11-K 1 form-11k_123103.txt MICREL, INC. 401(K) FORM 11-K 12-31-2003 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 11-K ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2003. [ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number 0-25236 A. Full title of the plan and address of the plan, if different from that of the issuer named below: MICREL, INC. 401(k) PLAN B. Name of issuer of the securities held pursuant to the plan and the address of its principle executive office: MICREL, INCORPORATED 2180 Fortune Drive San Jose, CA 95131 REQUIRED INFORMATION 1. Financial Statements and Schedule The following documents are filed as part of this report on the pages indicated: Page No. -------- Independent Auditors' Report 3 Statements of Net Assets Available for Benefits 4 Statement of Changes in Net Assets Available for Benefits 5 Notes to Financial Statements 6 Supplemental Schedule Schedule H, Part IV Item 4i - Schedule of Assets (Held At End of Year) 12 2. Exhibits Exhibit 23 - Independent Auditors' Consent 13 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees have duly caused this annual report to be signed on its behalf by the undersigned thereunto duly authorized. MICREL, INC. 401(k) PLAN Date: June 29, 2004 By: /s/ Richard D. Crowley Jr. -------------------------- Richard D. Crowley Jr. Vice President, Finance and Chief Financial Officer -2- INDEPENDENT AUDITORS' REPORT ---------------------------- To the Administrative Committee Micrel, Inc. 401(k) Plan San Jose, California We have audited the accompanying statements of net assets available for benefits of Micrel, Inc. 401(k) Plan as of December 31, 2003 and 2002, and the related statement of changes in net assets available for benefits for the year ended December 31, 2003. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we Plan and perform the audits 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, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Micrel, Inc. 401(k) Plan as of December 31, 2003 and 2002, and the changes in net assets available for benefits for the year ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets (held at end of year) is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. ARMANINO McKENNA LLP San Ramon, California June 25, 2004 -3-
MICREL, INC. 401(k) PLAN Statements of Net Assets Available for Benefits December 31, 2003 and 2002 __________________________ ASSETS ------ 2003 2002 ------------ ------------ Cash $ 112,173 $ 146,662 Investments at fair value Registered investment companies 23,507,469 19,930,209 Common stocks - 729,033 Employer common stock 452,007 176,834 ------------ ------------ Total investments at fair value 23,959,476 20,836,076 ------------ ------------ Investments at contract value Guaranteed investment contract 2,952,361 - ------------ ------------ Total investments 26,911,837 20,836,076 ------------ ------------ Participant loans 837,555 798,641 Employee contribution receivable - 477 ------------ ------------ Net assets available for benefits $ 27,861,565 $ 21,781,856 ============ ============ The accompanying notes are an integral part of these financial statements.
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MICREL, INC. 401(k) PLAN Statement of Changes in Net Assets Available for Benefits For the Year Ended December 31, 2003 __________________________ Additions to net assets Contributions Participant contributions $ 2,971,995 Rollovers 160,111 ------------ Total contributions 3,132,106 Interest and dividends 75,199 Net appreciation in fair value of investments 4,845,104 ------------ Total additions 8,052,409 ------------ Deductions from net assets Benefits paid to participants 1,891,199 Investment and administrative fees 81,501 ------------ Total deductions 1,972,700 ------------ Net increase in net assets 6,079,709 Net assets available for benefits at December 31, 2002 21,781,856 ------------ Net assets available for benefits at December 31, 2003 $ 27,861,565 ============ The accompanying notes are an integral part of these financial statements.
-5- MICREL, INC. 401(k) Plan Notes to Financial Statements December 31, 2003 and 2002 _________________________ 1. Description of the Plan ---------------------------- The following description of the Micrel, Inc. 401(k) Plan (the "Plan") provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan's provisions. General ------- The Plan, a defined contribution plan sponsored by Micrel, Inc. (the "Company" or "Employer"), intended to qualify under Section 401(a) and related provisions of the Internal Revenue Code, was established effective January 1, 1980. The Plan is designed to provide participants with a means to defer a portion of their compensation for retirement. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"). During the year ended December 31, 2003, the Plan was amended to reflect certain provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA") and the provisions of certain other acts collectively referred to as "GUST". Participants should refer to the Plan documents for further details on the amendments. Plan administration ------------------- The Company is the administrator of the Plan and, as such, carries out the duties imposed by ERISA. The Company has delegated certain responsibilities for the operation and administration of the Plan. Custodianship of the assets and investment transactions were provided by Security Trust Company, N.A. ("Security Trust") and Charles Schwab & Company, Inc. ("Charles Schwab") during 2003. Recordkeeping services are provided by Invesmart. Effective January 2002, the Plan replaced Charles Schwab & Company, Inc. with Security Trust as custodian of the Plan's investments. All participant-directed investments were converted to cash on December 27, 2001, to facilitate the transfer of funds to Security Trust on January 2, 2002. In March 2002, the nonparticipant-directed funds were also transferred from Charles Schwab to Security Trust. Effective November 2003, the Plan replaced Security Trust with Charles Schwab as custodian of the Plan's investments. As a result of the change in custodian, the Plan changed the investment funds that participants can choose from. All participant-directed and non-participant directed investments were transferred from Security Trust to Charles Schwab on November 20, 2003. The Company sold all non-employer common stock and moved the assets into pooled mutual funds. Certain administrative fees of the plan, including audit fees, were paid directly by the Company for the year ended December 31, 2003. -6- MICREL, INC. 401(k) Plan Notes to Financial Statements December 31, 2003 and 2002 _________________________ 1. Description of the Plan (continued) ---------------------------------------- Eligibility ----------- All non-excluded employees as defined by the Plan become eligible to participate in the Plan on the first day of the month following their employment commencement date. Participants of the Plan who have more than six months of service as defined are eligible to receive discretionary contributions from the Company based on the provisions of the plan. Participants should refer to the plan document for the Plan's eligibility provisions. Contributions ------------- Annually, participants may elect to make salary deferral contributions up to 100% of their pretax eligible compensation, as defined in the Plan, subject to certain IRS limitations. A participant may also contribute cash to the Plan in the form of a "rollover contribution" from another qualified employer-sponsored retirement plan. Employer contributions may be contributed at the discretion of the Company's board of directors and are invested in a portfolio of investments as directed by the Company. The Company did not make a contribution to the Plan for the year ended December 31, 2003. Participants direct the investment of their contributions into various investment options offered by the Plan. The Plan currently offers money market funds, registered investment companies (i.e., mutual funds), and employer common stock as investment options for participants. The non- employer common stocks held by the Plan were not investment alternatives for participants. Participant accounts -------------------- Each participant's account is credited with the participant's contribution and earnings thereon and an allocation of (a) the Company's contribution and earnings thereon, and charged with an allocation of administrative expenses, and (b) forfeitures of terminated participants' non-vested accounts. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant's vested account. Vesting ------- Participants are immediately vested in their voluntary contributions plus actual earnings thereon. Vesting in the Company discretionary contributions portion of their accounts plus actual earnings thereon is based on years of continuous service as defined by the Plan. A participant is 100% vested after 6 years of credited service. -7- MICREL, INC. 401(k) Plan Notes to Financial Statements December 31, 2003 and 2002 _________________________ 1. Description of the Plan (continued) ---------------------------------------- Payment of benefits ------------------- Distributions and withdrawals are payable upon termination, financial hardship, disability, death, or retirement. The participant (or his/her beneficiary), may elect to receive either a lump-sum amount equal to the vested value of his or her account, or installments over a period of years not to exceed the life expectancy of the participant. Participant loans ----------------- Participants may borrow from their accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their vested account balance. Loan terms range from 1 to 5 years or up to 15 years for the purchase of a primary residence. The loans are secured by the remaining balance in the participant's account and bear interest at rates that range from 6.0% to 11.5%, which are commensurate with local prevailing rates as determined by the Plan administrator. Principal and interest is paid ratably through monthly payroll deductions. Forfeitures ----------- Forfeitures shall be allocated to all participants eligible to share in the allocations in the same proportion that each participant's compensation for the year bears to the compensation of all participants for such year. These accounts will be used to reduce future employer contributions and administrative expenses. At December 31, 2003, there was $240,913 in forfeited nonvested accounts. 2. Summary of Significant Accounting Policies ----------------------------------------------- Basis of accounting ------------------- The financial statements of the Plan are prepared under the accrual basis of accounting. Payment of benefits ------------------- Benefits are recorded when paid. Investment valuation and income recognition ------------------------------------------- The Plan's investments are stated at fair value. Shares of registered investment companies (i.e., mutual funds) are valued at quoted market prices as reported by the Custodian, which represent the net asset value of shares held by the Plan at year-end. Common stocks are valued at quoted market prices as reported by the Custodian. Participant loans are valued at cost which approximates fair value. The guaranteed investment contract is reported at contract value, which approximates fair value, as reported to the Plan by MetLife (see Note 3). -8- MICREL, INC. 401(k) Plan Notes to Financial Statements December 31, 2003 and 2002 _________________________ 2. Summary of Significant Accounting Policies (continued) ----------------------------------------------------------- Investment valuation and income recognition (continued) ------------------------------------------------------- Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Investment valuation and return is subject to fluctuations in the market performance of the underlying investment alternatives provided by the Plan. Accordingly, investment returns may vary from period to period depending on the performance of the underlying investments and these variations could be significant. Investment fees, which may vary according to the individual funds selected, are paid out of the assets of the Plan. Participants should refer to the prospectus of the individual investment funds for further details on individual investment fees. Estimates --------- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Plan administrator to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results may differ from those estimates. Reclassifications ----------------- Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. 3. Guaranteed Investment Contract The Plan invests in a fully benefit-responsive guaranteed investment contract with MetLife. The investment contract is credited with earnings on the underlying investments and charged for participant withdrawals and administrative expenses. The investment contract is included in the financial statements at contract value as reported to the Plan by MetLife. Contract value represents contributions made under the contract, plus earnings, less participant withdrawals and administrative expenses and approximates fair value. Participants may ordinarily direct the withdrawal or transfer of all or a portion of their investments at contract value. There are no reserves against contract value for credit risk of the contract issuer or otherwise. The average yield and crediting interest rates were approximately 4.35% for the year ended December 31, 2003, respectively. The crediting interest rate is based on an agreed-upon formula with the issuer, but may not be less than 0% percent. Such interest rates are reviewed and reset, as applicable, on a quarterly basis. -9- MICREL, INC. 401(k) Plan Notes to Financial Statements December 31, 2003 and 2002 _________________________ 4. Investments ---------------- The following presents investments that represent 5 percent or more of the Plan's net assets at December 31: 2003 2002 ------------ ------------ MetLife Stable Value Fund N/A $ 2,933,702 MetLife GIC $ 2,952,361 N/A Strong Government Sector Fund N/A $ 2,247,287 Schwab Institutional Advantage Money Market Fund N/A $ 2,174,044 Dreyfus S&P 500 Index Fund $ 2,574,414 $ 1,889,373 Gabelli Value Fund $ 2,559,962 $ 1,883,840 Weitz Partners Value Fund $ 2,029,245 $ 1,541,437 Selected American Fund $ 1,764,413 $ 1,179,812 Artisian Midcap Fund $ 1,458,132 N/A Columbia Intermediate Bond Fund $ 2,130,464 N/A American Funds Growth Funds of America Fund $ 1,414,930 N/A Managers Special Equity Fund $ 1,601,323 N/A Gabelli Growth Fund N/A $ 1,095,193
During 2003, the Plan's investments appreciated in value by $4,845,104 (including gains and losses on investments bought and sold, as well as held during the year) as follows: Registered investment companies $ 4,489,200 Non-employer common stock 183,975 Employer common stock 171,929 ------------ $ 4,845,104 ============
5. Nonparticipant-Directed Investments ---------------------------------------- Information about the net assets and significant components of the changes in net assets relating to the nonparticipant-directed investments is as follows: 2003 2002 ------------ ------------ Net assets Registered investment companies (mutual funds) 4,880,722 3,770,151 Non-employer common stocks - 729,033 ------------ ------------ $ 4,880,722 $ 4,499,184 ============ ============
-10- MICREL, INC. 401(k) Plan Notes to Financial Statements December 31, 2003 and 2002 _________________________ 5. Nonparticipant-Directed Investments (continued) 2003 ------------ Changes in net assets Interest and dividends $ 34,828 Net appreciation in fair value of investments 772,511 Benefits paid to participants (416,144) Administrative expenses (9,657) ------------ $ 381,538 ============
6. Tax Status --------------- The Plan has adopted the Invesmart basic prototype plan. The Internal Revenue Service has determined and informed Invesmart by a letter dated November 19, 2001, that its prototype plan is designed in accordance with applicable sections of the Code. The Plan has been amended since receiving the determination letter. However, the Plan administrator and the Plan's tax counsel believe that the Plan is designed and is currently being operated in compliance with the applicable requirements of the Code. Therefore, no provision for income taxes has been included in the Plan's financial statements. 7. Related Party Transactions ------------------------------- Plan investments are held by Schwab. Schwab is the custodian as defined by the Plan and therefore, these transactions qualify as party-in-interest transactions specifically exempted from the prohibited transaction rules of ERISA. 8. Plan Termination --------------------- Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of plan termination, the full value of each participant's account shall become fully vested and nonforfeitable. -11- SUPPLEMENTAL SCHEDULE ---------------------
MICREL, INC. 401(k) PLAN Schedule H, Part4, Item 4i - Schedule of Assets (Held At End of Year) EIN: 94-2526744; Plan No. 001 December 31, 2003 ____________________ (c) (b) Description of Investment including (e) Identity of Issue, Maturity Date, Rate of interest, (d) Current (a) Borrower, Lessor, or Similar Party Collateral, Par or Maturity Value Cost Value --- ---------------------------------- ----------------------------------- ----------- ----------- * Micrel Inc. Common Stock $ 451,604 $ 452,007 Artisan Midcap Fund Mutual Fund $ 1,368,809 $ 1,458,132 Buffalo Small Cap Fund Mutual Fund $ 899,322 $ 955,343 Columbia Intermediate Bond fund Mutual Fund $ 2,121,309 $ 2,130,464 Dodge & Cox Stock Fund Mutual Fund $ 491,689 $ 601,048 Dreyfus Bond Market Index Fund Mutual Fund $ 895,876 $ 888,023 Dreyfus S&P 500 Index Fund Mutual Fund $ 2,460,039 $ 2,574,414 American Funds EuroPacific Growth Fund R4 Mutual Fund $ 1,173,245 $ 1,247,181 Gabelli Value Fund Mutual Fund $ 2,435,534 $ 2,559,962 American Funds Growth Funds of America R4 Mutual Fund $ 1,349,689 $ 1,414,930 Managers Special Equity Fund Mutual Fund $ 1,541,740 $ 1,601,323 Metlife GIC Mutual Fund $ 2,940,083 $ 2,952,361 Royce Premier Fund Mutual Fund $ 1,351,414 $ 1,388,001 * Schwab International Index Fund Mutual Fund $ 1,009,418 $ 1,087,507 * Schwab S&P 500 Index Fund E Shares Mutual Fund $ 363,566 $ 292,179 Selected American Fund Mutual Fund $ 1,662,708 $ 1,764,413 SIT US Government Securities Fund Mutual Fund $ 516,003 $ 516,136 Van Kampen Growth & Income Fund Mutual Fund $ 77,161 $ 82,817 Weitz Partners Value Fund Mutual Fund $ 1,818,122 $ 2,029,245 Whilshire Target Large Company Growth Investment Fund Mutual Fund $ 480,768 $ 559,304 * Schwab Institutional Advantage Money Market Fund Mutual Fund $ 357,047 $ 357,047 Cash Cash $ 112,173 $ 112,173 * Participant Loans Interest Rates 6.0-11.5% N/A $ 837,555 *Indicates a party-in-interest.
-12- EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 333-105862 of Micrel, Incorporated on Form S-8 of our report dated June 25, 2004, appearing in this Annual Report on Form 11-K of Micrel, Inc. 401(k) Plan for the year ended December 31, 2003. /s/ Armanino McKenna LLP ------------------------ ARMANINO McKENNA LLP San Ramon, California June 29, 2004 -13-