CASH AND INVESTMENTS. The following is a summary of available-for-sale securities:

  MARCH 31, 1998         MARCH 31,1997
(In thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated
Gross Unrealized Gains Gross Unrealized Losses Estimated
Money market funds $  13,614 $   --- $  --- $  13,614   $  23,864 $   --- $  --- $  23,864
Auction rate preferred 30,292 12 (2) 30,302   17,297 5 (1) 17,301
Municipal bonds 296,509 189 (29) 296,669   378,848 165 (31) 378,982
  $340,415 $201 $(31) $340,585   $420,009 $170 $(32) $420,147
Included in short-term investments $195,326     $209,944
Included in cash and cash equivalents 145,259     210,203
  $340,585     $420,147

All investments classified as "available-for-sale securities" have maturities due in one year or less. Realized gains or losses from sales of available-for-sale securities were immaterial for all periods presented.

Held-to-maturity securities of $36.3 million at March 31, 1998 and March 31, 1997, represent investments in US Treasury Securities for which amortized cost approximates estimated fair value. Held-to-maturity securities relate to certain collateral requirements for lease agreements associated with the Company's corporate facilities and have maturities due in one year or less. See Note 6 of Notes to Consolidated Financial Statements.

DERIVATIVES. In fiscal 1997, the Company entered into foreign exchange forward contracts to minimize the impact of future exchange fluctuations on the US dollar cost of investing in the USIC joint venture. The contracts required the Company to exchange US dollars for New Taiwan dollars and matured within one year. The contracts were accounted for as a hedge of an identifiable foreign currency commitment. Realized losses, which were immaterial, were recognized upon maturity of the contracts in fiscal 1998 and included in the USIC joint venture investment.

The Company has entered into an interest rate swap agreement with a third party in order to reduce risk related to movements in interest rates. Under the agreement, which was effective starting in May 1996 and terminates in November 1998, the Company effectively converted the fixed rate interest payments related to $125 million of the Company's convertible long-term debt to variable rate interest payments without the exchange of the underlying principal amounts. The Company receives fixed interest rate payments (equal to 5.935%) from the third party and is obligated to make variable rate payments (equal to the three month Libor rate) to the third party during the term of the agreement. The fair value of the interest rate swap is immaterial based on market exchange rates.

At March 31, 1998, no commitments under foreign currency forward or option contracts were outstanding.

LONG-TERM DEBT AND LINES OF CREDIT. In November 1995, the Company completed a private placement of $250 million aggregate principal convertible subordinated notes under Rule 144A of the Securities Act of 1933. The notes, which mature in 2002, are convertible at the option of the note holders into the Company's common stock at a conversion price of $51 per share, subject to adjustment upon the occurrence of certain events. The conversion price represented a 24.77% premium over the closing price of the Company's stock on November 7, 1995. Interest is payable semi-annually at 5.25% per annum. As of November 4, 1997, the notes are redeemable at the option of the Company at an initial redemption price of 103.75% of the principal amount. However, prior to November 3, 1998, the notes are not redeemable unless the closing price of the Company's common stock has exceeded $71.40 (40% premium over the conversion price) per share for twenty trading days within a period of thirty consecutive trading days. Redemption prices as a percentage of the principal amount are 103%, 102.25%, 101.50% and 100.75% in the years beginning November 1, 1998, November 1, 1999, November 1, 2000 and November 1, 2001, respectively. Debt issuance costs of $6.1 million incurred in conjunction with issuance of the convertible subordinated notes are being amortized over the seven-year life of the notes. In 1998, the Company recorded debt issuance cost amortization of $0.9 million. At March 31, 1998, the fair value of the convertible subordinated notes was approximately $255 million based on quoted market prices. The Company has reserved 4,901,961 shares of common stock for the conversion of these notes.

The Company has $40 million available under a syndicated bank revolving credit line agreement, which expires in March 2001. Under this agreement, borrowings bear interest at the prime rate or 0.625% over the Libor rate. Additionally, the Company's Ireland manufacturing facility has an additional $6.2 million available under a multicurrency credit line, which expires in November 1999. Under this agreement, borrowings bear interest at the bank's prime rate. At March 31, 1998, no borrowings were outstanding under any credit lines. The Company is in full compliance with the agreement's required covenants and financial ratios. The agreements prohibit the payment of cash dividends without prior bank approval.

Return to Notes to Consolidated Financial Statements