-----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, GuYWCcXHD1FP22YUoP1MHIMOpsOD7C+1MyARpihODQLfiQobfjSYfu6GiTQrPsj0 Qq8bl6LtcYe/9zZSMrUGcw== 0000950109-01-504939.txt : 20020410 0000950109-01-504939.hdr.sgml : 20020410 ACCESSION NUMBER: 0000950109-01-504939 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010929 FILED AS OF DATE: 20011113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTEGRATED CIRCUIT SYSTEMS INC CENTRAL INDEX KEY: 0000874689 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 232000174 STATE OF INCORPORATION: PA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19299 FILM NUMBER: 1783724 BUSINESS ADDRESS: STREET 1: 2435 BLVD OF THE GENERALS CITY: NORRISTOWN STATE: PA ZIP: 19403 BUSINESS PHONE: 6106305300 MAIL ADDRESS: STREET 1: 2435 BLVD OF THE GENERALS CITY: NORRISTOWN STATE: PA ZIP: 19403 10-Q 1 d10q.txt FORM 10-Q INTEGRATED CIRCUIT SYSTEMS, INC. ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------ Form 10-Q ------------------ (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - ---- EXCHANGE ACT OF 1934 For the Quarter ended September 29, 2001 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: 0-19299 -------------------------------- Integrated Circuit Systems, Inc. (Exact name of registrant as specified in its charter) Pennsylvania 23-2000174 -------------------------------- ------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 2435 Boulevard of the Generals Norristown, Pennsylvania 19403 (Address of principal executive offices) (610) 630-5300 (Registrant's telephone number including area code) -------------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- As of November 9, 2001, there were 66,107,329 shares of Common Stock; $0.01 par value, outstanding. ================================================================================ 1 INTEGRATED CIRCUIT SYSTEMS, INC. INDEX
Page Number ------ PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements: Consolidated Balance Sheets: September 29, 2001 (Unaudited) and June 30, 2001 3 Consolidated Statements of Operations (Unaudited): Three Months Ended September 29, 2001 and September 30, 2000 4 Consolidated Statements of Cash Flows (Unaudited): Three Months Ended September 29, 2001 and September 30, 2000 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3. Quantitative and Qualitative Disclosures About Market Risk 12 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 13
2 Item 1. Consolidated Financial Statements INTEGRATED CIRCUIT SYSTEMS, INC. AND SUBSIDIARIES Consolidated Balance Sheets (In thousands)
September 29, June 30, 2001 2001 -------------------- ------------------ (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 77,798 $ 91,400 Marketable securities 26,228 3,000 Accounts receivable, net 31,800 27,359 Inventory, net 11,578 10,097 Deferred income taxes 3,810 4,053 Prepaid income taxes 1,625 -- Prepaid assets 5,143 5,411 Other current assets 940 596 -------- -------- Total current assets 158,922 141,916 -------- -------- Property and equipment, net 10,547 11,215 Other assets 970 986 -------- -------- Total assets $170,439 $154,117 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current portion of long-term obligations $ 412 $ 429 Accounts payable 17,116 8,579 Accrued expenses and other current liabilities 3,373 3,566 Income taxes payable -- 1,306 -------- -------- Total current liabilities 20,901 13,880 -------- -------- Long-term debt, less current portion 175 280 Other liabilities 1,048 904 -------- -------- Total liabilities 22,124 15,064 -------- -------- Shareholders' equity: Common stock, $0.01 par, authorized 300,000; Issued and outstanding 66,733 and 66,128 shares as of September 29, 2001 and June 30, 2001, respectively. 667 661 Additional paid in capital 216,100 211,524 Accumulated deficit (61,364) (70,229) Deferred compensation (2,437) (2,722) Notes receivable (185) (181) Treasury stock, at cost, 375 shares (4,681) -- Other comprehensive income 215 -- -------- -------- Total shareholders' equity 148,315 139,053 -------- -------- Total liabilities and shareholders' equity $170,439 $154,117 ======== ========
See accompanying notes to consolidated financial statements. 3 INTEGRATED CIRCUIT SYSTEMS, INC. AND SUBSIDIARIES Consolidated Statements of Operations (In thousands) (Unaudited)
Three Months Ended ---------------------------------- September 29, September 30, 2001 2000 -------------- -------------- Revenues: $35,707 $51,351 Cost and expenses: Cost of sales 15,146 19,469 Research and development 6,648 7,140 Selling, general and administrative 4,448 6,117 Goodwill amortization -- 59 ------- ------- Operating income 9,465 18,566 ------- ------- Interest and other income 925 601 Interest expense (22) (153) ------- ------- Income before income taxes 10,368 19,014 Income taxes 1,503 3,463 ------- ------- Net income $ 8,865 $15,551 ======= ======= Basic income per share: Net income $ 0.13 $ 0.24 Diluted income per share: Net income $ 0.13 $ 0.22 Weighted average share outstanding - basic 66,428 64,375 Weighted average share outstanding - diluted 70,019 69,428
See accompanying notes to consolidated financial statements. 4 INTEGRATED CIRCUIT SYSTEMS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited) (In thousands)
Three Months Ended -------------------------------------- September 29, September 30, 2001 2000 -------------- -------------- Cash flows from operating activities: Net income $ 8,865 $ 15,551 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,273 1,286 Amortization of bond premiums 3 (3) Deferred financing charge 3 3 Amortization of deferred compensation 246 286 (Gain) loss on sale of assets (28) (29) Tax benefit of stock options 3,946 2,586 Deferred income taxes 414 (543) Changes in assets and liabilities: Accounts receivable (4,442) (857) Inventory (1,480) (172) Other assets, net (146) 748 Accounts payable, accrued expenses and other current liabilities 8,342 305 Accrued interest expense -- (14) Income taxes (2,932) 4,986 -------- -------- Net cash provided by operating activities 14,064 24,133 -------- -------- Cash flows from investing activities: Purchase of marketable securities (23,019) -- Capital expenditures (621) (1,182) Other 101 347 -------- -------- Net cash used in investing activities (23,539) (835) -------- -------- Cash flows from financing activities: Net repayments under line of credit agreement -- (10,000) Exercise of stock options 531 190 Shares purchased through stock purchase plan 144 155 Initial public offering expenses -- (194) Purchase of treasury stock (4,681) -- Repayments of long-term debt (121) (139) -------- -------- Net cash used in financing activities (4,127) (9,988) -------- -------- Net (decrease) increase in cash and cash equivalents (13,602) 13,310 Cash and cash equivalents: Beginning of period 91,400 28,940 -------- -------- End of period $ 77,798 $ 42,250 ======== ========
See accompanying notes to consolidated financial statements. 5 INTEGRATED CIRCUIT SYSTEMS, INC. AND SUBSIDIARIE Notes to Consolidated Financial Statements (1) INTERIM ACCOUNTING POLICY The accompanying financial statements have not been audited. In the opinion of our management, the accompanying consolidated financial statements reflect all adjustments (consisting only of normal recurring accruals) necessary to present fairly our financial position at September 29, 2001 and results of operations and cash flows for the interim periods presented. Certain items have been reclassified to conform to current period presentation. Certain footnote information has been condensed or omitted from these financial statements. Therefore, these financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended June 30, 2001. Results of operations for the three months ended September 29, 2001 are not necessarily indicative of results to be expected for the full year. (2) CONSOLIDATION POLICY The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All material intercompany balances and transactions have been eliminated. (3) ACCOUNTING FOR GOODWILL Our adoption of Statement of Financial Accounting Standards No. 142 ("SFAS No. 142"), "Goodwill and Intangible Assets" eliminates the amortization of goodwill in our current quarter. Our goodwill amortization expense in the first quarter of fiscal year 2001 totaled $59,000 pretax. Had we continued to amortize goodwill, our amortization expense in the first quarter of fiscal year 2002 would have been $59,000 pretax. This transition had no impact on diluted EPS in either quarter. (4) INVENTORY Inventory is valued at the lower of cost or market. Cost is determined by the first in, first out (FIFO) method. The components of inventories are as follows (in thousands): September 29, 2001 June 30, 2001 ------------------ ------------- Work-in-process $ 6,521 $ 6,513 Finished parts 8,334 7,178 Less: Obsolescence reserve (3,277) (3,594) --------- --------- $ 11,578 $ 10,097 ========= ========= (5) DEBT In June 2000, we obtained a $30.0 million revolving credit facility with a commercial bank. The facility expires in June 2002, with an option to extend the facility for additional period and is subject to certain covenants, including maintenance of certain financial ratios. As of September 29, 2001, we had no outstanding balances under this agreement, and we were in compliance with the revolving credit facility covenants. (6) CAPITAL STOCK In September, we announced a repurchase program, which authorized the purchase, from time to time, of 2.0 million shares of our common stock on the market. As of September 29, 2001, we had purchased 375,000 shares for $4.7 million. (7) NEW ACCOUNTING PRONOUNCEMENTS In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 141 ("SFAS No. 141"), "Business Combinations", which supersedes Accounting Principles Board Opinion No. 16 6 ("APB No. 16"), "Business Combinations". The most significant changes made by SFAS No. 141 is the requirement of the usage of the purchase method of accounting for all business combinations initiated after June 30, 2001 and established specific criteria for the recognition of intangible assets separately from goodwill. In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets", which supercedes APB No. 17, "Intangible Assets". SFAS No. 142 provides guidance on accounting for goodwill and other intangible assets subsequent to acquisition. These provisions are effective for fiscal years beginning after December 15, 2001. We adopted this statement during the first quarter of fiscal year 2002. In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations", which amends SFAS No. 19, "Financial Accounting and Reporting by Oil and Gas Producing Companies". SFAS No. 143 provides guidance on accounting for the retirement of tangible long-lived assets and the associated asset retirement costs. These provisions are effective for fiscal year beginning after June 15, 2002. We do not believe that adoption of this statement will have a material impact on our operating results. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". SFAS No. 144 established a single accounting model for the disposition of long-lived assets by sale. These provisions are effective for fiscal years beginning after December 15, 2001. We do not believe that adoption of this statement will have a material impact on our operating results. (8) NET INCOME PER SHARE Basic net income per share is based on the weighted-average number of common shares outstanding excluding contingently issuable or returnable shares that contingently convert into Common Stock upon certain events. Diluted net income per share is based on the weighted average number of common shares outstanding and diluted potential common shares outstanding. The following table set forth the computation of net income (numerator) and shares (denominator) for earnings per share:
Three Months Ended September 29, September 30, 2001 2000 ------------- ------------- Numerator (in thousands): Net income $ 8,865 $15,551 ------- ------- Denominator (in thousands): Weighted average shares outstanding used for basic income per share 66,428 64,375 Common stock options 3,591 5,053 ------- ------- Weighted average shares outstanding used for diluted income per share 70,019 69,428 ======= =======
(9) INCOME TAXES Our effective income tax rate was 14.5% for the first quarter of fiscal year 2002 as compared to 18.2% in the prior year period. The effective tax rate for fiscal years 2002 and 2001 reflects the tax-exempt status of our Singapore operation, which has been given pioneer status, or exemption of taxes on non-passive income for five years. We do not currently calculate deferred taxes on our investment in our Singapore operations, as all undistributed earnings are permanently 7 reinvested back into the Singapore facility. If we were to record deferred taxes on our investment, the amount would be a $27.7 million liability as of September 29, 2001. (10) COMPREHENSIVE INCOME Total comprehensive income represents net income plus the results of certain equity changes not reflected in the condensed consolidated and combined statements of operations. The after-tax components of accumulated other comprehensive income are shown below.
Three Months Ended September 29, September 30, 2001 2000 ------------- -------------- Net income $ 8,865 $15,551 ------- ------- Other comprehensive income: Unrealized Gain on Investments 215 -- ------- ------- Total comprehensive income $ 9,080 $15,551 ======= =======
(11) LEGAL PROCEEDINGS From time to time, various inquiries, potential claims and charges and litigation are made, asserted or commenced by or against us, principally arising from or related to contractual relations and possible patent infringement. We believe that any of these claims currently pending, individually and in the aggregate, have been adequately reserved and will not have any material adverse effect on our consolidated financial position or results of operations, although no assurance can be made in this regard. Cypress Semiconductor Corporation, ("Cypress"), and International Microcircuits Inc. filed a suit against us in the U.S. District Court in Delaware, alleging that we infringed on three patents and induced others to infringe on them as well. Plaintiffs seek injunctive relief, unspecified damages and enhanced damages for willful infringement. We denied the allegations and filed a counterclaim seeking to invalidate the patents. We filed a patent infringement lawsuit in the U.S. District Court, Northern District of California against Cypress, alleging that Cypress infringes upon one of our patents, and we seek injunctive relief and damages against Cypress. Cypress denied the allegations and filed a counterclaim seeking to invalidate our patent. On July 20, 2001, Cypress filed a complaint with the U.S. International Trade Commission, ("ITC"), to commence an investigation of us for patent infringement. . We denied the allegations of Cypress in the ITC complaint. Litigation in the Delaware lawsuit about a patent that is subject of Cypress' ITC complaint is stayed, until the ITC's determination under the Cypress complaint becomes final. On November 5, 2001, we filed a complaint with the ITC to commence an investigation of Cypress for patent infringement. We will continue to vigorously pursue our rights and defenses in all litigation with Cypress. Although we believe that all the litigation would not have a material adverse effect on our results of operations and financial condition, no assurance can be made in this regard. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements Except for the historical statements and discussions contained herein, statements contained in this Report on Form 10-Q constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, such as when we describe what we believe, expect or anticipate will occur, and other similar statements. You must remember that our expectations may not be correct. While we believe these expectations and projections are reasonable, such forward-looking statements are inherently subject to risks, uncertainties and assumptions about us, including, among other things: . Our dependence on continuous introduction of new products based on the latest technology . The intensely competitive semiconductor and personal computer component industries . The importance of frequency timing generator products to total revenue . Our dependence on the personal computer industry and third-party silicon wafer fabricators and assemblers of semiconductors . Risks associated with international business activities and acquisitions and integration of acquired companies or product lines . Our dependence on proprietary information and technology and on key personnel . Our product liability exposure and the potential unavailability of insurance . General economic conditions, including economic conditions related to the semiconductor and personal computer industries We do not guarantee that the transactions and events described in this Form 10-Q will happen as described or that they will happen at all. You should read this Form 10-Q completely and with the understanding that actual future results may be materially different from what we expect. We disclaim any intention or obligation to update these forward-looking statements, even though our situation will change in the future. Results of Operations The following table sets forth, for the periods indicated, the percentage relationship to revenue of certain cost, expense and income items. The table and the subsequent discussion should be read in conjunction with the financial statements and the notes thereto:
Three Months Ended September 29, September 30, 2001 2000 ------------------- ----------------- Revenues 100.0% 100.0% Gross Margin 57.6 62.1 Research and development 18.6 13.9 Selling, general and administrative 12.5 11.9 Goodwill amortization -- 0.1 ----- ----- Operating income 26.5 36.2 ----- ----- Interest and other income 2.6 1.2 Interest expense (0.1) (0.3) ----- ----- Income before income taxes and extraordinary gain 29.0 37.1 Income taxes 4.2 6.8 ----- ----- Net income 24.8% 30.3% ===== =====
9 FIRST QUARTER FISCAL YEAR 2002 AS COMPARED TO FIRST QUARTER FISCAL YEAR 2001 Revenue. Revenue decreased by $15.7 million to $35.7 million for the first quarter ended September 29, 2001 as compared to the prior year quarter. The 31% decrease is primarily due to macroeconomic factors, which affected overall revenue. The average selling price declined 21.1%, while the volume decreased 11.9%. Foreign revenue (which includes shipments of integrated circuits ("ICs") to foreign companies as well as offshore subsidiaries of US multinational companies) was 78.2% of total revenue for the first quarter of fiscal year 2002 as compared to 72.2% of total revenue in the prior year quarter. This increase is attributable to strong demand in the Asian PC market for the first quarter of fiscal year 2002. While the percentage increase reflected growing sales to the Pacific Rim markets, certain of our international sales were to customers in the Pacific Rim, which in turn sold some of their products to North America, Europe and other non-Asian markets. Our sales are denominated in U.S. dollars and minimize foreign currency risk. Gross Margin. Cost of sales decreased $4.4 million to $15.1 million for the quarter ended September 29, 2001, as compared to the prior year quarter. Cost of sales as a percentage of total revenue was 42.4% for the first quarter of fiscal year 2002 as compared to 37.9% in the prior year quarter. The overall decrease in margin is due to product mix. Research and Development Expense. Research and development ("R&D") expense decreased $0.5 million to $6.6 million for the first quarter of fiscal year 2002 from $7.1 million in the prior year quarter. As a percentage of revenue, research and development increased to 18.6% in the first quarter of fiscal year 2002 as compared to 13.9% in the prior year period. Our continued emphasis on R&D includes greater spending in research and development for our silicon timing business. The decreased expense represented a greater percentage of revenue due to the significant decrease in sales during the first quarter of fiscal year 2002. Selling, General, Administrative and Other. Selling, general, administrative and other expense decreased $1.7 million to $4.4 million for the first quarter of fiscal year 2002 as compared to the prior year period. We continued to benefit from operating expense control measures. As a percentage of total revenue, selling, general and administrative expenses increased to 12.5% in the first quarter of fiscal year 2002 as compared to 11.9% in the prior year period. The increase as a percentage of revenue is the result of lower revenues. Operating Income. In dollar terms, operating income was $9.5 million in the first quarter of fiscal year 2002 compared to $18.6 million in the first quarter of fiscal year 2001. Expressed as a percentage of revenue, operating income was 26.5% and 36.2% in the first quarter of fiscal year 2002 and the prior year period, respectively. Interest Expense. Interest expense was $22,000 in the first quarter of fiscal year 2002 and $0.2 million in the first quarter of fiscal year 2001. Interest and Other Income. Interest and other income was $0.9 million for the quarter ended September 29, 2001 and $0.6 million in the prior year quarter. An increase in cash flows from operations has contributed to a greater cash balance available for investing. Income Tax Expense. Our effective income tax rate was 14.5% for the first quarter of fiscal year 2002 as compared to 18.2% in the prior year period. The effective tax rate for fiscal years 2002 and 2001 reflects the tax-exempt status of our Singapore operation, which has been given pioneer status, or exemption of taxes on non-passive income for five years. The decrease in overall tax rate was directly attributable to increased revenue and income in our Singapore operations relative to our domestic operations. We do not currently calculate deferred taxes on our investment in our Singapore operations, as all undistributed earnings are permanently reinvested back into the Singapore facility. If we were to record deferred taxes on our investment, the amount would be a $27.7 million liability as of September 29, 2001. 10 INDUSTRY FACTORS Our strategy has been to develop new products and introduce them ahead of the competition in order to have them selected for design into products of leading OEMs. Our newer components, which include advanced motherboard FTG components, data communication components and PC multimedia audio and graphics components, are examples of this strategy. However, there can be no assurance that we will continue to be successful in these efforts or that further competitive pressures would not have a material impact on revenue growth or profitability. We include customer released orders in our backlog, which may be canceled generally with 30 days advance notice without significant penalty to the customers. Accordingly, we believe that our backlog, at any time, should not be used as a measure of future revenues. The semiconductor and personal computer industry, in which we participate, is generally characterized by rapid technological change, intense competitive pressure, and, as a result, products price erosion. Our operating results can be impacted significantly by the introduction of new products, new manufacturing technologies, rapid changes in the demand for products, decreases in the average selling price over the life of a product and our dependence on third-party wafer suppliers. Our operating results are subject to quarterly fluctuations as a result of a number of factors, including competitive pressures on selling prices, availability of wafer supply, fluctuation in yields, changes in the mix of products sold, the timing and success of new product introductions and the scheduling of orders by customers. We believe that our future quarterly operating results may also fluctuate as a result of Company-specific factors, including pricing pressures on our more mature FTG components as well as the competitive pressure, continuing demand for our custom ASIC products and acceptance of our newly introduced ICs, board level and software products and market acceptance of our customers' products. Due to the effect of these factors on future operations, past performance may be a limited indicator in assessing potential future performance. LIQUIDITY AND CAPITAL RESOURCES At September 29, 2001, our principal sources of liquidity included cash and investments of $104.0 million as compared to the June 30, 2001 balance of $94.4 million. Net cash provided by operating activities was $14.1 million in the first quarter of fiscal year 2002, as compared to $24.1 million in the prior year quarter. This decrease is primarily attributable to the decrease in income, and the increase in accounts receivable and income tax, partially offset by an increase in accounts payable. Our days sales outstanding increased from 71 days as of the fourth quarter of fiscal year 2001 to 81 days in the first quarter of fiscal year 2002, while inventory turns increased from 5.2 times in fiscal year 2001 to 5.6 times in the first quarter of fiscal year 2002. Purchases for property and equipment were $0.6 million in the first quarter of fiscal year 2002 as compared to $1.2 million in the prior year quarter. In September, we announced a repurchase program, which authorized the purchase, from time to time, of 2.0 million shares of our common stock on the market. As of September 29, 2001, we had purchased 375,000 shares for $4.7 million. In June 2000, we secured a $30.0 million revolving credit facility with a commercial bank. The facility expires in June 2002, with an option, at the bank's sole discretion, to extend the facility for additional period and is subject to certain covenants, including maintenance of certain financial ratios. In the first quarter of fiscal year 2002, we had no outstanding balances under this agreement. As of September 29, 2001, we were in compliance with the revolving credit facility covenants. We believe that the funds on hand together with funds expected to be generated from our operations as well as borrowings under our bank revolving credit facility will be sufficient to meet our anticipated cash needs for working 11 capital and capital expenditures for at least the next twelve months. Thereafter, we may need to raise additional funds in future periods to fund our operations and potential acquisitions if any. We may also consider conducting future equity or debt financings if we perceive an opportunity to access the capital markets on a favorable basis, within the next twelve months or thereafter. Any such additional financing, if needed, might not be available on reasonable terms or at all. Failure to raise capital when needed could seriously harm our business and results of operations. If additional funds were raised through the issuance of equity securities or convertible debt securities, the percentage of ownership of our shareholders would be reduced. Furthermore, such equity securities or convertible debt securities might have rights, preferences or privileges senior to our common stock. NEW ACCOUNTING PRONOUNCEMENTS In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 141 ("SFAS No. 141"), "Business Combinations", which supersedes Accounting Principles Board Opinion No. 16 ("APB No. 16"), "Business Combinations". The most significant changes made by SFAS No. 141 is the requirement of the usage of the purchase method of accounting for all business combinations initiated after June 30, 2001 and established specific criteria for the recognition of intangible assets separately from goodwill. In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets", which supercedes APB No. 17, "Intangible Assets". SFAS No. 142 provides guidance on accounting for goodwill and other intangible assets subsequent to acquisition. These provisions are effective for fiscal years beginning after December 15, 2001. We adopted this statement during the first quarter of fiscal year 2002. In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations", which amends SFAS No. 19, "Financial Accounting and Reporting by Oil and Gas Producing Companies". SFAS No. 143 provides guidance on accounting for the retirement of tangible long-lived assets and the associated asset retirement costs. These provisions are effective for fiscal year beginning after June 15, 2002. We do not believe that adoption of this statement will have a material impact on our operating results. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". SFAS No. 144 established a single accounting model for the disposition of long-lived assets by sale. These provisions are effective for fiscal years beginning after December 15, 2001. We do not believe that adoption of this statement will have a material impact on our operating results. Item 3. Quantitative and Qualitative Disclosures About Market Risk Foreign Currency Exposures Our sales are denominated in U.S. dollars, accordingly, we do not use forward exchange contracts to hedge exposures denominated in foreign currencies or any other derivative financial instruments for trading or speculative purposes. The effect of an immediate 10% change in exchange rates would not have a material impact on our future operating results or cash flows. Interest Rate Risk As of September 29, 2001 we did not have obligations under the bank credit and, therefore, we currently do not engage in interest rate hedging activities. 12 Item 6. Exhibits and Reports on Form 8-K (a) Reports on Form 8-K: A report on Form 8-K, dated September 19, 2001, was filed to report the announcement of a stock repurchase program. The repurchase program authorizes the purchase, from time to time, of 2,000,000 shares of the Company's common stock. 13 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. INTEGRATED CIRCUIT SYSTEMS, INC. Date: November 13, 2001 By: /s/ Hock E. Tan ----------------------------------------------- Hock E. Tan President and Chief Executive Officer Date: November 13, 2001 By: /s/ Justine F. Lien ----------------------------------------------- Justine F. Lien Vice President, Finance and Chief Financial Officer (Principal financial & accounting officer) 14 -----END PRIVACY-ENHANCED MESSAGE-----