-----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, FWfObsffVE8p8Tln+0tiGHkEWGqB2gmi3Sfao99d98//IkJetePvYE0b5CsrOTW8 zyAzWZsbU4CBsYjLkI1QVg== 0000891618-00-002724.txt : 20000512 0000891618-00-002724.hdr.sgml : 20000512 ACCESSION NUMBER: 0000891618-00-002724 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATMEL CORP CENTRAL INDEX KEY: 0000872448 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 770051991 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-19032 FILM NUMBER: 626370 BUSINESS ADDRESS: STREET 1: 2325 ORCHARD PKWY CITY: SAN JOSE STATE: CA ZIP: 95131 BUSINESS PHONE: 4084410311 MAIL ADDRESS: STREET 1: 2325 ORCHARD PKWY CITY: SAN JOSE STATE: CA ZIP: 95131 10-Q 1 FORM 10-Q FOR PERIOD ENDED 3/31/00 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED MARCH 31, 2000 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 0-19032 ATMEL CORPORATION (Registrant) DELAWARE 77-0051991 (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 2325 ORCHARD PARKWAY, SAN JOSE, CALIFORNIA 95131 (Address of principal executive offices) (408) 441-0311 Registrant's telephone number Indicate by a 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 [ ] ON MAY 5, 2000, REGISTRANT HAD OUTSTANDING 221,804,579 SHARES OF COMMON STOCK. 2 ATMEL CORPORATION FORM 10-Q QUARTER ENDED MARCH 31, 2000 INDEX
PAGE ---- PART I: FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets at March 31, 2000 and December 31, 1999 1 Condensed Consolidated Statements of Operations for the three months ended March 31, 2000 and March 31, 1999 2 Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2000 and March 31, 1999 3 Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2000 and March 31, 4 1999 Notes to Condensed Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3. Quantitative and Qualitative Disclosures About Market Risk 14 PART II: OTHER INFORMATION Item 1. Legal Proceedings 15 Item 2. Changes in Securities and Use of Proceeds 15 Item 6. Exhibits and Reports on Form 8-K 15 SIGNATURES 16
3 PART I: FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ATMEL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
MARCH 31, 2000 December 31, 1999 -------------- ----------------- (unaudited) CURRENT ASSETS Cash and cash equivalents $ 802,684 $ 251,272 Short term investments 159,036 161,190 Accounts receivable 305,232 281,843 Inventories 270,048 274,065 Other current assets 75,489 70,938 ----------- ----------- TOTAL CURRENT ASSETS 1,612,489 1,039,308 Fixed assets, net 1,039,864 938,562 Other assets 36,757 37,040 ----------- ----------- TOTAL ASSETS $ 2,689,110 $ 2,014,910 =========== =========== CURRENT LIABILITIES Current portion of long-term debt $ 144,975 $ 147,166 Trade accounts payable 281,744 278,562 Accrued liabilities and other 116,156 94,584 Deferred income on shipments to distributors 30,030 31,500 ----------- ----------- TOTAL CURRENT LIABILITIES 572,905 551,812 Convertible notes 278,019 275,899 Long-term debt less current portion 382,856 378,134 Deferred income taxes 7,586 7,586 ----------- ----------- TOTAL LIABILITIES 1,241,366 1,213,431 ----------- ----------- STOCKHOLDERS' EQUITY Common stock 1,018,095 397,167 Accumulated other comprehensive loss (67,675) (51,160) Retained earnings 497,324 455,472 ----------- ----------- Total stockholders' equity 1,447,744 801,479 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,689,110 $ 2,014,910 =========== ===========
The accompanying notes are an integral part of these condensed consolidated financial statements. 1 4 ATMEL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per-share data) (Unaudited)
Three Months Ended March 31, 2000 1999 --------- --------- NET REVENUES $ 429,186 $ 290,037 EXPENSES Cost of revenues 252,722 186,165 Research and development 61,913 47,229 Selling, general and administrative 45,110 35,920 --------- --------- TOTAL OPERATING EXPENSES 359,745 269,314 --------- --------- OPERATING INCOME 69,441 20,723 Interest and other income (expenses), net (4,048) 5,367 --------- --------- INCOME BEFORE TAXES 65,393 26,090 Income tax provision (23,541) (9,392) --------- --------- INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 41,852 16,698 Cumulative effect of accounting change, net of tax effect -- (29,068) --------- --------- NET INCOME (LOSS) $ 41,852 $ (12,370) ========= ========= BASIC NET INCOME (LOSS) PER SHARE: INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE $ 0.20 $ 0.09 CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAX EFFECT -- (0.15) --------- --------- NET INCOME (LOSS) $ 0.20 $ (0.06) ========= ========= DILUTED NET INCOME (LOSS) PER SHARE: INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE $ 0.19 $ 0.09 CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAX EFFECT -- (0.15) --------- --------- NET INCOME (LOSS) $ 0.19 $ (0.06) ========= ========= SHARES USED IN BASIC NET INCOME (LOSS) PER SHARE CALCULATIONS 213,485 199,976 ========= ========= SHARES USED IN DILUTED NET INCOME (LOSS) PER SHARE CALCULATIONS 239,328 199,976 ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements. 2 5 ATMEL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Three Months Ended March 31, 2000 1999 --------- --------- CASH FROM OPERATING ACTIVITIES Net income (loss) $ 41,852 $ (12,370) Items not requiring the use of cash Depreciation and amortization 51,547 47,200 Cumulative effect of accounting change, net of taxes -- 29,068 Loss (gain) on sale of fixed assets 1,963 (12,474) Other 7,074 (2,230) Changes in operating assets and liabilities Accounts receivable (24,700) (5,434) Inventories 4,017 (379) Prepaid taxes and other assets (5,773) 26,092 Trade accounts payable and other accrued liabilities 18,443 (24,844) Income taxes payable -- (6,516) Deferred income on shipments to distributors (1,470) (4,042) --------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 92,953 34,071 --------- --------- CASH FROM INVESTING ACTIVITIES Acquisition of fixed assets (168,992) (15,570) Sales of fixed assets 1,280 18,794 Acquisition of other assets -- (579) Purchase of investments (11,106) (31,215) Sale or maturity of investments 13,945 38,938 --------- --------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (164,873) 10,368 --------- --------- CASH FROM FINANCING ACTIVITIES Proceeds from capital leases and notes 33,719 4,817 Principal payments on capital leases and notes (22,756) (24,003) Payment for settlement of warrants -- (2,467) Issuance of common stock 620,928 3,622 --------- --------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES 631,891 (18,031) --------- --------- Effect of foreign currency on cash and cash equivalents (7,438) (6,498) --------- --------- Net increase in cash and cash equivalents 551,412 19,910 Cash and cash equivalents at beginning of period 251,272 161,721 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 802,684 $ 181,631 ========= ========= INTEREST PAID $ 7,856 $ 8,937 INCOME TAXES PAID $ 41 $ 4,560 FIXED ASSET PURCHASES IN ACCOUNTS PAYABLE $ 89,381 $ 2,683
The accompanying notes are an integral part of these condensed consolidated financial statements. 3 6 ATMEL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) Unaudited
Three Months Ended March 31, 2000 1999 -------- -------- Net income (loss) $ 41,852 $(12,370) Other comprehensive income (loss), net of tax: Foreign currency translation adjustments (16,079) (13,844) Unrealized gains (losses) on securities (436) 867 -------- -------- Other comprehensive income (loss) (16,515) (12,977) -------- -------- Comprehensive income (loss) $ 25,337 $(25,347) ======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements. 4 7 ATMEL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2000 (In thousands, except per share data) (Unaudited) 1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES These unaudited interim financial statements reflect our financial position and that of our subsidiaries as of March 31, 2000. The statements also show our results of operations, comprehensive income (loss) and cash flows for the three month periods ended March 31, 2000 and 1999. These interim statements include all normal recurring adjustments which we believe are necessary to fairly present our financial position. All material intercompany balances have been eliminated. Because all of the disclosures required by generally accepted accounting principles are not included, these interim statements should be read in conjunction with the audited financial statements included in our Annual Report to Shareholders filed on Form 10-K for the year ended December 31, 1999. The year end condensed balance sheet data was derived from our audited financial statements and does not include all of the disclosures required by generally accepted accounting principles. The income statements for the periods presented are not necessarily indicative of results that we expect for any future period, nor for the entire year. Prior year amounts have been reclassified to conform with current presentation. 2. INVENTORIES Inventories are stated at the lower of cost (first-in, first-out for raw materials and purchased parts and average cost for work in progress) or market, and are comprised of the following:
March 31, 2000 December 31, 1999 -------------- ----------------- Raw materials and purchased parts $ 23,744 $ 19,527 Finished goods 66,764 61,840 Work in progress 179,540 192,698 -------- -------- Total $270,048 $274,065 ======== ========
3. SHORT TERM INVESTMENTS Short term investments are stated at cost plus any applicable unamortized premium or discount. 4. NET INCOME (LOSS) PER SHARE A reconciliation of the numerator and denominator of basic and diluted net income (loss) per share is provided in the following table. All shares have been restated to reflect the 2-for-1 stock split effected in December 1999. 5 8
Three Months Ended March 31, 2000 1999 --------- --------- Basic net income (loss) (numerator) $ 41,852 ($ 12,370) Interest saved on convertible bonds, net of taxes 2,478 0 Diluted net income (loss) (numerator) $ 44,330 ($ 12,370) ========= ========= Shares used in basic net income (loss) per share calculations (denominator): Weighted average shares of common stock outstanding (basic) 213,485 199,976 Dilutive effect of stock options 7,872 0 Dilutive effect of convertible bonds 17,971 0 Shares used in diluted net income (loss) per share calculations (denominator): Weighted average shares of common stock outstanding (diluted) 239,328 199,976 ========= ========= Basic net income (loss) per share $ 0.20 ($ 0.06) ========= ========= Diluted net income (loss) per share $ 0.19 ($ 0.06) ========= =========
For the three months ended March 31, 1999 we excluded 16,522 of potential common shares from the calculation of diluted earnings per share because their effect was antidilutive. 5. OPERATING SEGMENTS We have four reportable segments, each of which requires different design, development and marketing resources to produce and sell semiconductor integrated circuits: Application Specific Integrated Circuits (ASIC), Logic, Nonvolatile Memories (NVM) and Temic. Information about segments:
Nonvolatile ASIC Logic Memories Temic Total -------- -------- -------- -------- -------- THREE MONTHS ENDED MARCH 31, 2000 Net revenues from external customers $101,516 $ 30,044 $227,684 $ 69,942 $429,186 Segment operating income 21,137 4,619 49,618 8,664 84,038 THREE MONTHS ENDED MARCH 31, 1999 Net revenues from external customers $ 79,624 $ 20,260 $124,083 $ 66,070 $290,037 Segment operating income 17,978 3,186 12,216 940 34,320
Reconciliations of segment information to financial statements:
Three Months Ended March 31, 2000 1999 -------- -------- Operating income Total income for reportable segments $ 84,038 $ 34,320 Unallocated amounts: Corporate R&D (13,000) (13,475) Corporate expenses (1,597) (122) -------- -------- Consolidated operating income before interest, taxes, and cumulative effect of accounting change $ 69,441 $ 20,723 ======== ========
6 9 6. RECENT ACQUISITIONS On January 6, 2000 the Company completed the purchase of an 8 inch wafer fabrication facility located in Irving, Texas. The facility is approximately 650,000 square feet and the Company intends to install 0.18-micron manufacturing equipment during 2000. 7. RECENT DEVELOPMENTS Public Offering. On February 3, 2000 Atmel sold 18,000,000 shares of common stock at a price of $35.50 per share. We intend to use the net proceeds of $611,820 to fund capital expenditures and for working capital and general corporate purposes. TCS Acquisition. On February 16, 2000, we signed a contract to acquire Thomson-CSF Semiconducteurs Specifique (TCS), a wholly-owned subsidiary of Thomson-CSF. The purchase will be completed after we receive approvals from appropriate French government departments. We do not expect any difficulties in obtaining the necessary approvals. TCS specializes in the development and manufacture of ASICs, including image sensors, as well as analog, digital and radio frequency ASICs, and products manufactured using SiGe processes. TCS products are used in such applications as digital cameras, fingerprint sensors, GPS and RF chips, which we believe will provide us with an enhanced ability to provide integrated solutions for the wireless and consumer end markets. 7 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Safe Harbor for Forward-Looking Statements under the Securities Litigation Reform Act of 1995: Investors are cautioned that certain statements in this Form 10-Q are forward looking statements that involve risks and uncertainties. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," and variations of such words and similar expressions are intended to identify such forward looking statements. These statements are based on current expectations and projections about the semiconductor industry and assumptions made by the management and are not guarantees of future performance. Therefore, actual events and results may differ materially from those expressed or forecasted in the forward looking statements due to factors such as the effect of changing economic conditions; material changes in currency exchange rates, political instability -- including war -- in countries where the Company manufactures and/or sells its products; disruptions in production or business systems due to year 2000 issues; conditions in the overall semiconductor market (including the historic cyclicality of the industry); continued financial turmoil in the worldwide market; risks associated with product demand and market acceptance risks; the impact of competitive products and pricing; delays in new product development; manufacturing capacity utilization; product mix and technological risks and other risk factors identified in the Company's filings with the Securities and Exchange Commission, including the Company's Report on Form 10-K. The Company undertakes no obligation to update any forward looking statements in this Form 10-Q. RESULTS OF OPERATIONS The following table shows certain operating data as a percentage of net revenues:
Three Months Ended March 31, 2000 1999 ------ ------ NET REVENUES 100.00% 100.00% EXPENSES Cost of revenues 58.9 64.2 Research and development 14.4 16.3 Selling, general and administrative 10.5 12.4 ------ ------ TOTAL EXPENSES 83.8 92.9 OPERATING INCOME 16.2 7.1 Interest and other income (expenses), net -1.0 1.9 ------ ------ INCOME BEFORE TAXES 15.2 9.0 Income tax provision -5.5 -3.2 ------ ------ INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 9.7 5.8 Cumulative effect of accounting change -- -10.0 ------ ------ Net income (loss) 9.7 % -4.3 % ====== ======
NET REVENUES Atmel's net revenues by segment for the three months ended March 31, 2000 and 1999 are summarized in the following table: 8 11
Three Months Ended (in thousands) March 31, Segment 2000 1999 Increase - ------------------ -------- -------- -------- ASIC $101,516 $ 79,624 $ 21,892 Logic 30,044 20,260 9,784 Nonvolatile Memory 227,684 124,083 103,601 Temic 69,942 66,070 3,872 -------- -------- -------- Total $429,186 $290,037 $139,149 ======== ======== ========
Atmel's revenues increased 48% to $429 million in the quarter ended March 31, 2000 from $290 million in the corresponding quarter of 1999. Revenue for every segment increased in the first quarter compared to one year ago, but the largest increase was in the nonvolatile memory (NVM) segment which has benefited from continuing growth in wireless communications markets. ASIC segment revenues grew by $22 million in the first quarter of 2000 over the same period in 1999 due to growth in unit volumes and higher selling prices. Sales of ASICs designed for use in wireless communications were a significant factor in the revenue increase. Logic segment revenues increased nearly $10 million in the first quarter of 2000 compared to the same quarter of 1999 because unit shipments increased significantly and average selling prices remained stable. Nonvolatile Memory revenues increased $104 million in the first quarter of 2000 compared to the same period in 1999. The current quarter experienced significantly higher unit shipments and stronger selling prices than a year ago. Nonvolatile Memory revenues have been strong in part because of demand for parts used in wireless telecommunications. The Company's net revenues by geographic area for the three-month periods ended March 31, 2000 and 1999 are summarized as follows (in millions):
Three Months Ended March 31 Region 2000 1999 - ------ ------ ------ North America $136.4 $ 97.7 Europe 144.3 90.1 Asia 113.9 71.4 Japan 34.6 24.6 ------ ------ $429.2 $283.8 ====== ======
North American sales increased in the first quarter of 2000 compared to 1999 due to more unit shipments at stronger prices. Sales outside North America as a percent of total sales increased almost 3% in the first quarter of 2000 to 68%. Sales to Europe increased 2% or $54 million in the first quarter of 2000 compared to the same period in 1999 due to significant growth in unit shipments to the wireless communications industry. Sales to Asia increased less than 2%, or $43 million, to $114 million in the first quarter of 2000, compared to sales of $71 million in the first quarter of 1999 due to significant unit shipment growth. 9 12 In the first quarter of 2000, approximately 21% of sales were denominated in foreign currencies compared to 25% in the first quarter of 1999. Exchange rate changes from the corresponding quarter in 1999 did not have a material effect on revenues. COST OF REVENUES Our cost of revenues as a percentage of net revenues decreased to 59% in the first quarter of 2000, compared with 64% in the first quarter of 1999. The decrease in cost of revenues as a percentage of net revenues was the result of manufacturing efficiencies we gained from greater utilization of our wafer fabrication facilities and a higher unit base over which we spread the fixed costs of operating our fabrication facilities. In 2000 we expect capital expenditures to be about $1 billion, up from $180 million in 1999. These expenditures will be focused on developing leading edge manufacturing capacity. We expect to make equipment purchases to add 0.18-micron capacity, and also to incur development expenses for next generation process technologies. Production delays, difficulties in achieving acceptable yields at our manufacturing facilities or industry wide overcapacity could materially and adversely affect our gross margin and future operating results. RESEARCH AND DEVELOPMENT As a percentage of net revenue, research and development cost decreased to 14% from 16% in the first quarter 1999. In dollar amounts spent, research and development expenses increased 31% in the first quarter of 2000, compared with the corresponding quarter in 1999. The increase has been primarily due to our continued investment in the shrinking of the die size of our integrated circuits from 0.5-micron line widths to 0.35-micron, 0.25-micron, and 0.18-micron line widths; enhancement of mature products; development of new products; advanced CMOS, BiCMOS, and silicon germanium process technologies; manufacturing improvements; and the costs associated with increasing production capacity in Colorado Springs and Rousset. We believe that continued investments in process technology and product development are essential for us to remain competitive in the markets we serve, and we are committed to high levels of expenditures for research and development. SELLING, GENERAL AND ADMINISTRATIVE Selling, general and administrative expenses increased by 26% to $45 million in the first quarter of 2000 from $36 million in the first quarter of 1999 due to higher selling expenses associated with increased sales. As a percentage of net revenues, selling, general and administrative expenses were 11% for the first quarter of 2000, compared with 12% for the first quarter of 1999. INTEREST AND OTHER INCOME (EXPENSES), NET We reported ($4) million of net interest and other expenses for the first quarter of 2000, compared to $5 million of net interest and other income for the corresponding period of 1999. In the first quarter of 1999 we recorded a $15 million pre-tax gain related to the sale of certain assets in other income. We have no significant other income in the current quarter. INCOME TAX PROVISION Atmel's effective tax rate was 36% for the three months ended March 31, 2000 and March 31, 1999. For the remainder of 2000 we expect the effective tax rate to continue at 36%. 10 13 NET INCOME Net income of $42 million for the first quarter of 2000 marked a $54 million increase from the loss of $12 million for the first quarter of 1999. The increase corresponds directly to the increase in net revenues and improved manufacturing efficiencies we discussed above. LIQUIDITY AND CAPITAL RESOURCES At March 31, 2000, we had $803 million in cash and cash equivalents, an increase of $552 million from December 31, 1999. The large increase is almost entirely due to receipt of proceeds from a secondary stock offering completed on February 3, 2000. Also as a result of the stock offering, our working capital more than doubled to just over $1 billion, compared to about $487 million at December 31, 1999. Accounts receivable increased 8% to $305 million at March 31, 2000 from $282 million at December 31, 1999. The average days of accounts receivable outstanding were 65 days and 67 days for the first quarter of 2000 and the fourth quarter of 1999. We monitor collection risks and provide an adequate allowance for doubtful accounts related to these risks. While there can be no guarantee of collecting these receivables, we believe that substantially all net receivables will be collected, given our customer's current credit ratings, and we expect that average days outstanding will decrease while business conditions remain strong. For the three months ended March 31, 1999, there were no material write-offs of accounts receivables. Inventories decreased $4 million to $270 million at March 31, 2000 from $274 million at December 31, 1999, the net effect of increasing work in process at our Rousset wafer fabrication facility while decreasing stockpiles of processed wafers in order to meet customer demands. We believe that our existing sources of liquidity, together with cash flows from operations, lease financing on equipment and other short- and medium-term bank borrowings, will be sufficient to meet our liquidity and capital requirements through 2000. We may, however, seek additional equity or debt financing to fund the expansion of our wafer fabrication capacity or other projects; the timing and amount of such capital requirements cannot be precisely determined at this time. There can be no assurance that such financing would be available in acceptable amounts or terms. CASH FLOW From Operating Activities: During the three months ended March 31, 2000, net cash provided by operations increased $59 million to $93 million, compared to $34 million in the same period of 1999. The largest increase, $43 million, was in "Trade accounts payable and other accrued liabilities." From Investing Activities: Net cash used in investing activities was $166 million for the three months ended March 31, 2000 compared to net cash provided by investing activities of $10 million in the first quarter of 1999. The single largest investment was for the purchase of an 8 inch wafer manufacturing facility in Irving, Texas. We will fund the remaining capital expenditure budget in 2000 for approximately $800 million (to be used for equipment purchases and development expense) using a combination of existing cash, sale of short-term investments, and equipment lease financing. From Financing Activities: In the first quarter of 2000, net cash provided by financing activities was $632 million compared to net cash used in financing activities of $18 million in the first quarter of 1999, a change of $650 million. The majority of the new cash, $612 million, is from the proceeds of the stock offering completed in February 2000. 11 14 OUR REVENUE AND OPERATING RESULTS FLUCTUATE SIGNIFICANTLY DUE TO A VARIETY OF FACTORS Our future operating results will be subject to quarterly variations based upon a wide variety of factors, many of which are not within our control. These factors include: - - the cyclical nature of both the semiconductor industry and the markets addressed by our products; - - fluctuations in manufacturing yields; - - the timing of introduction of new products; - - the timing of customer orders; - - price erosion; - - changes in mix of products sold; - - the extent of utilization of manufacturing capacity; - - product obsolescence; - - availability of supplies and raw materials; - - price competition and other competitive factors; and - - fluctuations in currency exchange rates. Any unfavorable changes in these factors could harm our operating results. In particular, we believe that our future sales growth will depend substantially on the success of our new products. Our new products are generally incorporated into our customers' products or systems at the design stage. However, design wins may precede volume sales by a year or more. We may not be successful in achieving design wins or any design win may not result in future revenues, which depend in large part on the success of the customer's end product or system. We expect the average selling price of each of our products to decline as individual products mature and competitors enter the market. To offset average selling price decreases, we rely primarily on reducing costs in the manufacturing of those products, increased unit sales to absorb fixed costs, and introducing new, higher priced products which incorporate advanced features or integrated technologies to address new or emerging markets. To the extent that such cost reductions and new product introductions do not occur in a timely manner, our operating results could be harmed. From time to time, our quarterly revenues and operating results can become more dependent upon orders booked and shipped within a given quarter and, accordingly, our quarterly results can become less predictable and subject to greater variability. In addition, our continued success will depend in large part on the continued growth of various electronics industries that use semiconductors, including manufacturers of computers, telecommunications equipment, automotive electronics, industrial controls, consumer electronics, data networking equipment and military equipment. Our success will also depend upon a better supply and demand balance within the industry. 12 15 YEAR 2000 RISKS We have executed a plan to make our computer systems, applications, computer and manufacturing equipment, and facilities year 2000 ready. To date, none of these systems has experienced material difficulties from the transition to year 2000. FOREIGN CURRENCY RISK When we take a foreign order denominated in a local currency we will receive fewer dollars than we initially anticipated if that local currency weakens against the dollar before we collect our funds. In addition to reducing revenue, this risk will negatively affect our operating results. We partially counterbalance this risk in Europe by our significant operations there whose costs are denominated in European currencies. Negative impacts on revenue are offset by positive impacts on costs. In Japan, our yen denominated sales are also subject to the exchange rate risk, but we do not have significant operations there with which to counterbalance our exposure. Sales denominated in yen were 7% of our revenue in the first quarter of 2000. Sales denominated in foreign currencies were 21% in the first quarter of 2000, compared to 25% in the comparable quarter of 1999. We also face the risk that our accounts receivables denominated in foreign currencies will be devalued if such foreign currencies weaken quickly and significantly against the dollar. Because we have European assets and liabilities in local currencies, we do not hedge accounts receivables denominated in European currencies. However, our accounts receivables in yen are hedged using a loan denominated in yen of approximately equal amount LITIGATION RISKS We have from time to time received, and may in the future receive, communications from third parties asserting patent or other intellectual property rights covering our products or processes. In the past, we have received specific allegations from major companies alleging that certain of our products infringe patents owned by such companies. If any litigation were to occur as a result of such allegations in the future, and we do not prevail in any such litigation, and are unable to obtain a satisfactory license, our results of operations may be adversely affected. In addition, the semiconductor industry is characterized by vigorous protection and pursuit of intellectual property rights or positions, which have on occasion resulted in significant and often protracted and expensive litigation. In the past, we have been involved in such litigation, which adversely affected our operating results. We cannot assure you that intellectual property claims will not be made against us in the future or that we will not be prohibited from using the technologies subject to any such claims or be required to obtain licenses and make corresponding royalty payments. In addition, the necessary management attention to and legal costs associated with litigation can have a significant adverse effect on operating results. 13 16 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK MARKET RISK SENSITIVE INSTRUMENTS We do not use derivative financial instruments in our operations. INTEREST RATE RISK We maintain investment portfolio holdings of various issuers, types and maturities whose values are dependent upon short-term interest rates. We generally classify these securities as available for sale, and consequently record them on the balance sheet at fair value with unrealized gains and losses being recorded as a separate part of stockholders' equity. We do not currently hedge these interest rate exposures. Given our current profile of interest rate exposures and the maturities of our investment holdings, we believe that an unfavorable change in interest rates would not have a significant negative impact on our investment portfolio or statement of operations through December 31, 2000. Atmel has short term debt, long term debt and capital leases totaling $806 million at March 31, 2000. Approximately $648 million of these borrowings have fixed interest rates. Approximately $158 million of floating rate debt is based on the Euro and EuroYen interest rates. We do not hedge either of these interest rates and could be negatively affected should either of these rates increase significantly. A hypothetical 40 basis point increase in both of these interest rates would have a $0.6 million adverse impact on income before taxes on Atmel's Consolidated Statements of Operations for 2000. While there can be no assurance that both of these rates will remain at current levels, we believe these rates will not increase significantly (defined as an increase of more than 40 basis points) and cause any harm to our operations and financial position. 14 17 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Atmel is not a party to any legal proceedings that management believes could have a material adverse effect on our operating results. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS On February 3, 2000 Atmel sold 18,000,000 shares of common stock at a price of $35.50 per share. We intend to use the net proceeds of $611,820 to fund capital expenditures and for working capital and general corporate purposes. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) Exhibit: 27.1 Financial Data Schedule (B) Reports on Form 8-K: None 15 18 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. ATMEL CORPORATION ----------------------------------- (Registrant) MAY 11, 2000 /S/ GEORGE PERLEGOS ----------------------------------- GEORGE PERLEGOS President, Chief Executive Officer (Principal Executive Officer) MAY 11, 2000 /S/ DONALD COLVIN ----------------------------------- DONALD COLVIN Chief Financial Officer and Vice President, Finance (Principal Financial and Accounting Officer) 16 19 INDEX TO EXHIBITS 27.1 Financial Data Schedule EX-27.1 2 EXHIBIT 27.1
5 3-MOS DEC-31-2000 JAN-1-2000 MAR-31-2000 802,684 159,036 305,232 18,260 270,048 1,612,489 1,039,864 51,547 2,689,110 572,905 0 0 0 950,420 497,324 2,689,110 429,186 429,186 252,722 359,745 107,023 0 4,048 65,393 23,541 0 0 0 0 41,852 0.20 0.19
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