-----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, BJRruXRS2KfK9qQB/ag/aLcEsDPwjjmIhy0AUXDgWKqwli8VSeG+Ed6h7lyClrrL Z3spbpxjgzgGlvXzipn4Bw== /in/edgar/work/20000615/0000898430-00-001814/0000898430-00-001814.txt : 20000919 0000898430-00-001814.hdr.sgml : 20000919 ACCESSION NUMBER: 0000898430-00-001814 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000430 FILED AS OF DATE: 20000615 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEMTECH CORP CENTRAL INDEX KEY: 0000088941 STANDARD INDUSTRIAL CLASSIFICATION: [3674 ] IRS NUMBER: 952119684 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06395 FILM NUMBER: 655659 BUSINESS ADDRESS: STREET 1: 652 MITCHELL RD CITY: NEWBURY PARK STATE: CA ZIP: 91320 BUSINESS PHONE: 8054982111 MAIL ADDRESS: STREET 1: 652 MITCHELL ROAD STREET 2: 652 MITCHELL ROAD CITY: NEWBURY PARK STATE: CA ZIP: 91320 10-Q 1 0001.txt FORM 10-Q 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 quarterly period ended April 30, 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 1-6395 SEMTECH CORPORATION (Exact name of registrant as specified in its charter) Delaware 95-2119684 (State or other jurisdiction (I.R.S. Employer incorporation or organization) identification No.) 652 Mitchell Road, Newbury Park, California, 91320 (Address of principal executive offices, Zip Code) Registrant's telephone number, including area code: (805) 498-2111 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, $0.01 par value, outstanding at April 30, 2000: 32,601,901. ---------- 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 accounting principles generally accepted in the United States 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 30, 2000, and the results of their operations and their cash flows for the three months then ended. 2 SEMTECH CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (in thousands, except per share data) (Unaudited)
Three Months Ended ------------------ April 30, May 2, 2000 1999 - ---------------------------------------------------------------------------------------- Net sales $57,412 $33,044 Cost of sales 26,220 16,445 ------- ------- Gross profit 31,192 16,599 ------- ------- Operating costs and expenses - Selling, general and administrative 8,220 5,642 Product development and engineering 7,045 4,117 ------- ------- Total operating costs and expenses 15,265 9,759 ------- ------- Operating income 15,927 6,840 Interest and other income, net 1,329 254 ------- ------- Income before taxes 17,256 7,094 Provision for taxes 5,177 2,341 ------- ------- Net income $12,079 $ 4,753 ======= ======= Earnings per share: Basic $0.37 $0.16 Diluted $0.32 $0.14 Weighted average number of shares: Basic 32,341 30,058 Diluted 37,382 33,102
3 SEMTECH CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands, except share data) April 30, January 30, 2000 2000 (Unaudited) (Audited) - ---------------------------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $238,470 $ 45,225 Temporary investments 171,352 18,066 Receivables, less allowances 30,968 25,223 Income taxes refundable 478 - Inventories 29,898 26,581 Other current assets 1,891 1,223 Deferred income taxes 8,361 4,106 -------- -------- Total current assets 481,418 120,424 Property, plant and equipment, net 24,785 24,397 Long-term investments 55,156 - Other assets 12,584 1,482 Deferred income taxes 3,114 3,047 -------- -------- TOTAL ASSETS $577,057 $149,350 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 11,213 $ 10,723 Accrued liabilities 11,829 8,869 Income taxes payable - 1,389 Other current liabilities 785 2,756 -------- -------- Total current liabilities 23,827 23,737 Other long-term liabilities 168 131 Convertible Subordinated Debentures 400,000 - Commitments and contingencies Stockholders' equity: Common stock, $0.01 par value, 40,000,000 authorized Issued and outstanding 326 320 Additional paid-in capital 69,328 53,885 Retained earnings 83,577 71,498 Accumulated other comprehensive loss (169) (221) -------- -------- Total stockholders' equity 153,062 125,482 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $577,057 $149,350 ======== ========
4 SEMTECH CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited)
Three Months Ended ------------------ April 30, May 2, 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ Cash flows from operating activities: Net income $ 12,079 $ 4,753 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,164 1,075 Deferred income taxes (4,322) 21 Changes in assets and liabilities, net of acquisition: Receivables (5,745) (2,423) Income taxes refundable - 258 Inventories (3,317) (2,071) Other assets (668) (497) Accounts payable and accrued liabilities 3,450 (541) Income taxes payable 9,683 1,799 Other current liabilities (1,971) (344) --------- ------- Net cash provided by operating activities 10,353 2,030 --------- ------- Cash flows from investing activities: Temporary investments, net (153,286) 255 Purchase of long-term investments (55,156) - Additions to property, plant and equipment (1,552) (1,229) --------- ------- Net cash used in investing activities (209,994) (974) --------- ------- Cash flows from financing activities: Exercise of stock options 3,899 855 Proceeds from issuance of debentures 388,898 - Stock repurchase - (6,642) Other 37 42 --------- ------- Net cash provided by (used in) financing activities 392,834 (5,745) --------- ------- Effect of exchange rate changes on cash 52 (70) Net increase (decrease) in cash and cash equivalents 193,245 (4,759) Cash and cash equivalents at beginning of period 45,225 41,035 --------- ------- Cash and cash equivalents at end of period $ 238,470 $36,276 ========= =======
5 SEMTECH CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 1. Earnings Per Share Basic earnings per common share are computed using the weighted average number of common shares outstanding during the period. Diluted earnings per common share include the incremental shares issuable upon the assumed exercise of stock options and assumed conversion of the $400.0 million subordinated debenture for the first quarter of fiscal year 2001.
(in thousands) Three Months Ended April 30, May 2, 2000 1999 - ------------------------------------------------------- Basic 32,341 30,058 ====== ====== Diluted 37,382 33,102 ====== ======
Options to purchase 31,000 shares were not included in the computation of diluted net income per share for the first quarter of fiscal year 2000, because such options were anti-dilutive. 2. Business Segments and Concentrations of Risk The Company operates in three reportable segments: Standard Semiconductor Products, Rectifier and Assembly Products, and Other Products. Included in the Standard Semiconductor Products segment are the power management, protection, high-performance, advanced communications and system management product lines. The Rectifier and Assembly Products segment includes the Company's line of assembly and rectifier products. The Other Products segment is made up of other custom IC and foundry sales. The accounting policies of the segments are the same as those described above in the summary of significant accounting policies. The Company evaluates segment performance based on net sales and operating income of each segment. Management does not track segment data or evaluate segment performance on additional financial information. As such, there are no separately identifiable segment assets nor is there any separately identifiable statements of income data (below operating income). The Company does not track or assign assets to individual reportable segments. Likewise, depreciation expense and capital additions are also not tracked by reportable segments.
Three Months Ended April 30, May 2, Net Sales 2000 1999 --------- ----------------------- Standard Semiconductor Products.......... $51,436 $27,630 Rectifier and Assembly Products.......... 3,879 3,266 Other Products........................... 2,097 2,148 ------- ------- Total Net Sales........................ $57,412 $33,044 ======= =======
Three Months Ended April 30, May 2, Operating Income 2000 1999 ---------------- ------------------------ Standard Semiconductor Products.......... $14,718 $6,386 Rectifier and Assembly Products.......... 693 144 Other Products........................... 516 310 ------- ------
6 Total Operating Income................. $15,927 $6,840 ======= ======
For the first quarters ended April 30, 2000 and May 2, 1999, the Company had no customer that accounted for more than 10 percent of net sales. As of April 30, 2000 and May 2, 1999, no one customer accounted for more than 10 percent of total accounts receivable. A summary of net external sales by region follows. The Company does not track customer sales by region for each individual reporting segment.
Three Months Ended April 30, May 2, Net Sales 2000 1999 --------- ----------------------- Domestic......................... $25,261 $12,722 Asia-Pacific..................... 25,835 16,125 European......................... 6,316 4,197 ------- ------- Total Net Sales................ $57,412 $33,044 ======= =======
Long lived assets located outside the United States as of the end of the first quarter of fiscal years 2001 and 2000 were approximately $1.5 million and $3.5 million, respectively. 3. Temporary and Long-Term Investments Temporary and long-term investments consist of bank and corporate obligations. Temporary investments have original maturities in excess of three months, but no greater than twelve months at the time of purchase. Long-term investments have original maturities in excess of one year. All investments are classified as "hold to maturity", thus no unrealized holding gains or losses were reported in the accompanying balance sheets. 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 generally reserved inventory which is considered obsolete or estimated to be in excess of 18 months demand, and has provided reserves for declines in selling price below cost. Inventories consisted of the following:
Raw Materials Work in Process Finished Goods Total (In thousands) - -------------------------------------------------------------------------------------------------------- April 30, 2000 Gross inventories $1,472 $20,845 $12,578 $34,895 Total reserves (301) (2,116) (2,580) (4,997) ------ ------- ------- ------- Net inventories $1,171 $18,729 $ 9,998 $29,898 ====== ======= ======= ======= January 30, 2000 Gross inventories $1,471 $17,276 $12,588 $31,335 Total reserves (288) (2,030) (2,436) (4,754) ------ ------- ------- ------- Net inventories $1,183 $15,246 $10,152 $26,581 ====== ======= ======= =======
5. Convertible Subordinated Debentures On February 14, 2000, the Company completed a private offering of $400.0 million principal amount of convertible subordinated debentures that pay an interest rate of 4 1/2 percent and are convertible into common stock at 7 a conversion price of $84.46 per share. The notes are due in seven years and callable by the Company after three years. The Company intends to use the net proceeds of the offering for general corporate purposes, including working capital, expansion of sales, marketing and customer service capabilities, and product development. In addition, the Company may use a portion of the net proceeds to acquire or invest in complementary businesses, technologies, services or products. 6. Lines of Credit The Company has a credit arrangement with a financial institution for borrowings up to $20.0 million at an interest rate of 30 day commercial paper plus 2.2 percent that is available through August 2000. The line of credit consists of two parts, the first facility is a $10.0 million line of credit for working capital needs and the second facility is a reducing revolver loan for equipment acquisitions. The available amount under the reducing revolver loan declines in equal increments over 84 months. As of April 30, 2000, the Company had approximately $7.8 million available under the reducing revolver portion. The arrangement is collateralized by the Company's domestic assets and provides for financial and non-financial covenants. Through its foreign subsidiary, the Company also maintains an overdraft credit line in the amount of 300,000 pounds sterling. As of April 30, 2000, the Company had no borrowings outstanding under these credit facilities. 7. Commitments and Contingencies On February 7, 2000, the Company was notified by the United States Environmental Protection Agency with respect to the Casmalia Disposal Site in Santa Barbara, California. The Company has been included in the Superfund program to clean up this disposal site for its involvement in utilizing this site for waste disposal. As of April 30, 2000, the Company provided approximately $245,000 for potential settlement under this program, however, the ultimate resolution and timing of the resolution is unknown at this time. The Company believes the amount provided is sufficient to cover any liability existing based on the currently available information. 8. Stock Split On September 14, 1999, the Company effected a two-for-one stock split in the form of a 100% stock dividend which was payable to shareholders of record as of August 30, 1999. All shares, per share data, common stock, and stock option amounts herein have been restated to reflect the effect of this split. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND ---------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- You should read the following discussion of our financial condition and results of operations together with the condensed financial statements and the notes to condensed financial statements included elsewhere in this Form 10-Q. This discussion contains forward-looking statements based on our current expectations, assumptions, estimates and projections about us and our industry. These forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, as more fully described in the "Forward Looking Statements" section of this Form 10-Q and the "Risk Factors" section of the Company's annual report on Form 10-K for the year ended January 30, 2000. We undertake no obligation to update any forward-looking statements for any reason, even if new information becomes available or other events occur in the future. 8 Overview We design, develop, manufacture and market a wide range of analog and mixed-signal semiconductors for commercial and military applications. Our products are sold principally to customers in the computer, communications and industrial markets. Computer market applications include desktop computers, servers, workstations, laptop computers, personal digital assistants (PDAs) and computer add-on cards. Products within the communications market include local area networks, wide area networks, cellular phones and base-stations. Industrial applications include automated test equipment (ATE), medical devices and factory automation systems. Our focus on these commercial applications over the past several years represents a substantial transition from our historical business, which was predominantly military and aerospace applications. Sales to customers are made on the basis of individual customer purchase orders. Many large commercial customers, particularly in the personal computer industry, include terms in their purchase orders, which provide liberal cancellation provisions. Recent trends within the industry toward shorter lead- times and "just-in-time" deliveries have resulted in our reduced ability to predict future shipments. As a result, we expect the percentage of turns-fill business (orders received and shipped within the same quarter) to increase as a percentage of net sales. With a portion of our sales emanating from retail computer and computer related applications, our past results have reflected some seasonality, with demand levels being higher in computer segments during the third and fourth quarters of the year in comparison to the first and second quarters. One of our strategies is to expand our business through strategic acquisitions. Over the past three years, we have made several small acquisitions in order to increase our pool of skilled technical personnel and penetrate new market segments such as high performance, advanced communications and system management devices. These acquisitions include: USAR Systems Incorporated; Practical Sciences, Inc.; Acapella Limited and Edge Semiconductor. The acquisitions of USAR, Acapella and Edge were accounted for as poolings of interests. Results of Operations The following table sets forth certain operating data as a percentage of total net sales for the periods indicated.
Quarter Ended April 30, May 2, 2000 1999 ---------------------- As a Percentage of Net Sales: Net sales 100.0% 100.0% Cost of sales 45.7 49.8 ----- ----- Gross profit 54.3 50.2 Operating costs and expenses: Selling, general & administrative 14.3 17.1 Product development and Engineering 12.3 12.5 ----- ----- Total operating costs and Expenses 26.6 29.5 ----- ----- Operating income 27.7 20.7 Interest and other income, net 2.3 0.8 ----- ----- Income before taxes 30.1 21.5 Provision for taxes 9.0 7.1 ----- ----- Net income 21.0% 14.4% ===== =====
Comparison of the Three Months Ended April 30, 2000 and May 2, 1999 Net Sales. We generally recognize revenue upon shipment of our products. We defer revenue recognition on shipment of certain products to distributors where return privileges exist until the products are sold through to end 9 users. Net sales for the first quarter of fiscal year 2001 were $57.4 million, compared to $33.0 million for the first quarter of fiscal year 2000, a 74 percent increase. This increase was due in part to favorable market conditions in the overall semiconductor industry and the growth in sales into the Company's main strategic end markets: communications, computer and industrial. Gross Profit. Gross profit is equal to our net sales less our cost of sales. Our cost of sales includes materials, direct labor and overhead. Cost of inventory is determined by the first-in, first-out method. Gross profit for the first three months of fiscal year 2001 was $31.2 million, compared to $16.6 million for the comparable period in the prior year, an 88 percent increase. Our gross margins (defined as gross profit as a percentage of net sales) are generally affected by price changes over the life of the products and the overall mix of products sold. Higher gross margins are generally expected from new products and improved production efficiencies as a result of increased utilization. Conversely, prices for existing products generally will continue to decrease over their respective life cycles. Our gross margin was 54.3 percent for the first quarter of fiscal year 2001. This compared to a gross margin of 50.2 percent for the first quarter of fiscal year 2000. The improvement is attributed to increased operating efficiencies associated with higher shipment levels, higher revenue contribution from new products and a favorable shift in product mix toward higher margin product lines. Operating Costs and Expenses. Operating costs and expenses generally consist of selling, general and administrative (SG&A), product development and engineering costs (R&D), costs associated with acquisitions, and other operating related charges. Operating costs and expenses were $15.3 million, or 26.6 percent of net sales, for the first quarter ended April 30, 2000. Operating costs and expenses for the prior year first quarter were $9.8 million, or 29.5 percent of net sales. Current year operating costs and expenses, as a percentage of net sales, are lower than previous levels due to higher shipment rates and greater efficiencies. SG&A expenses for the first quarter of fiscal year 2001 were $8.2 million, or 14.3 percent of net sales, compared to $5.6 million, or 17.1 percent of net sales for the prior year first quarter. The increase in expenditures was due primarily to the overall growth of our business, while the decrease in percentage of net sales reflects higher revenue contributions from newer products. R&D expenses as a percentage of net sales were relatively consistent at $7.0 million, or 12.3 percent of net sales, for the first three months of fiscal year 2001, compared to $4.1 million, or 12.5 percent of net sales, for the first three months of fiscal year 2000. We continue to invest heavily in areas deemed critical for developing and marketing new products, which are generally targeted at broadening our customer base, product lines and end- product applications. Interest and Other Income. Net interest and other income of $1.3 million was realized in the first quarter of fiscal year 2001. For the first quarter of fiscal year 2000, interest and other income was $254,000. Other income and expenses for the first quarter of fiscal year 2001 is primarily interest income, net of $4.1 million of interest expense associated with the outstanding subordinated debentures. For the prior year first quarter, interest and other income is primarily interest income. The significant increase in interest and other income is attributable to cash provided by the February 2000 issuance of convertible subordinated debentures. Provision for Taxes. Expense for income taxes was $5.2 million in the first quarter fiscal year 2001, compared to $2.3 million in the first quarter of fiscal year 2000. The effective tax rate for the first quarter of fiscal year 2001 was 30 percent and for the comparable quarter of fiscal year 2000 was 33 percent. The decline is due to increased sales through foreign-based subsidiaries that are in lower tax jurisdictions. Liquidity and Capital Resources On February 14, 2000, we completed a private offering of $400.0 million principal amount of convertible subordinated debentures that pay an interest rate of 4 1/2 percent and are convertible into our common stock at a conversion price of $84.46 per share. The notes are due in seven years. We intend to use the net proceeds of the offering for general corporate purposes, including working capital, expansion of sales, marketing and customer service capabilities, and product development. In addition, we may use a portion of the net proceeds to acquire or invest in complementary businesses, technologies, services or products. 10 On April 30, 2000, we had working capital of $457.6 million, compared with $96.7 million at January 30, 2000. The ratio of current assets to current liabilities at April 30, 2000 was 20.2 to 1, compared to 5.1 to 1 at January 30, 2000. The increase was primarily due to cash generated by the issuance of convertible subordinated debentures. Cash provided by operating activities was $10.4 million for the first quarter of fiscal year 2001, compared to $2.0 million for the first quarter of fiscal year 2000. Net income for the first three months of fiscal year 2001 was reduced by non-cash charges for depreciation and amortization of $1.2 million. Net operating cash flows were favorably impacted by net income of $12.1 million compared to $4.8 million in the prior year period. Net cash provided by operating activities for the first three months of fiscal year 2001 was positively impacted by an increase in accounts payable, accrued liabilities and income tax liability. These items were partially offset by increases in deferred income taxes, receivables, and inventories. Cash provided by operating activities for the first three months of fiscal year 2000 was favorably impacted by net income, non-cash charges for depreciation and amortization of $1.1 million and increases in income taxes payable. These items were partially offset by increases in receivables, inventories and other assets, and declines in accounts payable and accrued liabilities, and other liabilities. Investing activities used $210.0 million for the first quarter of fiscal year 2001 compared to $974,000 in the first quarter of fiscal year 2000. Investing activities for the first quarter of fiscal year 2001 consists of increases in temporary investments, purchases of long-term investments, and capital expenditures of $153.3 million, $55.2 million and $1.6 million, respectively. Cash used in investing activities for the comparable prior year period reflects primarily additions to property and equipment. Our financing activities provided $392.8 million during the first three months of fiscal year 2001 and used $5.7 million in the prior year first quarter. Financing activities for the first three months of fiscal year 2001 reflect the proceeds, net of related fees, from the issuance of $400.0 million of convertible subordinated debentures and cash provided by stock option exercises. Financing activities for the comparable prior period represent primarily cash from stock option exercises and cash used to repurchase our stock. The Company has a credit arrangement with a financial institution for borrowings up to $20.0 million at an interest rate of 30 day commercial paper plus 2.2 percent that is available through August 2000. The line of credit consists of two parts, the first facility is a $10.0 million line of credit for working capital needs and the second facility is a reducing revolver loan for equipment acquisitions. The available amount under the reducing revolver loan declines in equal increments over 84 months. As of April 30, 2000, the Company had approximately $7.8 million available under the reducing revolver portion. The arrangement is collateralized by the Company's domestic assets and provides for financial and non-financial covenants. Through its foreign subsidiary, the Company also maintains an overdraft credit line in the amount of 300,000 pounds sterling. As of April 30, 2000, the Company had no borrowings outstanding under these credit facilities. In order to develop, design and manufacture new products, we had to make significant expenditures during the past five years. These investments aimed at developing new products, including the hiring of many design and applications engineers and related purchase of equipment, will continue. We fully intend to continue to invest in those areas that have shown potential for viable and profitable market opportunities. Certain of these expenditures, particularly the addition of design engineers, do not generate significant payback in the short- term. We plan to finance these expenditures with cash generated by operations and cash on-hand. Purchases of new capital equipment were made primarily to expand manufacturing capacity and improve efficiency. Funding for these purchases was made from our operating cash flows and cash reserves. We have made significant investments in product and process technology. We believe that sales generating cash flows, together with the proceeds of the debt offering, cash reserves and existing credit facilities, are sufficient to fund operations and capital expenditures for the foreseeable future. Inflation 11 Inflationary factors have not had a significant effect on our performance over the past several years. A significant increase in inflation would affect our future performance. Recently Issued Accounting Standards In June 1998 and June 1999, the FASB issued SFAS No. 133, "Accounting for Derivative Investments and Hedging Activities," and SFAS No. 137, which delayed the effective date of SFAS No. 133. We will adopt the statement in February 2001 and do not expect the adoption of this statement to have a material impact on our financial position or results of operations. In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition." SAB No. 101 provides additional guidance on the recognition, presentation and disclosure of revenue in financial statements. The Company has reviewed this bulletin and believes that its current revenue recognition policy is consistent with the guidance of SAB No. 101. Year 2000 Compliance As of the date of this Form 10-Q, we have not experienced any significant disruptions or computer processing errors or failures related to any Year 2000 issues. A significant percentage of the software that runs most of the computers in the United States relies on two-digit date codes to perform a number of computation and decision making functions. Commencing on January 1, 2000 these computer programs had the potential to fail from an inability to interpret date codes properly, misreading ''00'' for the year 1900 instead of the year 2000. No adverse effects were encountered and no future expense is expected as a result of Year 2000. FORWARD LOOKING STATEMENTS In addition to historical information, this Form 10-Q contains statements relating to our future results. These statements include certain projections and business trends, which are ''forward-looking'' within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are made only as of the date of this Form 10-Q. We do not undertake to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise. Actual results may differ materially from projected results as a result of certain risks and uncertainties. These risks and uncertainties include, without limitation, those described under the "Risk Factors" section of the Company's annual report on Form 10-K for the year ended January 30, 2000, including those set forth below: . successful development and timing of new products; . ability to attract or retain specialized technical personnel; . cyclical nature of the semiconductor industry due to global and market conditions; . availability of manufacturing capacity; . fluctuation of quarterly operating results; . loss of a significant customer or customer order; . our ability to manage and integrate our expanding and more diverse operations; . our ability to integrate strategic acquisitions; 12 . our ability to compete against larger, more established entities; . fluctuations in manufacturing yields; . our ability to protect our intellectual property rights; . uncertainties of litigation; and . other risks and uncertainties. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS ----------------------------------------------------------- Foreign Currency Risk As a global enterprise, the Company faces exposure to adverse movements in foreign currency exchange rates. The Company's foreign currency exposures may change over time as the level of activity in foreign markets grows and could have a adverse impact upon the Company's financial results. Certain of the Company's assets, including certain bank accounts and accounts receivable, exist in nondollar-denominated currencies, which are sensitive to foreign currency exchange rate fluctuations. The nondollar- denominated currencies are principally German Deutschmarks, British Pounds Sterling and French Francs. Additionally, certain of the Company's current and long-term liabilities are denominated principally in British Pounds Sterling currencies, which are also sensitive to foreign currency exchange rate fluctuations. Because of the relatively small size of each individual currency exposure, the Company does not employ hedging techniques designed to mitigate foreign currency exposures. Likewise, the Company could experience unanticipated currency gains or losses. Interest Rate Risk The Company has a line of credit with a financial institution at an interest rate of 30-day commercial paper plus 2.2 percent. At any time, a sharp rise in interest rates could have a material adverse impact upon the Company's cost of working capital and interest expense. The Company does not currently hedge this potential interest rate exposure. As of April 30, 2000 the Company had $400.0 million in long-term debt outstanding at a fixed interest rate of 4 1/2 percent. 13 PART II - OTHER INFORMATION --------------------------- ITEM 1. LEGAL PROCEEDINGS ----------------- The Company has periodically become subject to legal proceedings in the ordinary course of our business. Other than the action detailed below, the Company is not currently involved in any proceedings, which are believed to have a material and adverse affect. On February 7, 2000, the Company was notified by the United States Environmental Protection Agency with respect to the Casmalia Disposal Site in Santa Barbara, California. The Company has been included in the Superfund program to clean up this disposal site for its involvement in utilizing this site for waste disposal. As of April 30, 2000, the Company has provided approximately $245 thousand for potential settlement under this program, however, the ultimate resolution and timing of the resolution is unknown at this time. The Company believes the amount provided is sufficient to cover any liability existing based on the currently available information. 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 Fiscal Year 2000 Annual Meeting of Shareholders of the Company was duly held on June 8, 2000. (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) Not applicable. (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 1 of Notes to Unaudited Consolidated Condensed Financial Statements. 27 -Financial Data Schedule, Article 5 (b) Reports on Form 8-K The Company filed a Report on Form 8-K on February 3, 2000 and February 15, 2000 relating to its private placement of $400.0 million of 4 1/2 percent Convertible Subordinated Notes due 2007. 14 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 15, 2000 /S/ John D. Poe -------------------------------- John D. Poe Chairman of the Board and Chief Executive Officer Date: June 15, 2000 /S/ David G. Franz, Jr. -------------------------------- David G. Franz, Jr. Vice President Finance, Chief Financial Officer, and Secretary 15 EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED APRIL 30, 2000, WHICH ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE FORM 10-Q FILING AND FORM 10-K FOR THE YEAR ENDED JANUARY 30, 2000. 1,000 3-MOS JAN-28-2000 JAN-31-2000 APR-30-2000 238,470 226,508 30,968 0 29,898 481,418 24,785 0 577,057 23,827 400,000 0 0 326 152,736 577,057 57,412 57,412 26,220 15,265 (1,329) 0 0 17,256 5,177 12,079 0 0 0 12,079 0.37 0.32
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