-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OyaIGcvHpFVWcbxfXisf+3Zj2/SLTDDWYVf02yaJUzjJ7I910lsm/8q3618Cck+c rPX8bxIwwI5ydvEfUZVthw== 0001009675-99-000001.txt : 19990125 0001009675-99-000001.hdr.sgml : 19990125 ACCESSION NUMBER: 0001009675-99-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990122 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SAWTEK INC \FL\ CENTRAL INDEX KEY: 0001009675 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 591864440 STATE OF INCORPORATION: FL FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-28276 FILM NUMBER: 99511452 BUSINESS ADDRESS: STREET 1: 1818 SOUTH HIGHWAY 441 STREET 2: P O BOX 609501 CITY: APOPKA STATE: FL ZIP: 32703 BUSINESS PHONE: 4078868860 MAIL ADDRESS: STREET 1: 1818 SOUTH HIGHWAY 441 CITY: APOPKA STATE: FL ZIP: 32703 10-Q 1 FORM 10-Q FOR SAWTEK INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------- FORM 10-Q -------------------- (Mark One) X Quarterly report pursuant to Section 13 or 15(d) of the Securities - ----- Exchange Act of 1934 For the quarterly period ended December 31, 1998 OR - ----- Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number: 000-28276 SAWTEK INC. (Exact name of registrant as specified in its charter) Florida 59-1864440 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1818 South Highway 441 Apopka, Florida 32703 (Address of principal executive offices) Telephone Number (407) 886-8860 (Registrant's telephone number, including area code) 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 ------ ------ As of January 15, 1999, there were 20,890,524 shares of the Registrant's Common stock outstanding, par value $.0005. Sawtek Inc. TABLE OF CONTENTS Part I. Financial Information Page Number --------------------- ----------- Item 1. Financial Statements (unaudited) Consolidated Balance Sheets as of December 31, 1998 and September 30, 1998 ........................................... 3 Consolidated Statements of Income for the three months ended December 31, 1998 and 1997.................................. 4 Consolidated Statements of Cash Flows for the three months ended December 31, 1998 and 1997.................................. 5 Notes to Consolidated Financial Statements........................ 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ........... 8 Part II. Other Information ----------------- Item 1. Legal Proceedings .......................................15 Item 2. Changes in Securities ...................................15 Item 3. Defaults Upon Senior Securities .........................15 Item 4. Submission of Matters to a Vote of Security Holders .....15 Item 5. Other Information ........................................15 Item 6. Exhibits and Reports on Form 8-K ........................15 Signatures.................................................................15 PART I - FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements SAWTEK INC. CONSOLIDATED BALANCE SHEETS (dollars in thousands, except per share data)
December 31, September 30, 1998 1998 ------------ ------------- (unaudited) Assets Current assets: Cash, cash equivalents and short-term investments $ 92,417 $ 84,131 Accounts receivable net of allowance for doubtful accounts and returns of $1,379 at December 30, 1998 and $1,399 at September 30, 1998 9,940 11,569 Inventories 7,650 8,453 Deferred income taxes 1,039 1,179 Other current assets 1,158 1,075 -------- -------- Total current assets 112,204 106,407 Other assets 100 109 Property, plant and equipment, net 40,979 42,194 -------- -------- Total assets $153,283 $148,710 ======== ======== Liabilities and shareholders' equity Current liabilities: Accounts payable $ 1,048 $ 1,830 Accrued wages and benefits 1,582 3,198 Other accrued liabilities 1,584 1,912 Current maturities of long-term debt 469 469 Income taxes payable 1,005 69 -------- -------- Total current liabilities 5,688 7,478 Long-term debt, less current maturities 2,052 2,169 Deferred income taxes 16,742 15,186 Shareholders' equity: Common stock; $.0005 par value; 120,000,000 authorized shares; issued and outstanding shares 21,415,429 at December 31, 1998 and 21,334,097 at September 30, 1998 11 11 Capital surplus 73,136 72,816 Unearned ESOP compensation (975) (975) Retained earnings 62,963 56,646 Less common stock held in treasury at cost; 504,904 shares at December 31, 1998 and 385,500 at September 30, 1998 (6,334) (4,621) -------- -------- Total shareholders' equity 128,801 123,877 -------- -------- Total liabilities and shareholders' equity $153,283 $148,710 ======== ======== See accompanying notes to consolidated financial statements.
3 SAWTEK INC. Consolidated Statements of Income (unaudited)
Three Months Ended December 31, ---------------------- 1998 1997 ---- ---- (in thousands, except per share data) Net sales $ 22,219 $ 24,694 Cost of sales 9,958 11,371 -------- -------- Gross profit 12,261 13,323 Operating expenses: Selling expenses 1,385 1,769 General & administrative expenses 1,079 1,431 Research & development expenses 1,197 868 -------- -------- Total operating expenses 3,661 4,068 -------- -------- Operating income 8,600 9,255 Other income - net (1,119) (818) -------- -------- Income before taxes 9,719 10,073 Income taxes 3,402 3,727 -------- -------- Net income $ 6,317 $ 6,346 ======== ======== Net income per share - basic $ 0.30 $ 0.30 Net income per share - diluted $ 0.30 $ 0.29 Shares used in computing net income per share - basic 20,882 21,023 Shares used in computing net income per share - diluted 21,231 21,733 See accompanying notes to consolidated financial statements.
4 SAWTEK INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Three Months Ended December 31, ------------------ 1998 1997 ---- ---- (in thousands) Operating activities: Net income $ 6,317 $ 6,346 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,601 1,618 Deferred income taxes 1,696 1,391 Changes in operating assets and liabilities: (Increase) decrease in assets: Accounts receivable 1,629 1,936 Inventories 803 (3,765) Other current assets (83) (201) Increase (decrease) in liabilities: Accounts payable (782) 1,307 Accrued liabilities (1,944) (1,555) Income taxes payable 936 1,942 ------- ------- Net cash provided by operating activities 10,173 9,019 Investing activities: Purchase of property, plant and equipment, net (377) (3,813) Short-term investments 19,561 (3,005) Other 94 ------- ------- Net cash provided by (used in) investing activities 19,184 (6,724) Financing activities: Principal payments on long-term debt (117) (313) Net proceeds from sale of Common stock 320 270 Purchase of Common stock for treasury (1,713) ------- ------- Net cash used in financing activities (1,510) (43) ------- ------- Increase in cash and cash equivalents 27,847 2,252 Cash and cash equivalents at beginning of period 42,132 42,300 Short-term investments 22,438 18,769 ------- ------- Cash, cash equivalents and short-term investment at end of period $92,417 $63,321 ======= ======= Interest paid $ 42 $ 65 Income taxes paid $ 770 $ 450 See accompanying notes to consolidated financial statements.
5 SAWTEK INC. Notes to Consolidated Financial Statements - December 31, 1998 (unaudited) 1. Basis of Presentation --------------------- The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information in response to the requirements of Article 10 of Regulation S-X. Accordingly, they do not contain all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the Company's financial condition as of December 31, 1998, and the results of its operations and its cash flows for the three-month periods ended December 31, 1998 and 1997. These financial statements should be read in conjunction with the Company's audited financial statements as of September 30, 1998, including the notes thereto, and the other information set forth therein included in the Company's most recent annual report on Form 10-K for the year ended September 30, 1998 (File No. 000-28276), which was filed with the Securities and Exchange Commission (the "SEC") on November 10, 1998. The following discussion may contain forward looking statements which are subject to the risk factors set forth in "Risks and Uncertainties" as stated in Item 2 of this Form 10-Q. The Company maintains its records on a fiscal year ending on September 30 of each year and all references to a year refer to the year ending on that date. The Company's first, second and third quarters normally end on the Sunday closest to the last day of the last month of such quarter, which was January 3, 1999, for the first quarter of fiscal 1999. However, for convenience, the financial statements are dated as of December 31, 1998. There were no material transactions from December 31, 1998 through January 3, 1999. The Company reviewed the application of SFAS No. 130, "Reporting Comprehensive Income", and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", and has determined that neither pronouncement is material to the Company's reported results or footnote disclosures. The Company does not have any material transactions to be reported under SFAS No. 130 and substantially all of its operations are in one business segment, the manufacture and sale of SAW-based products, with respect to the segment disclosure requirements of SFAS No. 131. Operating results for the three-month period ended December 31, 1998 are not necessarily indicative of the operating results that may be expected for the year ending September 30, 1999. Certain historical accounts have been restated to conform to the current year presentation. 6 2. Earnings Per Share ------------------ The following table sets forth the computation of basic and diluted earnings per share in accordance with the Statement of Financial Accounting Standard Number 128:
Three Months Ended December 31, ------------------ 1998 1997 ---- ---- (in thousands, except per share data) Numerator: Net income available to common stockholders $ 6,317 $ 6,346 ======= ======= Denominator: Denominator for basic earnings per share: Weighted average shares 20,882 21,023 Effect of dilutive securities: Employee stock options 349 710 ------- ------- Denominator for diluted earnings per share: Adjusted weighted average shares and assumed conversions 21,231 21,733 ======= ======= Basic earnings per share $ 0.30 $ 0.30 ======= ======= Diluted earnings per share $ 0.30 $ 0.29 ======= =======
Options to purchase 446,000 shares at prices ranging from $22.125 to $35.00 per share were outstanding during the quarter but were not included in the computation of diluted earnings per share because the option exercise price was greater than the average market price of the common shares and, therefore, the effect would be anti-dilutive. 3. Inventories - Inventories are composed of the following: -----------
December 31, 1998 September 30, 1998 ----------------- ------------------ (in thousands) Raw Material $3,872 $3,809 Work in Process 1,271 1,969 Finished Goods 2,507 2,675 ------ ------ Total $7,650 $8,453 ====== ======
7 4. Property, Plant and Equipment - Property, plant and equipment are composed ----------------------------- of the following:
December 31, 1998 September 30, 1998 ----------------- ------------------ (in thousands) Land and Improvements $ 830 $ 830 Buildings 16,519 16,595 Production and Test Equipment 37,970 37,235 Computer Equipment 3,254 3,239 Furniture and Fixtures 2,676 2,666 Construction in Progress 736 1,043 ------- ------- 61,985 61,608 Less Accumulated Depreciation 21,006 19,414 ------- ------- Total $40,979 $42,194 ======= =======
5. Shareholders' Equity - The consolidated changes in shareholders' equity for -------------------- the three months ended December 31, 1998 are as follows:
(in thousands) Unearned Treasury Common Stock Capital ESOP Retained Stock Shares Amount Surplus Compensation Earnings Shares Amount ------ ------ ------- ------------ -------- ------ ------ Balance at October 1, 1998 21,334 $11 $72,816 $(975) $56,646 386 (4,621) Net income 6,317 Sale of common stock 81 320 Purchase of treasury stock 119 (1,713) ------ --- ------- ----- ------- --- ----- Balance at December 31, 1998 21,415 $11 $73,136 $(975) $62,963 505 (6,334) ====== === ======= ====== ======== === =====
Item 2. Management's discussion and analysis of financial condition and results of operations The following discussion and analysis should be read in conjunction with the Company's Consolidated Financial Statements and Notes thereto included elsewhere in this Form 10-Q. Except for the historical information contained herein, the discussion in this Form 10-Q contains certain forward-looking statements such as statements of the Company's plans, objectives, expectations and intentions that involve risks and uncertainties. The cautionary statements made herein should be read as being applicable to all related forward-looking statements wherever they appear. The Company's actual results could differ materially from those discussed here. Factors that could cause or contribute to such differences include those discussed in "Risks and Uncertainties," as well as those discussed elsewhere herein. 8 Overview ======== The Company was incorporated in 1979 to design, develop, manufacture and market a broad range of electronic components based on surface acoustic wave ("SAW") technology used in telecommunications, data communications, video transmission, military and space systems and other markets. The Company's focus has been on the high-end performance spectrum of the market, and its primary products are SAW bandpass filters, resonators, delay lines, oscillators and SAW-based sub-systems. Initially, the Company's products were concentrated in the military and space systems market. The Company has since shifted its attention to commercial markets which accounted for approximately 93% of net sales in the first three months of fiscal 1999. The Company has also experienced significant growth in its international markets over the last five years, with international sales accounting for approximately 34% of net sales for the first three months of fiscal 1999. However, sales to South Korean customers have declined from 21% of revenue in the quarter ended December 31, 1997 to 9% in the current quarter due to the economic recession in that country and the corresponding slow down in consumer and industrial demand. The Company has a wide range of customers, but a significant portion of its revenue is derived from the top three customers which accounted for approximately 50% of net revenue for the quarter ended December 31, 1998 and 1997. Results of Operations ===================== The following table sets forth, for the periods indicated, the percentage relationship of certain items from the Company's statements of income to total net sales:
Three Months Ended December 31, ------------------ 1998 1997 ---- ---- Net sales 100.0% 100.0% Cost of sales 44.8 46.0 ----- ----- Gross profit 55.2 54.0 Operating expenses: Selling expenses 6.2 7.2 General & administrative expenses 4.9 5.8 Research & development expenses 5.4 3.5 ----- ----- Total operating expenses 16.5 16.5 ----- ----- Operating income 38.7 37.5 Other income - net 5.0 3.3 ----- ----- Income before taxes 43.7 40.8 Income taxes 15.3 15.1 ----- ----- Net income 28.4% 25.7% ===== =====
9 Net Sales. Net sales decreased 10% from $24.7 million in the quarter ended December 31, 1997 to $22.2 million in the quarter ended December 31, 1998 due to reduced sales into the South Korean market as a result of the economic recession in that country and due to lower average selling prices for high volume filters for telephone handsets based on Code Division Multiple Access ("CDMA") technology and filters for base station applications based on Global System for Mobile ("GSM) communications technology. Revenue from South Korean customers declined from 21% of total revenue in the quarter ended December 31, 1997 to 9% in the quarter ended December 31, 1998 reflecting the slow down in demand from these customers due to the economic turmoil in South Korea. The Company believes that the financial turmoil in Asia will continue to impact the Company in fiscal 1999 and that revenue from Asian customers will likely be below the revenue from these customers in fiscal 1998. In addition, the Company believes that prices for filters for CDMA base stations may decline in the future due to the conversion to smaller surface mount packages which would reduce revenue and reduce gross margins on these products. Sales of CDMA base station filters accounted for approximately 24% of total revenue in the quarter ended December 31, 1998. Gross Margin. Gross margin increased from 54.0% for the quarter ended December 31, 1997 to 55.2% in the quarter ended December 31, 1998 due to improved yields, lower manufacturing labor costs, and higher than expected margins for bandpass filters for base station and handset applications and for chemical sensor products. The Company believes gross margins will decline as the Company shifts more of its product mix to handset filters which are lower priced, have lower profit margins, and are subject to more competitive pricing pressure than the Company's other products. Operating Expenses. Operating expenses overall remained at 16.5% of net sales for the quarter ended December 31, 1998 compared to the same period one year ago. Selling expenses decreased as a percentage of net revenue due to lower commissions paid to independent sales representatives. General and administrative expenses decreased as a percentage of net sales due to less administrative personnel. Research and development expenses increased due to more expenditures for programs, particularly for SAW-based chemical sensors. Other Income. Other income primarily represents interest income which increased for the three-month period as the Company recorded increased interest income on its investment of cash, cash equivalents and short-term investments. Income Tax Expense. The provision for income taxes as a percentage of income before income taxes was 37% for the quarter ended December 31, 1997 and 35% for the quarter ended December 31, 1998. The lower effective tax rate relates to tax benefits received from the Company's foreign sales corporation, tax exempt interest income, a lower effective rate for state income taxes, and other factors. The Company expects that its effective tax rate will remain at approximately 34% to 36% during fiscal 1999. 10 Liquidity and Capital Resources - ------------------------------- The Company has financed its operations to date through cash generated from operations, bank borrowings, lease financing, the private sale of securities, its May 1, 1996 initial public offering, and the July 1, 1997 follow-on public offering. The Company requires capital principally for equipment, financing of accounts receivable and inventory, investment in product development activities and new technologies, expansion of its operation in Costa Rica, and potential acquisitions of new technologies or compatible companies. For the three months ended December 31, 1998, the Company generated net cash from operating activities of $10.2 million, consisting primarily of net income of $6.3 million, $1.6 million of depreciation and amortization, a $1.6 million reduction in accounts receivable and $1.7 million in deferred taxes, offset by the net decrease in accounts payable and accruals of $2.7 million. The Company has a revolving credit agreement totaling $20.0 million from SunTrust Bank, Central Florida, N.A. available through March 31, 2000. There were no balances outstanding on this credit line at December 31, 1998. The Company made capital expenditures of approximately $377,000 during the quarter ended December 31, 1998. The Company intends to spend approximately $8 million to $10 million in fiscal 1999 on capital equipment and facilities. The Company repurchased 119,405 shares of its Common stock for $1.7 million in the quarter ended December 31, 1998. In the fourth quarter of fiscal 1998, the Board of Directors authorized the Company to repurchase up to 1,000,000 shares of Common stock which includes the 504,905 purchased through December 31, 1998. The Company expects to continue to repurchase shares of its Common stock from time to time in the future. The repurchased shares will be used to satisfy stock option exercises and issuance of shares under other stock-related benefit programs. The Company believes that its present cash position, together with its credit facility and funds expected to be generated from operations, will be sufficient to meet its projected working capital and other cash requirements through the next 12 months. Thereafter, the Company may require additional equity or debt financing to address its working capital needs or to provide funding for capital expenditures. There can be no assurance that events in the future will not require the Company to seek additional capital sooner or, if so required, that it will be available on terms acceptable to the Company, if at all. Impact of Inflation on the Company - ---------------------------------- Management does not believe that inflation has had a material impact on operating costs and earnings of the Company. New Accounting Pronouncements - ----------------------------- There were no new pronouncements issued that would have a material impact on the Company's financial statements that have not already been adopted by the Company. 11 Year 2000 Compliance - -------------------- The Year 2000 relates to the method used by computer systems and software for recognizing the two-digit year code as the year 1900, instead of 2000. Computer hardware and software describes traditional information technology systems such as enterprise resource planning systems, accounting systems, fax servers, print servers, desktop computers and applications, telephone/PBX systems, as well as other systems such as manufacturing equipment, facilities equipment and security systems. Some of Sawtek's computer hardware and software may recognize a year represented by "00" as 1900, instead of 2000. This could result in unexpected behavior in the affected hardware or software. These systems will need to be able to accept four-digit entries to distinguish years beginning with 2000 from prior years. As a result, systems that do not accept four-digit year entries will need to be upgraded or replaced to comply with such Year 2000 requirements. Sawtek's State of Readiness - Year 2000 - --------------------------------------- Sawtek's Year 2000 inventory, assessment, remediation and testing began in January 1998 and is planned to be completed by June 1999. As of December 31, 1998, it is estimated that 70% of the issues that are necessary for a successful Year 2000 transition are resolved. The remaining 30% of the issues are in progress and are planned to be completed by June 1999. To certify Year 2000 compliance, Sawtek employed two methods. Vendor certification was the primary method utilized. In order for a system to be considered compliant from vendor certification, Sawtek required a written statement from the vendor, as well as a description of the testing methods used. If this information was not available or was not considered thorough enough, Sawtek performed an internal test. These tests include the use of a certified hardware test program, the examination of the software source code by Sawtek's Software Engineering Department or Information Systems Department and advancing the date past January 1, 2000. Sawtek also surveyed key suppliers. As of January 20, 1999, 100% of those surveyed have responded. Of those surveyed, 50% are already compliant. The remainder expect to be compliant some time in 1999. No suppliers responded that they would fail to be Year 2000 compliant. Sawtek is in the process of surveying its key customers and the results are expected to be completed by the end of February 1999. Costs to Address the Company's Year 2000 Issues - ----------------------------------------------- The bulk of the Company's costs to address Year 2000 issues are internal staff time estimated at less than $100,000 for the past fiscal year and the cost to upgrade its main MRP software which is certified as Year 2000 compliant. The cost of this upgrade, which was purchased in fiscal 1998, was $48,000. The estimated cost to complete the Year 2000 compliance and transition is less than $200,000 for fiscal 1999, which will be funded out of fiscal 1999 operating cash flow. 12 The Risks of the Company's Year 2000 Issues - ------------------------------------------- The Company's products are not date sensitive and, therefore, are not subject to year 2000 defects or problems. The Company believes that its primary manufacturing, engineering, financial and administrative systems are Year 2000 compliant. The greatest potential risk from Year 2000 issues relates to a major supplier or customer whose systems are not Year 2000 compliant and who may be unable to meet delivery requirements for an important raw material or equipment or who may not be able to accept shipment of the Company's products until they correct their Year 2000 problem. The Company presently believes that the Year 2000 issue will not pose significant operational problems for the Company. However, if all Year 2000 issues are not properly identified, or assessment, remediation and testing are not effected timely, there can be no assurance that the Year 2000 issue will not materially adversely impact the Company's results of operations or adversely affect relationships with customers, vendors, or others. Additionally, there can be no assurance that the Year 2000 issues of other entities will not have a material adverse impact on the Company's systems or results of operations. The Company's Contingency Plans - Year 2000 - ------------------------------------------- The Company has begun, but not yet completed, a comprehensive analysis of the operational problems and costs (including loss of revenues) that would be reasonably likely to result from the failure by the Company and certain third parties to complete efforts necessary to achieve Year 2000 compliance on a timely basis. A contingency plan has not been developed for dealing with the most reasonably likely worst-case scenario, and such scenario has not yet been clearly identified. The Company currently plans to complete such analysis and contingency planning by June 30, 1999. Foreign Currency - ---------------- The Company generates approximately 30% to 40% of its revenue from sales outside of the United States. In addition, approximately 40% to 50% of its product is produced in Costa Rica. To date, substantially all of the Company's sales have been denominated in U.S. dollars and the vast majority of costs incurred are in U.S. dollars. As a result, the Company has not engaged in significant transactions involving foreign currency management. Over the past year, the valuations of many foreign currencies have fluctuated relative to the U.S. dollar. The Korean won and Japanese yen, in particular, have fluctuated in value due in part to the economic problems experienced by these countries over the past year. A stronger U.S. dollar makes it more difficult for companies in these countries to purchase U.S. products and it has made it more difficult for Sawtek to compete against SAW producers based in these countries. The new common European currency, the euro, made its debut in January 1999. Approximately 20% of the Company's sales are in Europe. To date, none of the Company's customers or suppliers have requested the Company to transact business in the euro. As a result, the impact of this new currency on the Company is not determinable at this time. 13 Risks and Uncertainties - ----------------------- This Form 10-Q contains certain forward-looking statements which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Act of 1995. Investors are cautioned that forward-looking statements such as statements of the Company's plans, objectives, expectations and intentions involve risks and uncertainties. The cautionary statements made in this report should be read as being applicable to all related forward-looking statements wherever they appear. Statements containing terms such as "believes," "does not believe," "no reason to believe," "expects," "plans," "intends," "estimates" or "anticipates" are considered to contain uncertainty and are forward-looking statements. The Company's actual results could differ materially from those discussed. Factors that could cause or contribute to such differences include the following: the Company's dependence on continuing demand for wireless communications services and CDMA technology, particularly CDMA handset units; economic turmoil in South Korea and other Asia-Pacific countries (as experienced during the past year) or other geographic areas of the world and risks associated with international operations; fluctuations in the value of foreign currency; pressure on revenues and gross profit margins due to competition; change in product mix and other factors; lower average selling prices of Sawtek's products; dependence on a limited number of customers, which are expected to continue to account for a high percentage of the Company's future net sales; fluctuations in the Company's quarterly results and backlog which may be caused by such factors as product mix changes, price competition, availability of manufacturing capacity, and customer order cancellation or rescheduling; the Company's dependence on its timely development of new or improved SAW products (such as SAW chemical sensors) to meet changing market needs and the risk of competing technologies which could replace or reduce the use of SAW technology for certain applications; risks associated with Costa Rica operations, as well as other risks discussed in Sawtek's SEC reports, including Form 10-K for the fiscal year ended September 30, 1998 filed with the SEC on November 10, 1998. A reader of this Form 10-Q should understand that it is not possible to predict or identify all such risk factors. Consequently, the reader should not consider this list to be a complete statement of all potential risks or uncertainties. The Company does not assume the obligation to update any forward-looking statement. 14 PART II - OTHER INFORMATION - --------------------------- Item 1. Legal Proceedings. The Company is not subject to any legal proceedings that, if adversely determined, would cause a material adverse effect on the Company's financial condition, business or results of operations. Item 2. Changes in Securities. None. Item 3. Defaults Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. None. Item 5. Other Information. None. Item 6. (a) Exhibits and Reports on Form 8-K. None (b) Exhibit 27 - Financial Data Schedule. SIGNATURES - ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: January 22, 1999 SAWTEK INC. (Registrant) /s/ Raymond A. Link Raymond A. Link Vice President Finance, Chief Financial Officer (Principal Financial and Accounting Officer) 15 EX-27 2 FDS FOR 1ST QUARTER 10-Q
5 (Replace this text with the legend) 001009675 Sawtek Inc. 1000 3-MOS SEP-30-1999 OCT-01-1998 DEC-31-1998 92,417 0 11,319 1,379 7,650 112,204 61,985 21,006 153,283 5,688 2,052 0 0 11 128,790 153,283 22,219 22,219 9,958 9,958 3,661 0 44 9,719 3,402 6,317 0 0 0 6,317 .30 .30
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