-----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, KwNOZimcXCJmkAXCKOLQa5g/dDjFXbPLJ9rPqlbT9OoMLeW3CYHnNzXIhkECGsD5 +wp2JNYAyC5GZSjCNLg1tQ== 0000891618-98-002390.txt : 19980515 0000891618-98-002390.hdr.sgml : 19980515 ACCESSION NUMBER: 0000891618-98-002390 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980514 SROS: NASD 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: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-19032 FILM NUMBER: 98620094 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 THE PERIOD ENDING 3/31/98 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, 1998 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) CALIFORNIA 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 MARCH 31, 1998, REGISTRANT HAD OUTSTANDING 99,176,153 SHARES OF COMMON STOCK. 2 ATMEL CORPORATION FORM 10-Q QUARTER ENDED MARCH 31, 1998 INDEX
PAGE PART I: FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets at March 31, 1998 and December 31, 1997 1 Condensed Consolidated Income Statements for the three months ended March 31, 1998 and March 31, 1997 2 Consolidated Statements of Cash Flows for the three months ended March 31, 1998 and March 31, 1997 3 Consolidated Statements of Comprehensive Income for the three months ended March 31, 1998 and March 31, 1997 4 Notes to Condensed Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II: OTHER INFORMATION Item 1. Legal Proceedings 13 Item 6. Exhibits and Reports on Form 8-K 13 SIGNATURES 14
-i- 3 PART I: FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ATMEL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
March 31, 1998 December 31, 1997 -------------- ----------------- (Unaudited) CURRENT ASSETS Cash and cash equivalents $ 140,064 $ 174,310 Short-term investments 88,879 63,222 Accounts receivable 282,421 216,991 Inventories 203,552 124,336 Prepaid taxes and other current assets 83,809 119,358 ---------- ---------- TOTAL CURRENT ASSETS 798,725 698,217 Other assets 51,800 42,338 Long-term investments 93,766 95,536 Fixed assets, net 1,078,461 985,949 ---------- ---------- TOTAL ASSETS $2,022,752 $1,822,040 ========== ========== CURRENT LIABILITIES Current portion of long-term debt $ 183,713 $ 67,522 Trade accounts payable and other accrued liabilities 304,593 290,890 Income taxes payable 9,769 0 Deferred income on shipments to distributors 28,411 25,256 ---------- ---------- TOTAL CURRENT LIABILITIES 526,486 383,668 Long-term debt less current portion 629,283 571,389 Deferred income taxes 34,499 34,499 ---------- ---------- TOTAL LIABILITIES 1,190,268 989,556 ---------- ---------- Put warrants 58,930 46,050 ---------- ---------- SHAREHOLDERS' EQUITY Common stock and other 303,696 334,303 Retained earnings 469,858 452,131 ---------- ---------- TOTAL SHAREHOLDERS' EQUITY 773,554 786,434 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,022,752 $1,822,040 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. -1- 4 ATMEL CORPORATION CONDENSED CONSOLIDATED INCOME STATEMENTS (In thousands, except per-share data) (Unaudited)
Three Months Ended March 31, ------------------------- 1998 1997 --------- --------- NET REVENUES $ 260,392 $ 252,946 EXPENSES Cost of sales 164,192 136,377 Research and development 36,659 29,171 Selling, general and administrative 27,826 25,943 --------- --------- TOTAL EXPENSES 228,677 191,491 --------- --------- OPERATING INCOME 31,715 61,455 Interest and other expenses, net (4,443) (1,858) --------- --------- INCOME BEFORE TAXES 27,272 59,597 Taxes on income 9,545 20,859 --------- --------- NET INCOME $ 17,727 $ 38,738 ========= ========= BASIC NET INCOME PER SHARE $ 0.18 $ 0.39 ========= ========= DILUTED NET INCOME PER SHARE $ 0.18 $ 0.38 ========= ========= SHARES USED IN BASIC NET INCOME PER SHARE CALCULATIONS 99,127 99,038 ========= ========= SHARES USED IN DILUTED NET INCOME PER SHARE CALCULATIONS 100,122 101,505 ========= =========
The accompanying notes are an integral part of these consolidated financial statements. -2- 5 ATMEL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Three Months Ended March 31, ------------------------- 1998 1997 --------- --------- CASH FROM OPERATING ACTIVITIES Net income $ 17,727 $ 38,738 Items not requiring the use of cash Depreciation and amortization 47,235 34,176 Other 4,509 4,775 Changes in operating assets and liabilities Accounts receivable (5,624) (19,588) Inventories (34,032) (14,199) Prepaid taxes and other assets 35,549 (6,426) Trade accounts payable and other accrued liabilities (41,319) (3,743) Income taxes payable 9,769 20,859 Deferred income on shipments to distributors 3,155 1,816 --------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 36,969 56,408 --------- --------- CASH FROM INVESTING ACTIVITIES Acquisition of fixed assets (75,936) (100,863) Acquisition of other assets (12,534) (1,072) Acquisition of Temic Telefunken Microelectronic (108,252) 0 Purchase of investments (147,782) (16,265) Sale or maturity of investments 123,895 18,884 --------- --------- NET CASH USED BY INVESTING ACTIVITIES (220,609) (99,316) --------- --------- CASH FROM FINANCING ACTIVITIES Proceeds from capital leases and notes 189,426 69,329 Principal payments on capital leases and notes (26,462) (21,738) Proceeds from settlement of warrants 0 4,425 Repurchase of stock (16,623) 0 Issuance of common stock 4,474 3,601 --------- --------- NET CASH PROVIDED BY FINANCING ACTIVITIES 150,815 55,617 --------- --------- EFFECT OF FOREIGN CURRENCY TRANSLATION ADJUSTMENT (1,421) (6,810) --------- --------- NET CASH PROVIDED (USED) (34,246) 5,899 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 174,310 104,113 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 140,064 $ 110,012 ========= ========= INTEREST PAID $ 8,682 $ 6,303 INCOME TAXES PAID $ 68 $ 2,115 FIXED ASSET PURCHASES IN ACCOUNTS PAYABLE $ 36,849 $ 70,907
The accompanying notes are an integral part of these consolidated financial statements. -3- 6 ATMEL CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) (Unaudited)
Three Months Ended March 31, ------------------------- 1998 1997 --------- --------- Net income $ 17,727 $ 38,738 Other comprehensive income, net of tax: Foreign currency translation adjustments (3,626) (4,427) Unrealized gains on securities 143 81 --------- --------- Other comprehensive income (3,483) (4,346) --------- --------- Comprehensive income $ 14,244 $ 34,392 ========= =========
The accompanying notes are an integral part of these consolidated financial statements. -4- 7 ATMEL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1998 (In thousands, except per share data) (Unaudited) 1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES These unaudited interim financial statements reflect all normal recurring adjustments which are, in the opinion of management, necessary to present fairly, in all material respects, the financial position of Atmel Corporation (Company or Atmel) and its subsidiaries as of March 31, 1998 and the results of operations and cash flows for the three month periods ended March 31, 1998 and 1997. 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 and notes thereto in the Company's Annual Report to Shareholders for the year ended December 31, 1997. The year-end condensed balance sheet data was derived from the 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 to be expected for any future period, nor for the entire year. 2. INVENTORIES Inventories are stated at the lower of cost (first-in, first-out for materials and purchased parts and average cost for work in progress) or market and comprise the following:
MARCH 31, 1998 DECEMBER 31, 1997 -------------- ----------------- Materials and purchased parts $ 12,063 $ 10,527 Work in progress 191,489 113,809 -------- -------- TOTAL $203,552 $124,336 ======== ========
3. NET INCOME PER SHARE The Company has adopted the provisions of Statement of Financial Accounting Standards No. 128, Earnings Per Share (SFAS 128) effective with the year ended December 31, 1997. All prior period net income per-share amounts have been restated to comply with SFAS 128 as well as the two-for-one stock splits paid on April 11, 1994, and August 8, 1995. In accordance with the disclosure requirements of SFAS 128, a reconciliation of the numerator and denominator of basic and diluted net income per share is provided as follows:
Three Months Ended March 31, -------------------- 1998 1997 ------- ------- Basic and diluted net income (numerator) $17,727 $38,738 ======= =======
-5- 8 Shares used in basic net income per share calculations (denominator): Weighted average shares of common stock outstanding 99,127 99,038 ======= ======= Shares used in diluted net income per share calculations (denominator): Weighted average shares of common stock outstanding 99,127 99,038 Dilutive effect of stock options 995 2,467 ------- ------- 100,122 101,505 ======= ======= Basic net income per share $ 0.18 $ 0.39 ======= ======= Diluted net income per share $ 0.18 $ 0.38 ======= =======
In connection with the Company's stock repurchase program announced in January 1998 to purchase up to 5,000 shares of its common stock, the Company has purchased 1,000 shares of its common stock during the three months ended March 31, 1998. The average purchase price of the shares repurchased was $16.62 per share. 4. PUT WARRANTS The Company has sold put warrants to an independent third party during the three months ended March 31, 1998 and used the proceeds from the sale of the put warrants to purchase call warrants. The put warrants entitle the holder to sell shares of the Company's common stock to the Company at contractual prices. The call warrants entitle the Company to buy, at contractual prices, from the same independent third party shares of the Company's common stock. The outstanding put and call warrants, which expire between May 1, 1998 and March 5, 1999, are exercisable at any time before maturity and may be settled in cash, at the Company's option. The maximum contractual repurchase obligation of $58,930 has been reclassified from shareholders' equity to put warrants as of March 31, 1998. There was no impact on basic and diluted net income per share in the three months ended March 31, 1998. 5. TEMIC ACQUISITION On March 1, 1998, the Company acquired the integrated circuit business of Temic Telefunken Mircoelectronic (Temic) of Hielbronn, Germany, a wholly owned subsidiary of Daimler-Benz A.G., for approximately $108,000 cash. Temic designs, manufactures and sells analog, microcontroller and ASIC products that service the automotive, telecommunications, consumer and industrial markets. The Company's operating results for the three months ended March 31, 1998 included approximately one month of the results of Temic which were not material to the Company. Accordingly, the Company has not provided pro-forma information for the acquisition of Temic. The Company's consolidated balance sheet as of March 31, 1998 reflected a preliminary allocation of the purchase price of Temic, which resulted in an increase in inventory, accounts receivable, fixed assets, current liabilities and long-term liabilities. A portion of the purchase price will be allocated to in-process research and development expense upon the completion of a valuation study. At the time of filing this Form 10-Q, the valuation study is still in progress. When the valuation study is completed, the results of operations for the first quarter ended March 31, 1998 will be amended to reflect this in-process research and development expense. -6- 9 6. CONTINGENCIES The Company is involved in certain patent related legal matters, in the ordinary course of business. No provision for any liability that may result upon the resolution of these matters has been made in the accompanying financial statements nor is the amount or range of possible loss, if any, reasonably estimable. The Company has been named as a defendant in a patent infringement lawsuit that was filed on January 21, 1998. The plaintiff contends that certain of the Company's devices infringe seven patents it allegedly owns and is seeking a judgment of infringement for each of these asserted patents and other costs. The Company is reviewing the lawsuit and believes that the complaints are without merit. No assurance can be given, however, that this matter will be resolved in the Company's favor. 7. RECENT ACCOUNTING PRONOUNCEMENT In April 1998, the American Institute of Certified Public Accountants issued Statement of Position (SOP) 98-5, Reporting on the Costs of Start-Up Activities. The SOP is effective for the Company's fiscal year ended December 31, 1999 and will require the effect of adoption be reported as a cumulative effect of change in accounting principle. The Company is studying the impact of this change of accounting principle on its 1999 financial statements. 8. SUBSEQUENT EVENT In April 1998, the Company completed a zero coupon convertible debt financing, which raised approximately $115,000. The debt is convertible, at the option of the holder, into the Company's common stock at the rate of 13.983 shares per $1,000 principal amount at maturity of the debt. The effective interest rate of the debt is 5.5 percent per annum. The net proceeds were used to repay a short-term loan of approximately $110,000 with Nationsbank which was originally borrowed to finance the acquisition of Temic. The debt is not redeemable by the Company prior to April 21, 2003. Thereafter, the debt will be redeemable for cash, at the option of the Company in whole at any time or in part from time to time at redemption prices equal to the issue price plus accrued interest. At the option of the holder as of April 21, 2003, 2008 and 2013, the Company may be required to redeem the debt at prices equal to the issue price plus accrued interest. The Company may, at its option, elect to redeem the debt for cash or common stock of the Company, or any combination thereof. -7- 10 9. COMPREHENSIVE INCOME The Company has adopted the provisions of Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income (SFAS 130), effective with its 1998 fiscal year. The income tax effect of each element of comprehensive income for the three months ended March 31, 1998 is as follows:
TAX BEFORE-TAX (EXPENSE) NET-OF-TAX AMOUNT OR BENEFIT AMOUNT ---------- ---------- ---------- Foreign currency translation adjustments $(5,578) $ 1,952 $ (3,626) ------- ------- -------- Unrealized gains on securities 220 (77) 143 ------- ------- -------- Other comprehensive income $(5,358) $ 1,875 $ (3,483) ======= ======= ========
The accumulated balances of other comprehensive income at March 31, 1998 are summarized as follows:
CURRENT BEGINNING PERIOD ENDING BALANCE CHANGE BALANCE ---------- ---------- ---------- Foreign currency translation adjustments $(6,449) $(3,626) $(10,075) Unrealized gain (loss) on securities (654) 143 (511) ------- ------- -------- $(7,103) $(3,483) $(10,586) ======= ======= ========
-8- 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS 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, conditions in the overall semiconductor market (including the historic cyclicality of the industry), continued financial turmoil in the Asian markets, 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 Form 10-K Report. The Company undertakes no obligation to update any forward looking statements in this Form 10-Q. The following table sets forth for the periods indicated certain operating data as a percentage of net revenues:
THREE MONTHS ENDED MARCH 31, ----------------------- 1998 1997 ---- ---- NET REVENUES 100.0 % 100.0 % EXPENSES Cost of sales 63.0 53.9 Research and development 14.1 11.5 Selling, general and administrative 10.7 10.3 ----- ----- TOTAL EXPENSES 87.8 75.7 OPERATING INCOME 12.2 24.3 Interest and other expense, net (1.7) (0.7) ------- ------- INCOME BEFORE TAXES 10.5 23.6 Taxes on income 3.7 8.2 ------ ------ NET INCOME 6.8 % 15.4 % ====== =====
NET REVENUES Net revenues increased 2.9 percent to $260.4 million in the quarter ended March 31, 1998 from $252.9 million in the corresponding quarter of 1997. This moderate increase was primarily attributable to the inclusion of revenues from Temic's integrated business, a recent acquisition by the Company. See Note 5 (Temic Acquisition) in Notes to Condensed Financial Statements for a discussion on Temic acquisition. -9- 12 Excluding the revenue contribution from Temic, net revenues for the first quarter ended March 31, 1998 would have decreased by approximately 5.0 percent compared to the corresponding quarter of 1997. The decrease was primarily due to the continued excess manufacturing capacity in the semiconductor industry. The excess capacity led to abnormal price erosion for the Company's non-volatile memory products from which the Company derived more than half of its revenues in the first quarter of 1998. The Company's quarterly revenues and operating results have become increasingly dependent upon orders booked and shipped within a given quarter. To the extent this trend continues, the Company's quarterly results will be less predictable and subject to greater variability. In recent years, the Company has significantly expanded its international operations, most recently through its acquisition of Temic. International sales and operations are subject to a variety of risks, including those arising from currency fluctuations, tariffs, trade barriers, taxes, export license requirements and foreign government regulations. Because most of the Company's foreign sales are denominated in U.S. dollars, the Company's products become less price competitive in countries with currencies declining in value against the dollar. In particular, the Company's operating results for the first quarter of 1998 were adversely impacted in part by a strengthening of the U.S. dollar against local currencies in the markets in which the Company sells products. There can be no assurance that the Company will not experience similar adverse effects in the future. In addition, the continuance or worsening of the adverse business and financial conditions in Asia, where more than 40.0 percent of the Company's revenues are generated, would likely have a material adverse effect on the Company's operating results in the future. COST OF SALES Cost of sales as a percentage of net revenues increased to 63.0 percent in the first quarter of 1998, from 53.9 percent in the corresponding period of 1997. The increase in cost of sales as a percentage of net revenues was primarily due to excess manufacturing capacity resulting from increases in fixed costs associated with the expansion of wafer fabrication facilities in Colorado Springs, Colorado and Rousset, France, lower product margins in many of the Company's non-volatile memory products and the inclusion of $16.5 million of additional cost of sales from Temic. The lower product margins were attributable to a smaller revenue base over which to spread fixed costs and the erosion of average selling prices that were not matched with a corresponding decrease in manufacturing cost. The Company expects competitive pressures to increase in its markets from existing companies and new entrants, which among other things could further accelerate the trend of such decreasing average selling price. Accordingly, there can be no assurance that the Company will be able to sustain its recent gross margins. The Company has lowered its capital expenditure plan in 1998 and will focus on implementing chemical, mechanical planarization (CMP), 0.35-micron and 0.25-micron technologies in its wafer manufacturing facilities. Implementation of these technologies will enable the Company to achieve cost reductions through die shrinks. However, production delays, difficulties in achieving acceptable yields at its Colorado Springs or its Rousset facility or overcapacity could materially and adversely affect the Company's gross margin and future operating results. RESEARCH AND DEVELOPMENT As a percentage of net revenues, research and development cost increased to 14.1 percent in the first quarter of 1998, from 11.5 percent in the corresponding quarter of 1997. Research and development expense increased 25.7 percent from $29.2 million in the first quarter of 1997 to $36.7 million in the -10- 13 first quarter of 1998. The increase was primarily due to the Company's continued investment in the shrinking of the die size of its integrated circuits from 0.65-micron to 0.5-micron line widths, enhancement of mature products, development of new products, advanced CMOS process technology, manufacturing improvements, the costs associated with increasing production capacity in Colorado Springs and Rousset and the inclusion of Temic's research and development expense. The Company believes that continued investment in process technology and product development are essential for it to remain competitive in the markets it serves and is committed to high levels of expenditures for research and development. SELLING, GENERAL AND ADMINISTRATIVE Selling, general and administrative expenses increased by 7.3 percent to $27.8 million in the first quarter of 1998 from $$25.9 million in the first quarter of 1997. The increase was largely due to headcount increases in both domestic and foreign operations, legal costs related to patent infringement lawsuit and the inclusion of Temic's selling, general and administrative expense. As a percentage of net revenues, selling, general and administration expenses were 10.7 percent for the first quarter of 1998 and 10.3 percent for the corresponding quarter of 1997. The Company expects selling general and administrative expenses to increase due primarily to expansions in international markets, legal costs associated with intellectual property litigation and provision for doubtful accounts receivable. INTEREST AND OTHER EXPENSES, NET The Company reported $4.4 million of net interest and other expenses for the first quarter of 1998, compared to $1.9 million of net interest and other expenses for the corresponding period of 1997. The increase in net interest and other expenses was primarily due to a combination of higher interest expense associated with the increase in borrowings used to finance the expansion of the Company's fabrication facilities in Colorado Springs, and Rousset, to finance the acquisition of Temic during the first quarter of 1998 offset by a portion of interest expense capitalized in the first quarter of 1997 in connection with the construction of the Company's fabrication facility in Rousset. TAXES ON INCOME The Company's effective tax rates were 35.0 percent for both the three months ended March 31, 1998 and 1997. NET INCOME Net income of $17.7 million for the first quarter of 1998 decreased by 54.2 percent from $38.8 million in the corresponding period of the prior year. RISKS ASSOCIATED WITH TEMIC ACQUISITION The Company acquired Temic on March 1, 1998. While the Company believes the Temic acquisition is in the best interest of the Company and its shareholders, there can be no assurance that management of the Company will be successful in its efforts to integrate the operations of Temic. There are significant risks associated with the Temic acquisition, including but not limited to difficulties in integration of product offerings, manufacturing operations and coordination of sales and marketing and research and development efforts. The difficulties of Temic integration may be increased by the necessity of coordinating geographically separated organizations, the complexity of -11- 14 the technologies being integrated and the necessity of integrating personnel with disparate business backgrounds and combining two corporate cultures. The integration of operations following Temic acquisition requires the dedication of management resources that may distract attention from day-to-day business and may disrupt key research and development, marketing or sales efforts. The inability of management to successfully integrate the Temic acquisition could have a material adverse effect on the business, operating results and financial condition of the Company. LIQUIDITY AND CAPITAL RESOURCES At March 31, 1998, the Company had $228.9 million in cash and short-term investments, an increase of $8.6 million from December 31, 1997, and $272.2 million in net working capital, a decrease of $42.3 million from December 31, 1997. At March 31, 1998, the Company also had long-term investments of $93.8 million, a decrease of $1.8 million from December 31, 1997. These investments consisted of United States government obligations and state and municipal securities. During the three months ended March 31, 1998, the Company generated net cash flows from operations of $37.0 million. Net cash used in investments was $220.6 million, due to acquisitions of fixed and other assets of $88.5 million, investment in Temic of $108.3 million, purchases of marketable securities of $147.8 million, offset by sale of marketable securities of $123.9 million. Net cash provided from financing activities was $150.8 million, due to funding from capital leases and bank borrowings of $189.4 million and proceeds from stock issuance of $4.5 million, offset by payments of capital leases and notes payable of $26.5 million and payments of $16.6 million for the repurchase of one million shares of the Company's common stock. The $189.4 million of capital lease and bank borrowings included a $110.0 million of short-term loan from Nationsbank which was used to finance the acquisition of Temic. This short-term loan with Nationsbank was subsequently repaid from the net proceeds received in connection with the zero coupon convertible debt financing completed in April 1998. See Note 8 (Subsequent Event) in the Notes to Condensed Financial Statements for a discussion on zero coupon convertible debt. The Company believes that its existing sources of liquidity, together with cash flows from operations, leasing financing on equipment and other short- and medium-term bank borrowing, will be sufficient to meet the Company's liquidity and capital requirements through 1998. The Company may, however, seek additional equity or debt financing to fund the expansion of its 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 amounts or terms acceptable to the Company. -12- 15 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company has been named as a defendant in a patent infringement lawsuit that was filed on January 21, 1998. The plaintiff contends that certain of the Company's devices infringe seven patents it allegedly owns and is seeking a judgment of infringement for each of these asserted patents and other costs. The Company is reviewing the lawsuit and believes that the complaints are without merit. No assurance can be given, however, that this matter will be resolved in the Company's favor. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) Exhibits: 27.1 Financial Data Schedule - March 31, 1998 27.2 Financial Data Schedule - June 30, 1996 27.3 Financial Data Schedule - September 30, 1996 27.4 Financial Data Schedule - December 31, 1996 27.5 Financial Data Schedule - March 31, 1997 27.6 Financial Data Schedule - June 30, 1997 27.7 Financial Data Schedule - September 30, 1997 27.8 Financial Data Schedule - December 31, 1997
(B) Reports on Form 8-K: There were no reports filed on Form 8-K during the quarter ended March 31, 1998. -13- 16 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 14, 1998 /s/ GEORGE PERLEGOS -------------------------------------------- GEORGE PERLEGOS President, Chief Executive Officer (Principal Executive Officer) MAY 14, 1998 /s/ KRIS CHELLAM -------------------------------------------- KRIS CHELLAM Vice President, Finance and Administration (Principal Financial and Accounting Officer) -14- 17 Exhibits Number Description - ------ ----------- 27.1 Financial Data Schedule - March 31, 1998 27.2 Financial Data Schedule - June 30, 1996 27.3 Financial Data Schedule - September 30, 1996 27.4 Financial Data Schedule - December 31, 1996 27.5 Financial Data Schedule - March 31, 1997 27.6 Financial Data Schedule - June 30, 1997 27.7 Financial Data Schedule - September 30, 1997 27.8 Financial Data Schedule - December 31, 1997
EX-27.1 2 FINANCIAL DATA SCHEDULE
5 0000872448 ATMEL CORPORATION 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 140,064 88,879 306,479 24,058 203,552 798,725 1,476,758 398,297 2,022,752 526,486 629,283 0 0 303,696 0 2,022,752 260,392 260,392 164,192 228,677 0 123 10,880 27,272 9,545 0 0 0 0 17,727 0.18 0.18
EX-27.2 3 FINANCIAL DATA SCHEDULE
5 0000872448 ARMEL CORPORATION 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 98,177 63,672 149,489 19,746 65,165 404,476 856,248 155,518 1,217,814 359,592 191,789 0 0 270,593 0 1,217,814 508,844 508,844 255,602 364,500 0 7,193 5,471 146,462 51,262 0 0 0 0 95,200 0.97 0.95
EX-27.3 4 FINANCIAL DATA SCHEDULE
5 0000872448 ATMEL CORPORATION 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 108,637 62,995 184,943 26,076 65,575 441,231 994,996 181,763 1,358,436 361,854 244,221 0 0 273,643 0 1,358,436 789,176 789,176 397,113 564,609 0 14,788 7,698 227,501 79,423 0 0 0 0 148,078 1.51 1.47
EX-27.4 5 FINANCIAL DATA SCHEDULE
5 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 104,113 53,165 202,788 28,273 70,320 460,023 1,081,028 213,605 1,455,914 336,402 278,576 0 0 339,421 0 1,455,914 1,070,288 1,070,288 539,215 764,816 0 19,347 12,851 309,153 107,431 0 0 0 0 201,722 2.06 2.00
EX-27.5 6 FINANCIAL DATA SCHEDULE
5 0000872448 ATMEL CORPORATION 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 110,012 46,241 223,506 30,424 84,519 498,190 1,179,656 242,140 1,571,419 372,107 318,607 0 0 368,702 0 1,571,419 252,946 252,946 136,377 191,491 0 2,323 6,303 59,597 20,859 0 0 0 0 38,738 0.39 0.38
EX-27.6 7 FINANCIAL DATA SCHEDULE
5 0000872448 ATMEL CORPORATION 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 172,610 51,255 236,847 20,015 103,045 614,326 1,255,211 277,048 1,722,848 307,894 508,811 0 0 350,532 0 1,722,848 477,882 477,882 262,277 371,109 0 2,397 13,164 101,759 35,613 0 0 0 0 66,146 0.67 0.64
EX-27.7 8 FINANCIAL DATA SCHEDULE
5 0000872448 ATMEL CORPORATION 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 166,691 63,135 282,576 21,967 124,296 699,241 1,303,989 314,189 1,818,292 350,996 529,735 0 0 351,601 0 1,818,292 717,932 717,932 397,849 560,764 0 5,020 21,831 148,453 51,958 0 0 0 0 96,495 0.97 0.92
EX-27.8 9 FINANCIAL DATA SCHEDULE
5 0000872448 ATMEL CORPORATION 12-MOS DEC-31-1997 JAN-01-1997 DEC-31-1997 174,310 63,222 241,614 24,623 124,336 698,217 1,340,561 354,612 1,822,040 383,668 571,389 0 0 334,303 0 1,822,040 958,282 958,282 602,239 933,233 0 51,884 31,155 6,001 4,200 0 0 0 0 1,801 0.02 0.02
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