x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended March 31, 2011
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Or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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20-3320580
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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4321 Jamboree Road
Newport Beach, California
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92660
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company o
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1
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1
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1
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2
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3
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4
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9
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10
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11
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11
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11
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11
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12
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12
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Item 1.
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Financial Statements
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March 31, 2011
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December 31,
2010
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(unaudited)
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ASSETS
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Current assets:
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Cash and cash equivalents
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$ | 25,403 | $ | 29,031 | ||||
Receivables: | ||||||||
Trade receivables, net of allowance for doubtful accounts of $284 and $326 at March 31, 2011 and December 31, 2010, respectively
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29,962 | 29,687 | ||||||
Due from related party
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4,554 | 3,376 | ||||||
Inventories
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20,864 | 19,096 | ||||||
Deferred tax asset
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4,728 | 4,728 | ||||||
Prepaid expenses and other current assets
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4,857 | 3,768 | ||||||
Total current assets
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90,368 | 89,686 | ||||||
Property, plant and equipment, net
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99,638 | 96,908 | ||||||
Investments
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17,100 | 17,100 | ||||||
Intangible assets, net
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47,236 | 48,394 | ||||||
Goodwill
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7,000 | 7,000 | ||||||
Other assets – related parties
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19,522 | 22,392 | ||||||
Other assets - others
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2,031 | 1,895 | ||||||
Total assets
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$ | 282,895 | $ | 283,375 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
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Short-term bank debt and current maturities of notes
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$ | 53,886 | $ | 53,338 | ||||
Accounts payable
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10,937 | 13,023 | ||||||
Due to related party
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4,520 | 3,389 | ||||||
Accrued compensation and benefits
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5,441 | 5,677 | ||||||
Deferred revenues
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2,425 | 1,834 | ||||||
Accrued interest
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2,752 | 5,393 | ||||||
Other current liabilities
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5,240 | 7,418 | ||||||
Total current liabilities
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85,201 | 90,072 | ||||||
Long term liabilities:
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Long-term debt from bank
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10,000 | 10,000 | ||||||
Notes
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65,521 | 64,463 | ||||||
Deferred tax liability
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9,876 | 9,876 | ||||||
Accrued pension, retirement medical plan obligations and other long-term liabilities
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18,169 | 18,055 | ||||||
Total liabilities
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188,767 | 192,466 | ||||||
Stockholder’s equity:
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||||||||
Additional paid-in capital
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63,531 | 63,531 | ||||||
Cumulative stock based compensation
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1,024 | 887 | ||||||
Accumulated other comprehensive loss (*)
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(1,903 | ) | (1,903 | ) | ||||
Retained earnings
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31,476 | 28,394 | ||||||
Total stockholders’ equity
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94,128 | 90,909 | ||||||
Total liabilities and stockholders’ equity
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$ | 282,895 | $ | 283,375 |
(*)
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Accumulated other comprehensive loss includes mainly plan assets and benefit obligation, net of taxes.
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Three months ended
March 31, 2011
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Three months ended
March 31, 2010
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Net revenues
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$ | 50,797 | $ | 53,906 | ||||
Cost of revenues
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34,785 | 33,972 | ||||||
Gross profit
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16,012 | 19,934 | ||||||
Operating expenses:
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Research and development
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3,157 | 3,281 | ||||||
Selling, general and administrative
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3,819 | 4,334 | ||||||
Amortization of intangible assets
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197 | 197 | ||||||
Total operating expenses
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7,173 | 7,812 | ||||||
Operating income
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8,839 | 12,122 | ||||||
Financing expense and other expense, net
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(4,293 | ) | (3,992 | ) | ||||
Net income before income taxes
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4,546 | 8,130 | ||||||
Income tax expense
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(1,464 | ) | (2,659 | ) | ||||
Net income
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$ | 3,082 | $ | 5,471 |
Three months ended
March 31, 2011
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Three months ended
March 31, 2010
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Operating activities:
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Net income
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$ | 3,082 | $ | 5,471 | ||||
Adjustments to reconcile net income for the period to net cash provided by operating activities:
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Depreciation and amortization of intangible assets
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8,853 | 7,757 | ||||||
Notes accretion and amortization of deferred financing costs
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1,617 | 1,360 | ||||||
Stock based compensation expense
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137 | 163 | ||||||
Changes in operating assets and liabilities:
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Receivables
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(275 | ) | (4,442 | ) | ||||
Inventories
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(1,768 | ) | 27 | |||||
Prepaid expenses and other current assets
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(1,089 | ) | 14 | |||||
Deferred tax assets
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-- | 1,958 | ||||||
Accounts payable
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(2,267 | ) | 1,440 | |||||
Due to related party, net
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1,197 | (2,764 | ) | |||||
Accrued compensation and benefits
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(236 | ) | 1,272 | |||||
Deferred Revenue
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591 | 505 | ||||||
Accrued interest
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(2,641 | ) | 1,923 | |||||
Other current liabilities
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(2,178 | ) | 642 | |||||
Deferred tax liability
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-- | -- | ||||||
Accrued pension, retirement medical plan obligations and long-term liabilities
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114 | 189 | ||||||
Net cash provided by operating activities
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5,137 | 15,515 | ||||||
Investing activities:
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Purchases of property and equipment
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(10,243 | ) | (5,800 | ) | ||||
Proceeds related to property and equipment
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1,478 | -- | ||||||
Purchases of intangible assets
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-- | (400 | ) | |||||
Net cash used in investing activities
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(8,765 | ) | (6,200 | ) | ||||
Financing activities:
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Short-term debt from bank
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-- | (5,000 | ) | |||||
Net cash used in financing activities
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-- | (5,000 | ) | |||||
Effect of foreign currency on cash
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-- | 51 | ||||||
Net increase in cash and cash equivalents
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(3,628 | ) | 4,366 | |||||
Cash and cash equivalents at beginning of period
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29,031 | 28,622 | ||||||
Cash and cash equivalents at end of period
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$ | 25,403 | $ | 32,988 | ||||
Non-cash investing activities:
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Investments in property, plant and equipment
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$ | 3,391 | $ | 3,423 | ||||
Supplemental disclosure of cash flow information:
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Interest paid
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$ | 5,559 | $ | 711 | ||||
Tax paid
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$ | 2,600 | $ | 318 |
Three months ended
March 31, 2011
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Three months ended
March 31, 2010
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(In thousands)
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Net income
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$ | 3,082 | $ | 5,471 | ||||
Foreign currency translation adjustment
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-- | 51 | ||||||
Comprehensive income
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$ | 3,082 | $ | 5,522 |
March 31, 2011
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December 31, 2010
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Customer 1
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25 | % | 20 | % | ||||
Customer 2
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13 | 15 | ||||||
Customer 3
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13 | 16 |
Three months ended March 31, 2011
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Three months ended March 31, 2010
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Customer A
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19 | % | 14 | % | ||||
Customer B
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16 | 8 | ||||||
Customer C
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13 | 34 |
March 31, 2011
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December 31, 2010
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Raw material
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$ | 4,655 | $ | 4,684 | ||||
Work in process
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14,852 | 11,821 | ||||||
Finished goods
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1,357 | 2,591 | ||||||
$ | 20,864 | $ | 19,096 |
Useful life (In years)
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March 31, 2011
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December 31, 2010
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Building improvements
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10-12 | $ | 24,305 | $ | 24,230 | |||||||
Machinery and equipment
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7 | 125,863 | 115,790 | |||||||||
Furniture and equipment
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5-7 | 2,308 | 2,308 | |||||||||
Computer software
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3 | 1,127 | 850 | |||||||||
153,603 | 143,178 | |||||||||||
Accumulated depreciation
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(53,965 | ) | (46,270 | ) | ||||||||
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$ | 99,638 | $ | 96,908 |
Weighted Average
Life (years)
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Cost
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Accumulated
Amortization
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Net
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Technology
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4;9 | $ | 2,300 | $ | 710 | $ | 1,590 | |||||||||
Patents and other core technology rights
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9 | 15,100 | 4,256 | 10,844 | ||||||||||||
In-process research and development
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-- | 1,800 | 1,800 | -- | ||||||||||||
Customer relationships
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15 | 2,600 | 440 | 2,160 | ||||||||||||
Trade name
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9 | 5,200 | 1,465 | 3,735 | ||||||||||||
Facilities lease
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19 | 33,500 | 4,593 | 28,907 | ||||||||||||
Total identifiable intangible assets
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14 | $ | 60,500 | $ | 13,264 | $ | 47,236 |
Weighted Average
Life (years)
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Cost
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Accumulated
Amortization
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Net
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Technology
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4;9 | $ | 2,300 | $ | 612 | $ | 1,688 | |||||||||
Patents and other core technology rights
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9 | 15,100 | 3,836 | 11,264 | ||||||||||||
In-process research and development
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-- | 1,800 | 1,800 | -- | ||||||||||||
Customer relationships
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15 | 2,600 | 396 | 2,204 | ||||||||||||
Trade name
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9 | 5,200 | 1,321 | 3,879 | ||||||||||||
Facilities lease
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19 | 33,500 | 4,141 | 29,359 | ||||||||||||
Total identifiable intangible assets
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14 | $ | 60,500 | $ | 12,106 | $ | 48,394 |
As of March 31, 2011
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As of December 31, 2010
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Due from related party (included in the accompanying balance sheets)
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$ | 24,076 | $ | 25,768 | ||||
Due to related party (included in the accompanying balance sheets)
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$ | 4,520 | $ | 3,389 |
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·
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anticipated trends in revenues;
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·
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growth opportunities in domestic and international markets;
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new and enhanced channels of distribution;
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customer acceptance and satisfaction with our products;
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·
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expected trends in operating and other expenses;
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·
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purchase of raw materials at levels to meet forecasted demand;
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anticipated cash and intentions regarding usage of cash;
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·
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changes in effective tax rates; and
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·
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anticipated product enhancements or releases.
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Three Months Ended
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March 31, 2011
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March 31, 2010
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Net revenues
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100 | % | 100 | % | ||||
Cost of revenues
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68.5 | 63.0 | ||||||
Gross profit
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31.5 | 37.0 | ||||||
Operating expenses:
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Research and development
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6.2 | 6.1 | ||||||
Selling, general and administrative
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7.5 | 8.0 | ||||||
Amortization of intangible assets
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0.4 | 0.4 | ||||||
Total operating expenses
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14.1 | 14.5 | ||||||
Operating income
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17.4 | 22.5 | ||||||
Financing expense and other expense, net
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(8.4 | ) | (7.4 | ) | ||||
Income tax expense
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(2.9 | ) | (4.9 | ) | ||||
Net income
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6.1 | % | 10.2 | % |
Number
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Description
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31.1
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Principal Executive Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a).
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31.2
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CFO Certification required by Rule 13a-14(a) or Rule 15d-14(a).
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32
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Section 1350 Certification. (Not provided as not required of voluntary filers)
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Date: May 20, 2011
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JAZZ TECHNOLOGIES, INC.
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By:
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/s/ Rafi Mor
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_____
(Principal Executive Officer)
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By:
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/s/ SUSANNA H. BENNETT
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Chief Financial Officer
(Principal Financial and Accounting Officer)
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Number
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Description
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31.1
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Principal Executive Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a).
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31.2
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CFO Certification required by Rule 13a-14(a) or Rule 15d-14(a).
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32
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Section 1350 Certification. (Not provided as not required of voluntary filers)
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1.
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I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 of Jazz Technologies, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Rafi Mor
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Rafi Mor
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_____
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(Principal Executive Officer)
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1.
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I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 of Jazz Technologies, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ SUSANNA H. BENNETT
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Susanna H. Bennett
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Chief Financial Officer
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(Principal Financial and Accounting Officer)
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