-----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, SHunQUNovXvRR6ajc0IQ/6BQVO1AtmRlY1qt9EKLKuBH5h3fmk4cqrzQxItTa7NG v9hV2M+MS47paQEftNhW5A== 0000898430-96-002588.txt : 19960613 0000898430-96-002588.hdr.sgml : 19960613 ACCESSION NUMBER: 0000898430-96-002588 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960428 FILED AS OF DATE: 19960612 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEMTECH CORP CENTRAL INDEX KEY: 0000088941 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 952119684 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06395 FILM NUMBER: 96579932 BUSINESS ADDRESS: STREET 1: 652 MITCHELL RD CITY: NEWBURY PARK STATE: CA ZIP: 91320 BUSINESS PHONE: 8054982111 MAIL ADDRESS: STREET 2: 652 MITCHELL ROAD CITY: NEWBURY PARK STATE: CA ZIP: 91320 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________ QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 ____________ For Quarter Ended April 28, 1996 Commission File Number 1-6395 -------------- ------ SEMTECH CORPORATION --------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 95-2119684 ------------------------------- ----------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 652 Mitchell Road, Newbury Park, California 91320 ------------------------------------------------------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (805) 498-2111 ------------------- N/A - ------------------------------------------------------------------------------ (Former name, former address and former fiscal year, if changed since last report.) 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 has required to file such reports), and (2) has been subject to such filing requirements for the past 90 days Yes X No --- --- Number of shares of Common Stock, $ .01 par value, outstanding at April 28, 1996: 6,027,085. --------- PART I - FINANCIAL INFORMATION ------------------------------ Item 1. Financial Statements -------------------- The consolidated condensed financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's latest Annual Report on Form 10-K. In the opinion of the Company, these unaudited statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position of Semtech Corporation and subsidiaries as of April 28, 1996, and the results of their operations and the changes in their cash flow for the three months then ended. -2- SEMTECH CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT FOR PER SHARE FIGURES)
THREE MONTHS ENDED -------------------------- APRIL 28, APRIL 30, 1996 1995 --------- --------- NET SALES $15,477 $12,780 Cost of sales 8,995 7,899 ------- ------- Gross profit 6,482 4,881 Operating expenses 3,693 3,008 ------- ------- Operating Income 2,789 1,873 Interest income (expense) 15 (9) ------- ------- Income before taxes 2,804 1,864 Provision for taxes 921 601 ------- ------- NET INCOME $ 1,883 $ 1,263 ======= ======= NET INCOME PER SHARE: Primary $ .30 $ .21 ======= ======= Fully diluted $ .30 $ .20 ======= =======
-3- SEMTECH CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (IN THOUSANDS)
APRIL 28, JANUARY 28, 1996 1996 --------- ----------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 4,919 $ 6,034 Temporary investments 411 411 Receivables, net 8,309 7,987 Inventories 10,823 9,986 Income taxes refundable 75 72 Deferred income taxes 648 521 Other current assets 417 465 ------- ------- TOTAL CURRENT ASSETS 25,602 25,476 ------- ------- PROPERTY, PLANT AND EQUIPMENT, NET 7,311 6,748 OTHER ASSETS 138 134 DEFERRED INCOME TAXES 340 327 ------- ------- TOTAL ASSETS $33,391 $32,685 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $ 399 $ 404 Accounts payable 3,340 4,060 Accrued liabilities 1,847 2,407 Other current liabilities 301 319 Income taxes payable 691 405 ------- ------- TOTAL CURRENT LIABILITIES 6,578 7,595 ------- ------- LONG-TERM DEBT, LESS CURRENT MATURITIES 915 1,024 OTHER LONG-TERM LIABILITIES 646 797 SHAREHOLDERS' EQUITY: Common Stock, $0.01 par value, 15,000,000 authorized 75 75 Additional paid-in capital 10,627 10,520 Retained earnings 14,905 13,022 Cumulative translation adjustment (355) (348) ------- ------- TOTAL SHAREHOLDERS' EQUITY 25,252 23,269 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $33,391 $32,685 ======= =======
-4- SEMTECH CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
FOR THE THREE MONTHS ENDED ------------------------------- APRIL 28, APRIL 30, 1996 1995 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES - Net income $ 1,883 $ 1,263 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 419 241 Changes in assets and liabilities: Receivables (322) (1,662) Inventories (837) 45 Other assets 44 80 Accounts payable and accrued liabilities (1,280) 426 Income tax refundable (3) (9) Income tax payable 286 388 Other current liabilities (18) - Deferred income taxes (140) - ------- ------- NET CASH PROVIDED BY OPERATING ACTIVITIES 32 772 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES - Temporary cash investments - 342 Additions to property, plant and equipment (982) (536) ------- ------- NET CASH USED BY INVESTING ACTIVITIES (982) (194) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES - Net line of credit activity - (175) Repayment of debt (114) (188) Tax benefits from exercise of stock options 66 - Stock options exercised 41 65 Other long-term liabilities (151) 28 Other - (74) ------- ------- NET CASH USED BY FINANCING ACTIVITIES (158) (344) ------- ------- Effect of exchange rate changes on cash (7) (31) Net increase (decrease) in cash and cash equivalents (1,115) 203 Cash and cash equivalents at beginning of period 6,034 3,261 ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,919 $ 3,464 ======= =======
-5- SEMTECH CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. INCOME TAXES - Effective February 1, 1993, the Company changed its method of accounting for income taxes to comply with the provisions of SFAS No. 109. Under SFAS No. 109, deferred income tax assets or liabilities are computed based on the temporary difference between the financial statement and income tax bases of assets and liabilities using the statutory marginal income tax rate in effect for the year in which the differences are expected to reverse. Deferred income tax expenses or credits are based on the changes in the deferred income tax assets or liabilities from period to period. Prior to fiscal year 1994, deferred income taxes were provided on temporary differences between the income or loss determined for financial reporting and income tax reporting at income tax rates in effect when the differences are expected to be settled. The change did not have a material effect on the financial statements. The income tax provision for the three months ended April 28, 1996 consisted of income tax expense of $874,000 on the income of the Company's U.S. operations and income tax expense of $47,000 on the income from the Company's foreign operation. In the prior year three month period ended April 30, 1995, the Company incurred income tax expense of $578,000 on the income of the Company's U.S. operations and income tax expense of $23,000 on income from the Company's foreign operation. 2. INCOME PER SHARE - Primary net income per share of common stock has been computed based on the weighted average number of common and common equivalent shares outstanding. Fully diluted income per share of common stock was determined on the assumption that all outstanding convertible debentures were converted under the if- converted method, as follows:
THREE MONTHS ENDED ----------------------- APRIL 28, APRIL 30, 1996 1995 --------- --------- PRIMARY........... 6,319,000 6,086,000 ========= ========= FULLY DILUTED..... 6,319,000 6,256,000 ========= =========
-6- 3. TEMPORARY INVESTMENTS - Temporary investments consist of commercial paper and government and corporate obligations with original maturities in excess of three months and are carried at cost, which approximates market. 4. INVENTORIES - The commercial semiconductor industry and the markets in which the Company's products are used are characterized by rapid changes and short product life cycles. Consistent with the industry, the Company has experienced declines in average selling prices over the life of its product lines. The Company has fully reserved inventory which is obsolete or in excess of one year's demand, and has provided reserves for declines in selling price below cost. Inventories consisted of the following:
Raw Work in Finished Total Materials process goods (thousands) - ------------------------------------------------------------------------------------ APRIL 28, 1996 Gross inventory $2,280 $7,488 $ 3,720 $13,488 Total reserves (727) $ (746) (1,192) (2,665) ------ ------ ------- ------- Net inventory $1,553 $6,742 $ 2,528 $10,823 ====== ====== ======= ======= JANUARY 28, 1996 Gross inventory $2,016 $7,370 $ 3,191 $12,577 Total reserves (722) $ (688) (1,181) (2,591) ------ ------ ------- ------- Net inventory $1,294 $6,682 $ 2,010 $ 9,986 ====== ====== ======= =======
5. LONG-TERM DEBT - Long-term debt at April 28, 1996 consists mainly of notes payable. Notes payable consists of fixed rate loans in the amount of $1,076,000 used for the acquisition of equipment and the loan on the Company's Scotland facility in the amount of $238,000. 6. LINE OF CREDIT - The Company maintains a credit arrangement with a financial institution for a working capital and equipment acquisition line of credit of up to $7,500,000 extending to August 1996 at an interest rate of 30 day rolling commercial paper plus 2.65 percent. The arrangement is collateralized by the Company's domestic assets and contains provisions regarding current ratios, debt to worth, and net worth. As of April 28, 1996, the Company had $753,000 of borrowings outstanding under this line which were converted into a term loan and reduce the borrowing limit on the line of credit. The Company also maintains an overdraft credit line in the amount of 300,000 pounds sterling at its wholly owned foreign subsidiary, and has obtained a commitment from its bank to expand the line to 1,000,000 pounds sterling on a formula line basis. 7. SIGNIFICANT CUSTOMERS For the three months ended April 28, 1996, one customer accounted for 13% of the Company's revenue. As of April 28, 1996, the Company had receivables from this customer of $993,000. For the three months ended April 30, 1995, one customer accounted for 10% of the Company's revenue. -7- Item 2. Management's Discussion and Analysis of Financial Conditions and ---------------------------------------------------------------- Results of Operations --------------------- (l) Material Changes in Financial Condition --------------------------------------- At April 28, 1996, Semtech Corporation (the "Company") had working capital of $19,024,000, compared with $17,881,000 at January 28, 1996 - an increase of $1,143,000. The increase was primarily due to the Company's profitability during the three months ended April 28, 1996. The Company's shipment levels and net income for the first quarter of fiscal 1997 were higher than the comparable quarter of last year. During the first quarter of fiscal 1997, the Company used $1,115,000 of cash and cash equivalents due to increased levels of inventory, outlays for capital equipment, payments of accrued year-end supplemental compensation and repayment of debt. Operating cash flow was a positive $32,000. The Company's accounts receivable increased by $322,000 during the quarter as the result of the Company's timing of shipments. The Company's inventories continued to increase as more resources were spent on new and existing product lines. The Company plans to continue to actively manage inventories to minimize inventory being carried and to maximize inventory turns. During the first quarter, the Company used cash of $114,000 to repay debt, $982,000 to pay for capital equipment purchases during the quarter and approximately $700,000 for capital equipment purchases which were accrued at year-end. These capital investments were made to increase the capacity and process capabilities for wafer fabrication and increase test capabilities. The ratio of current assets to current liabilities at April 28, 1996, was 3.9 to 1, compared to 3.4 to 1 at January 28, 1996. The following leverage ratios indicate the extent to which the Company has been financed with debt:
APRIL 28, JANUARY 28, 1996 1996 ---------- ------------ Long-term debt as a % of total capitalization* 3.5% 5.2% Total debt to total capitalization* 5.0% 4.2%
*Total capitalization is defined as the sum of long-term debt and shareholders' equity. The Company continues to implement its strategic plan to expand product lines that serve the computer, communications, industrial and automotive markets. In the past four years the Company has made significant investments in the development and promotion of new products designed to transition away from serving primarily military and aerospace customers. Commitments for new equipment are designed to provide the Company with advanced production capabilities needed to produce new products. In the first quarter ended April 28, 1996 the Company committed $695,000 for capital equipment. The commitments made in the first quarter were to increase test capacity, improve production capabilities and to upgrade the Company's central computer system. Outstanding obligations for capital equipment were $250,000 at April 28, 1996, compared to $537,000 at January 28, 1996. Future capital acquisitions will continue to be based on economic conditions of the Company's markets and the Company's ability to utilize such assets effectively. The Company intends to finance the majority of its capital investments and ongoing operations from -8- internally generated funds, on-hand cash balances, and an available line of credit. The Company believes that current internal cash flows, together with the Company's cash and cash equivalents, temporary investments, and the Company's credit facilities are sufficient to support all currently anticipated future investments in equipment and facilities. (2) Material Changes in Results of Operations ----------------------------------------- The following information is provided to further explain certain financial information shown in the Consolidated Condensed Statements of Operations for the three months ended April 28, 1996 and April 30, 1995. THREE MONTH PERIOD ENDED APRIL 28, 1996 COMPARED WITH THE THREE MONTH PERIOD - ---------------------------------------------------------------------------- ENDED APRIL 30, 1995: - -------------------- INDUSTRY TRENDS AND OUTLOOK - The commercial semiconductor industry and the markets in which the Company's products are used are characterized by rapid changes and short product life cycles. During the first quarter of fiscal year 1997, the Company experienced reduced demand for foundry wafers and increased price competition in its commercial semiconductor product lines. The Company believes that this trend will continue into the second quarter. The semiconductor industry as a whole has experienced a general slowdown believed to be caused by increased supply and decreased demand by end markets. Typical of the semiconductor industry, the Company has experienced declines in average selling prices over the life of its product lines. Prices declines have further been influenced by increased competition and decreased demand. Efforts to offset this decline include increasing units shipped, finding new applications for existing products and introduction of new products. Management will continue to take steps to minimize the impact of declines in average selling prices, however, there is no assurance that these efforts will be successful. Declines in average selling prices and reduced absorption related to lower production rates can significantly impact the gross margins of the Company. The market for both the Company's commercial and military-aerospace products remains fiercely competitive. The Company is focusing efforts on eliminating less profitable product lines and pushing new product development. The Company also derives a significant amount of revenue from the sale of foundry wafers. These wafers are generally purchased by manufacturers who package the individual silicon die in their products. The foundry business is also very competitive, with other foundries offering similar services. The revenue generated by the foundry and standard products segments can vary significantly depending not only on macro trends within the industry, but also on conditions at specific customers. -9- REVENUES - Revenues for the first quarter ended April 28, 1996 were $15,477,000 compared to $12,780,000 in the first quarter ended April 30, 1995, an overall increase of 21%. In comparison to last year's first quarter, sales of the Company's standard and custom products increased by 34%, while sales of foundry services declined by approximately 14%. Sales of devices used in commercial applications represented approximately 85% of total revenues in the first quarter of fiscal 1997. Computer and peripheral applications represent a large portion of the customer base for the Company's commercial products. Communications, industrial and foundry customers make up the balance of commercial sales. Revenues from military and aerospace customers remained relatively flat in the quarter at approximately 15% of net sales. Sales to commercial customers was 78% versus 22% to military-aerospace customers in the first quarter of last year. Shipments to customers located in the Asia-Pacific region were approximately 26% of the total sales for the first quarter of fiscal 1997, an increase over the 21% of total sales recorded in the first quarter of last year. Sales to European customers represented 14% of first quarter of fiscal 1997 total sales compared to 13% in the first quarter of fiscal 1996. New orders levels for the first quarter were less than total shipments in the quarter, resulting in a book-to-bill ratio of less than 1 to 1, but above the industry-wide average. In the first quarter, the Company witnessed a change in customer's buying patterns away from longer-term orders to short-term orders, referred to as "turns-fill" orders. The Company believes the semiconductor's industry wide slowdown will continue to affect buying patterns and new order rates through the second quarter and potentially longer. The book-to-bill ratio for last year's first quarter was above 1.10 to 1. Such "turns-fill" orders will be very important for the Company to meet its second quarter revenue targets. There is no guarantee that the Company's "turns-fill" order rate will be sufficient for meeting short-term targets. COSTS AND EXPENSES - COST OF GOODS SOLD - Gross profit margins as a percentage of net sales increased to 42% in the first quarter of fiscal 1997, compared to 38% in the same period last year. Gross margins have improved over last year's levels due to increased shipments of higher margin commercial products and improved manufacturing efficiencies. Gross margins in comparison to last year have also been positively impacted by increased throughput at the Company's manufacturing facilities. Future gross margin performance will be affected by shipment rates, product mix, productivity levels and price changes. Average selling prices, capacity utilization and new order rates will continue to have the most significant impact on margins. -10- OPERATING EXPENSES - Operating costs and expenses were approximately flat at 24% of net sales in the first three months of fiscal 1997 compared to 24% in the first quarter of fiscal 1996. The increase in gross operating expenses reflects an increase in variable selling costs and increased spending on research and development (R&D) activity in the first three months of fiscal 1997. The Company is aggressively pursuing additional design and applications talent to foster new product development. Added headcount and overall support of development will continue to result in higher R&D spending levels. The Company hopes to offset some of the increased R&D expense with decreased expenses as percentage of sales in administrative and sales activities. Such a decrease in operating expenses other than R&D will be dependent on the Company's ability to grow revenues. OTHER - Other income of $15,000 was realized in the quarter ended April 28, 1996, compared to other expense of $9,000 in the prior year's first quarter. The other income and expenses are primarily interest income and expense. -11- PART II - OTHER INFORMATION --------------------------- Item 1. Legal Proceedings ----------------- The Company is involved in legal matters which are routine to the nature of its business. Management is of the opinion that the ultimate resolution of all such matters will not have a material adverse effect on the accompanying consolidated condensed financial statements. Item 2. Changes in Securities --------------------- Not applicable. Item 3. Defaults upon Senior Securities ------------------------------- Not applicable. Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- (a) The 1996 Annual Meeting of Shareholders of the Company was duly held on June 6, 1996. (b) Inapplicable, as (i) proxies for the meeting were solicited pursuant to Regulation 14 under the Act; (ii) there was no solicitation in opposition to the management's nominees as listed in the Proxy Statement; and (iii) all of such nominees were duly elected. (c) Other matters voted upon at the meeting (i) Amendment to the 1994 Long-term Stock Incentive Plan in which there were 2,885,344 affirmative votes, 659,585 negative votes, 23,248 abstaining votes and 1,526,370 Broker Non- Votes. (d) Not applicable Item 5. Other Information ----------------- Not applicable. Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits 11.1 -Computation of per share earnings - See Note 2 of Notes to Consolidated Condensed Financial Statements. 27 -Financial Data Schedule, Article 5 (b) Reports on Form 8-K There were no reports on Form 8-K filed during the three months ended April 28, 1996. -12- 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. SEMTECH CORPORATION ------------------- Registrant Date: June 12, 1996 /S/ John D. Poe -------------------------------- John D. Poe President and Chief Executive Officer Date: June 12, 1996 /S/ David G. Franz, Jr. -------------------------------- David G. Franz, Jr. Vice President Finance, Chief Financial Officer, and Secretary -13- EX-27 2 FINANCIAL DATA SCHEDULE ARTICLE 5
5 THIS SCHEDULE CONTAINS RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED APRIL 28, 1996, WHICH ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE FORM 10-Q FILING AND FORM 10-K FOR THE YEAR ENDED JANUARY 28, 1996. 1,000 3-MOS APR-28-1996 JAN-29-1996 APR-28-1996 4,919 411 8,309 0 10,823 25,602 7,311 0 33,391 6,578 0 0 0 75 25,177 33,391 15,477 15,477 8,995 8,995 3,693 0 25 2,804 921 1,883 0 0 0 1,883 0.30 0.30
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