                       | 
|Year ended September 30, 1999                       |                            | 
|Allowance for doubtful accounts and product returns |                            | 
|(deducted from accounts receivable)                 |                            |  | $                                   | 1,076 |            | $ | 475                   | 
|                                                    |                            |  |                                     |       |            |   |                       | 

|55
|--

|SIGNATURES


Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Milpitas,
State of California, on the 26th day of December, 2001.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | ELANTEC SEMICONDUCTOR, INC.By: /s/ Richard M. Beyer
Richard M. BeyerPresident, Chief Executive Officer, and Director
| |  | ----------------------------------------------------------------------------------------------------------------------------------

|KNOW
ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Richard M. Beyer and Brian McDonald, his true and
lawful attorneys-in-fact, each with the power of substitution, for him in any
and all capacities, to sign amendments to this Report on Form 10-K, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
conforming all that said attorneys-in-fact, or his or her substitute or
substitutes, may do or cause to be done by virtue thereof.


Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Name |  | Title |  | Date
|---- |  | ----- |  | ----

|Principal Executive
Officer:
|----------------------------

|/s/ Richard M. Beyer

      Richard M. Beyer |  | President, Chief Executive Officer and Director |  | December 26, 2001
|------------------------------------------------------- |  | ----------------------------------------------- |  | -----------------

|Principal Financial
Officer:
|----------------------------

|/s/ Brian McDonald

      Brian McDonald |  | Vice President of Finance and Administration, Chief Financial Officer and Secretary |  | December 26, 2001
|--------------------------------------------------- |  | ----------------------------------------------------------------------------------- |  | -----------------

|Additional Directors:
|---------------------

|/s/ James V. Diller

      James V. Diller |  | Chairman of the Board of Directors |  | December 26, 2001
|----------------------------------------------------- |  | ---------------------------------- |  | -----------------

|/s/ Chuck K. Chan

      Chuck K. Chan |  | Director |  | December 26, 2001
|------------------------------------------------- |  | -------- |  | -----------------

|/s/ Alan V. King

      Alan V. King |  | Director |  | December 26, 2001
|----------------------------------------------- |  | -------- |  | -----------------

|/s/ Umesh Padval

      Umesh Padval |  | Director |  | December 26, 2001
|----------------------------------------------- |  | -------- |  | -----------------

|56
|--

|SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549


EXHIBITS


to


Form 10-K


Under


THE SECURITIES
EXCHANGE ACT OF 1934


ELANTEC SEMICONDUCTOR,
INC.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------

|INDEX TO
EXHIBITS
|-----------------

|ExhibitNumber | Description
|------------- | -----------
|             

|10.09 | Executive Change in Control Severance Benefits Agreement between Registrant and Richard Beyer, as amended.
|----- | ----------------------------------------------------------------------------------------------------------

|21.01 | Subsidiaries of the Company
|----- | ---------------------------

|23.01 | Independent Auditors Consent
|----- | -----------------------------