-----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, LGMLalql5EI89TGSeO4sezKxpTFsyuqfYrZpXdralstnO8tLX1FMAV4hi+FY5jw+ iyoLc+Ca6u15lQlVEGIsEQ== 0000898430-99-002541.txt : 19990617 0000898430-99-002541.hdr.sgml : 19990617 ACCESSION NUMBER: 0000898430-99-002541 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990502 FILED AS OF DATE: 19990616 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: SEC FILE NUMBER: 001-06395 FILM NUMBER: 99647506 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 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 May 2, 1999 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, $0.01 par value, outstanding at May 2, 1999: 15,047,147. - ---------- 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 May 2, 1999, 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 ------------------ May 2, May 3, 1999 1998 - ---------------------------------------------------------------------------------------- NET SALES $33,044 $29,534 Cost of Sales 16,445 15,060 ------- ------- Gross Profit 16,599 14,474 ------- ------- Operating costs and expenses: Selling, general and administrative 5,642 4,633 Product development and engineering 4,117 2,945 Acquisition costs - 255 ------- ------- Total operating costs and expenses 9,759 7,833 ------- ------- Operating Income 6,840 6,641 Interest and other income, net 254 171 ------- ------- Income before taxes 7,094 6,812 Provision for taxes 2,341 2,275 ------- ------- NET INCOME $ 4,753 $ 4,537 ======= ======= Earnings per share: Net income per share - Basic $ 0.32 $ 0.31 Diluted $ 0.29 $ 0.29 Weighted average number of shares - Basic 15,029 14,446 Diluted 16,551 15,744
3 SEMTECH CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands, except share data)
May 2, January 31, 1999 1999 (Unaudited) - --------------------------------------------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $36,276 $41,035 Temporary investments 1,393 1,648 Receivables, less allowances 17,837 15,414 Income taxes refundable - 258 Inventories 18,874 16,803 Other current assets 1,772 1,275 Deferred income taxes 2,155 2,139 ------- ------- Total current assets 78,307 78,572 ------- ------- Property, plant and equipment, net 13,571 13,417 Other assets 89 89 Deferred income taxes 441 478 ------- ------- TOTAL ASSETS $92,408 $92,556 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 6,267 $ 5,296 Accrued liabilities 3,590 5,102 Income taxes payable 1,344 - Other current liabilities 1,986 2,330 ------- ------- Total current liabilities 13,187 12,728 ------- ------- Other long-term liabilities 61 57 ------- ------- Commitments and contingencies Shareholders' equity: Common stock, $0.01 par value, 40,000,000 authorized Issued and outstanding 150 152 Additional paid-in capital 30,954 30,461 Retained earnings 52,563 49,411 Treasury shares, at cost (4,184) - Accumulated other comprehensive income (323) (253) ------- ------- Total shareholders' equity 79,160 79,771 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $92,408 $92,556 ======= =======
4 SEMTECH CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited)
For the Three Months Ended ----------------------------------------------- May 2, May 3, 1999 1998 ---------------------- ---------------------- Cash flows from operating activities - Net income $ 4,753 $ 4,537 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,075 878 Deferred income taxes 21 3 Changes in assets and liabilities: Receivables (2,423) (1,143) Income taxes refundable 258 - Inventories (2,071) (1,610) Other assets (497) (379) Accounts payable and accrued liabilities (541) (201) Income taxes payable 1,799 2,138 Other current liabilities (344) (208) ------- ------- Net cash provided by operating activities 2,030 4,015 ------- ------- Cash flows from investing activities - Temporary cash investments 255 - Additions to property, plant and equipment (1,229) (1,008) ------- ------- Net cash used by investing activities (974) (1,008) ------- ------- Cash flows from financing activities - Exercise of stock options 855 650 Stock repurchase (6,642) - Other long-term liabilities 4 4 Other 38 573 ------- ------- Net cash provided (used) by financing activities (5,745) 1,227 ------- ------- Effect of exchange rate changes on cash (70) 74 Net increase (decrease) in cash and cash equivalents (4,759) 4,308 Cash and cash equivalents at beginning of period 41,035 18,808 ------- ------- Cash and cash equivalents at end of period $36,276 $23,116 ======= =======
5 SEMTECH CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 1. Earnings Per Share - --------------------- Earnings per share are presented in accordance with Statement of Financial Accounting Standard (SFAS) No. 128, "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.
Three Months Ended --------------------------------- May 2, May 3, 1999 1998 ---------- ---------- Basic 15,029,000 14,446,000 ========== ========== Diluted 16,551,000 15,744,000 ========== ==========
Options to purchase 31,000 and 53,500 shares were not included in the computation of first quarter diluted net income per share for fiscal 2000 and fiscal 1999, respectively, because such options were considered anti-dilutive. 2. Segment Reporting - -------------------- 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, automated test equipment (ATE), transient voltage suppressors (TVS) and advanced communication IC 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 the Company's accounting policies for financial reporting purposes. 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 ----------------------------- Net Sales (in thousands) May 2, May 3, 1999 1998 - ------------------------------------------------------------------------------------ Standard Semiconductor Products $27,630 $22,818 Rectifier and Assembly Products 3,266 3,658 Other Products 2,148 3,058 ------- ------- Total Net Sales $33,044 $29,534 ======= =======
6
Three Months Ended --------------------------- Operating Income (in thousands) May 2, May 3, 1999 1998 - ---------------------------------------------------------------------------------------- Standard Semiconductor Products $6,386 $5,128 Rectifier and Assembly Products 144 526 Other Products 310 987 ------ ------ Total Net Sales $6,840 $6,641 ====== ======
For the three months ended May 2, 1999 and May 3, 1998, no one customer accounted for 10% or more of the Company's net sales. 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 -------------------------------- Net Sales (in thousands) May 2, May 3, 1999 1998 - ------------------------------------------------------------------------------------- Domestic $12,722 $16,243 Asia-Pacific 16,125 9,156 European 4,197 4,135 ------- ------- Total Net Sales $33,044 $29,534 ======= =======
Long lived assets located outside the United States at May 2, 1999 amount to $3,473,575. 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 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 Work in Finished Total (thousands) Materials Process Goods - ---------------------------------------------------------------------------------------------------------- May 2, 1999 Gross inventories $1,897 $11,347 $ 9,698 $22,942 Total reserves (426) (1,329) (2,313) (4,068) ------ ------- ------- ------- Net inventories $1,471 $10,018 $ 7,385 $18,874 ====== ======= ======= ======= January 31, 1999 Gross inventories $1,879 $ 9,906 $ 9,016 $20,801 Total reserves (426) (1,329) (2,243) (3,998) ------ ------- ------- ------- Net inventories $1,453 $ 8,577 $ 6,773 $16,803 ====== ======= ======= =======
7 5. Comprehensive Income - ----------------------- On February 2, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income". For year-end financial statements, SFAS No. 130 requires that net income and all other non-owner changes in equity be displayed in a financial statement with the same prominence as other consolidated financial statements. In addition, the standard encourages companies to display the components of other comprehensive income below the total for net income.
Three Months Ended ----------------------------------- May 2, May 3, 1999 1998 -------------------------------------------------------------------------- Net Income $4,753 $4,537 Change in foreign currency translation (70) 74 ------- ------- Comprehensive Income $4,683 $4,611 ====== ======
6. Stock Repurchase - ------------------- On February 2, 1999, the Company announced that its Board of Directors had approved the repurchase of up to $10 million of its common stock. During the three months ended May 2, 1999, the Company repurchased 227,500 shares at a cost of $6.6 million. Of the shares repurchased, 80,667 have been reissued to cover the exercise of employee stock options. The difference between the cost of the treasury shares and the re-issuance under the stock option plan was charged against retained earnings. 7. Lines of Credit - ------------------ In August of 1998, the Company agreed to a new credit arrangement with a financial institution for borrowings up to $20,000,000 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 $10,000,000 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 May 2, 1999, the Company had $9,285,713 available under the reducing revolver portion. The arrangement is collateralized by the Company's domestic assets and provides for financial and non-financial covenants. As of May 2, 1999, the Company had no borrowings outstanding under this credit facility. Through its foreign subsidiary, the Company also maintains an overdraft credit line in the amount of 300,000 pounds sterling. Item 2. Management's Discussion and Analysis of Financial Conditions and ---------------------------------------------------------------- Results of Operations --------------------- (l) Material Changes in Financial Condition --------------------------------------- On May 2, 1999, Semtech Corporation (the Company) had working capital of $65,120,000, compared with $65,844,000 at January 31, 1999. The ratio of current assets to current liabilities at May 2, 1999, was 5.9 to 1, compared 8 to 6.2 to 1 at January 31, 1999. The decline was primarily due to the Company's use of cash to repurchase stock. In the first three months of fiscal year 2000, the Company used $4,759,000 of cash and cash equivalents. The decline in cash and cash equivalents was due to cash outlays for inventory, capital equipment, increased accounts receivable, year-end supplemental compensation relating to the prior fiscal year and the repurchase of 227,500 shares of the Company's common stock. Operating cash flow for the first three months of the year was a positive $2,030,000. During the first three months of fiscal 2000, the Company used cash of $1,229,000 to pay for capital equipment purchases. Efforts by the Company over the past several years to increase Standard Semiconductor Product segment sales have been effective. New products have been introduced for use in a wide variety of computer, test and communications systems. In order to develop, design and manufacture new products, the Company had to make significant expenditures during the past four years. Such investments aimed at developing new products, including the hiring of many design and applications engineers and related equipment, will continue. Semtech fully intends 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. The Company plans to finance these expenditures with cash generated by operations and cash on-hand. (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 Income for the three month periods ended May 2, 1999 and May 3, 1998. THREE MONTH PERIOD ENDED MAY 2, 1999 COMPARED WITH THE THREE MONTH PERIOD ENDED - ------------------------------------------------------------------------------- MAY 3, 1998: - ------------ INDUSTRY TRENDS AND OUTLOOK As a result of industry-wide trends to lower operating voltages, sub-micron IC process technology and higher bandwidths, there has been growth in the need for complex power management, protection, interface and communication solutions. The Company has been successful in meeting the needs of customers requiring high-performance analog and mixed-signal solutions. However, with the increased demand for these solutions has come added competition. The Company has grown significantly over the past five years due to new product developments, good relationships with strategic customers, focus on fast growing market segments and overall favorable industry conditions. Future growth by the Company will remain dependent on market conditions, economic factors, the ability to introduce new products and increase operating efficiencies. The overall health of the electronic components industry and the end-markets for electronic systems have a large influence on the Company's success. Significant weakness in the industry, end-markets or economic conditions will adversely affect the Company's financial performance. Increased competition and a continued move to short lead times within the components industry will continue to affect the Company's performance on a quarterly basis. The Company has experienced declines in customer lead times as manufacturers move to "just-in-time" inventory systems. Likewise, Semtech generally has only 60-90 days visibility of future period shipments. With the increased success and growth in demand for analog and mixed-signal semiconductors, the Company has seen new competitors enter the market. 9 In addition, existing competitors have become more aggressive in protecting market share and customer relationships. Typical of the semiconductor industry, the Company has experienced declines in average selling prices over the life of its product lines. 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 offset the impact of declines in average selling prices, however, there is no assurance that these efforts will be successful. RESULT OF OPERATIONS Net Sales Net sales for the first quarter ended May 2, 1999 were $33,044,000 compared to $29,534,000 in the first quarter ended May 3, 1998, an increase of 12%. The increase in revenues for the first quarter compared to the prior year period was due to continued improvement in the Company's ability to market and produce its products used in targeted end-market applications. End-market applications for the Company's products sold during the first quarter of fiscal 2000 are estimated to be 40% computer, 28% communications, 23% industrial (which includes ATE), 6% military/aerospace and 3% foundry sales. For the prior year's first quarter, end-market applications were estimated to be 42% computer, 15% communications, 26% industrial, 11% military/aerospace and 6% foundry. The Company expects to derive more net sales from the communications market as specific product development and marketing efforts are made in this market. Geographically, sales for the first three months of fiscal 2000 were approximately 38% domestic, 49% to Asian and 13% to European customers. For the first three months of last fiscal year, domestic sales were 55% of net sales, Asia was 31% and Europe was 14%. The increase in sales to Asia reflects the increased use of foreign-based subsidiaries and subcontractors by original equipment manufacturers (OEMs) for assembling their finished products. Due to this trend, the Company estimates that two-thirds of all shipments made into Asia are eventually exported out of the region in finished products. New orders New orders received during the first quarter of fiscal year 2000 were more than net shipments, resulting in a book-to-bill ratio of greater than 1 to 1. The book-to-bill ratio for the comparable three month period last year also exceeded 1 to 1. New orders received in the first quarter of this year reflected the general conditions of the major end-markets and the major manufacturers supplying these markets. Demand for the Company's Standard Semiconductor Product segment represented a majority of the new order activity during the quarter. Orders from ATE customers and the communications market showed the strongest relative strength within the first quarter of fiscal year 2000. For the first quarter of last fiscal year, ATE orders were the strongest relative end-market application for new orders. While order rates are subject to seasonal factors, overall industry trends have a more profound effect on orders for each respective quarter. Due to the significance of computer and computer peripheral markets to the Company, order rates have been stronger during the third and fourth quarters of the past three fiscal years. While certain industry trends can potentially outweigh seasonal factors, order rates are subject to fluctuations. 10 COSTS AND EXPENSES Cost of Sales Gross profit margin as a percentage of net sales was 50% in the first quarter of fiscal 2000, compared to 49% in the same period last year. The improvement in gross margin is attributed to increased operating efficiencies associated with higher shipment levels, higher revenue contribution from products introduced in the last year, and a favorable shift in product mix towards higher margin product lines. The product lines included in the Standard Semiconductor Product segment sell at higher gross margins than the overall corporate average. Future trends that will effect the Company's gross margin include price changes over the life of the products, higher gross margins expected from new products and improved production efficiencies as a result of increased utilization. The Company has focused its efforts on increasing the number of new products introduced, particularly those which are proprietary or limited source in nature. The Company expects that prices for existing products will continue to decrease over their respective life cycles. The Company does believe it can further improve its consolidated gross margin to above 50% of net sales over the next twelve months. Such an expansion in gross margin assumes continued revenue growth, increased contribution from new products and additional manufacturing efficiencies. Operating Expenses Operating costs and expenses were at 30% of net sales in the first quarter of fiscal 2000, which was higher than the 27% in the first quarter of fiscal 1999. Included in the operating expenses for the first quarter ended May 3, 1998, are one-time costs of $255,000 associated with the acquisition of Acapella Limited. Operating expenses for the first three months of fiscal year 2000 where higher than the comparable prior period due to increased spending in the areas of research and development, strategic marketing, and to a lesser degree in general and administrative functions. The Company continues to invest heavily in areas deemed critical for developing and marketing new products. The Company anticipates that spending on research and development will continue to increase over time. Interest and Other Income Interest and other income of $254,000 was realized in the quarter ended May 2, 1999, compared to interest and other income of $171,000 in the prior year's first quarter. Other income and expenses for both periods is primarily interest income. Provision for Taxes THE EFFECTIVE TAX RATE FOR THE FIRST QUARTERS OF FISCAL YEARS 2000 AND 1999 REMAINED CONSTANT AT 33%. Inflation Inflationary factors have not had a significant effect on the company's performance over the past three fiscal years. A significant increase in inflation would affect the company's future performance. Recently Issued Accounting Standards In 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 is effective in fiscal year 2001 and 11 management does not expect adoption of this standard to have a material impact on the Company's financial reporting or results of operations. YEAR 2000 COMPLIANCE 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 may fail from an inability to interpret date codes properly, misreading "00" for the year 1900 instead of the year 2000. Semtech is in the final stages of a comprehensive program to identify, evaluate and address issues associated with the ability of its information technology and non-information technology systems to properly recognize the Year 2000 in order to avoid interruption of the operation of these systems and a material adverse effect on Semtech's operations as a result of the century change. Each of the information technology software programs that the Company currently uses has either been certified by its respective vendor as Year 2000 compliant or will be replaced with software that is so certified prior to December 1999. Semtech's computer system interfaces with the computers and technology of different companies, including those of foreign companies. The Company considers the Year 2000 readiness of its foreign customers and vendors of particular importance given the general concern that the computer systems abroad may not be as prepared as those in domestic operations to handle the century change. As part of its Year 2000 compliance program, Semtech has contacted its significant vendors and customers to ascertain whether the systems used by such third parties are Year 2000 compliant. The Company plans to have all Year 2000 compliance initial testing and any necessary conversions completed by December 1999. Semtech estimates the costs to reprogram, replace and test its information and non-information technology systems for Year 2000 compliance will be between $100,000 and $150,000 over the life of the project. However, such expenditures could increase materially following testing of non-information technology systems and the evaluation of the Year 2000 compliance status of integral third party vendors and customers. Costs incurred in connection with Year 2000 compliance efforts will be expensed as incurred. Semtech currently anticipates that its information technology and non- information technology systems will be Year 2000 compliant by December 1999, though no assurances can be given that compliance testing will not detect unanticipated problems. The Company has evaluated the Year 2000 compliance status of its top 25 third party suppliers. Based on these evaluations, the Company can only approximate the likelihood of third party system failures. A system failure by any of Semtech's significant customers or vendors could have a material adverse effect on the Company's operations. The Company believes that the most likely worst case scenario resulting from the century change could be the inability to produce and ship products at current rates for an indeterminable period of time, which could have a material adverse effect on the results of operations and liquidity. Semtech is developing contingency plans to handle a Year 2000 system failure of its information and non-information technology systems and to handle any necessary interactions with the computers and technology of any integral non- complying third party. FORWARD LOOKING STATEMENTS 12 Some statements included in this filing which are not historical in nature are forward-looking statements within the meaning of the Private Securities Legislation Act of 1995. Forward looking statements regarding the Company's future performance and financial results are subject to certain risks and uncertainties. The Company cautions investors that there can be no assurance that actual results or business conditions will not differ materially from those suggested in such forward-looking statements as a result of various factors, including, but not limited to, the Company's ability to introduce new products, support existing and new customers, achieve manufacturing efficiencies, penetrate new markets and additional end-product applications, and the ability to use equity incentives to recruit and retain technical talent. In addition, external factors of risk include the overall health of the electronics industry, certain end-market applications (including personal computers and test systems), exposure to regional economic and political conditions and exposure to overall global economic conditions. As a result of these factors and other items of risk outlined in this Form 10-Q, the Company's future development efforts involve a high degree of uncertainty. GIVEN THESE UNCERTAINTIES, THE SHAREHOLDERS OF THE COMPANY ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON SUCH FORWARD-LOOKING STATEMENTS. 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 an 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 the interest expense. The Company does not currently hedge this potential interest rate exposure. As of May 2, 1999 the Company had no long-term debt outstanding. 13 PART II - OTHER INFORMATION --------------------------- Item 1. Legal Proceedings ----------------- The Company is involved in certain legal matters, which are routine to the nature of its business. Management is of the opinion that the ultimate resolution of these matters will not have a material adverse effect on its financial position or results of operations. 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 1999 Annual Meeting of Shareholders of the Company was duly held on June 10, 1999. (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 There were no reports on Form 8-K filed during the three months ended May 2, 1999. 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, 1999 /S/ John D. Poe -------------------------------- John D. Poe Chairman of the Board and Chief Executive Officer Date: June 15, 1999 /S/ David G. Franz, Jr. -------------------------------- David G. Franz, Jr. Vice President Finance, Chief Financial Officer, and Secretary 15 EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains results of operations for the three months ended May 2, 1999, which are qualified in their entirety by reference to the Form 10-Q filing and Form 10-K for the year ended January 31, 1999. 1,000 3-MOS JAN-30-2000 FEB-01-1999 MAY-02-1999 36276 1393 17837 0 18874 78307 13571 0 92408 13187 0 0 0 150 79010 92408 33044 33044 16445 9759 (254) 0 0 7094 2341 4753 0 0 0 4753 0.32 0.29
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