-----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, Vrj/hPtOI5Wl6wV5XS+NjMvPIdiljXryc3UZAZeEtphiCKu+y5OpkWDVMp0JHBWG 2yZ3COBn6rYgC/GAKvW/dg== 0000929624-96-000263.txt : 19961115 0000929624-96-000263.hdr.sgml : 19961115 ACCESSION NUMBER: 0000929624-96-000263 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960929 FILED AS OF DATE: 19961113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEVEL ONE COMMUNICATIONS INC /CA/ CENTRAL INDEX KEY: 0000908985 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 330128224 STATE OF INCORPORATION: CA FISCAL YEAR END: 0101 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-22068 FILM NUMBER: 96661092 BUSINESS ADDRESS: STREET 1: 9750 GOETHE RD CITY: SACRAMENTO STATE: CA ZIP: 95627 BUSINESS PHONE: 9168555000 10-Q 1 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark one) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: September 29, 1996 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 0-22068 LEVEL ONE COMMUNICATIONS, INCORPORATED State: California I.R.S. Employer ID No.: 33-0128224 Address: 9750 Goethe Road, Sacramento, CA 95827 Telephone: (916) 855-5000 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 periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ --- The number of Common Shares of the registrant outstanding on September 29, 1996, was 12,983,554. INDEX
PAGE ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of September 29, 1996, and December 30, 1995............................................ 3 Consolidated Statements of Operations for the Three and Nine Months Ended September 29, 1996, and September 30, 1995. 4 Consolidated Statements of Cash Flows for the Nine Months Ended September 29, 1996, and September 30, 1995............. 5 Notes to Financial Statements.................................. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.......................................... 8 PART II. OTHER INFORMATION Item 1. Litigation....................................................... 14 Item 4. Submission of Matters to a Vote of Shareholders.................. 14 Item 6. Exhibits and Reports on Form 8-K................................. 14 Signatures....................................................... S-1
2 LEVEL ONE COMMUNICATIONS, INCORPORATED CONSOLIDATED BALANCE SHEETS (in thousands)
September 29, 1996 December 30, 1995 ------------------ ----------------- (unaudited) ASSETS Current Assets: Cash and cash equivalents $13,747 $ 21,628 Short-term investments 16,208 8,223 Accounts receivable, net 17,004 15,390 Inventories 12,189 15,772 Deferred income tax benefit 2,504 4,289 Prepaid expenses 2,719 2,905 -------- -------- Total current assets 64,371 68,207 Property and equipment, net 19,920 20,438 Long-term investments 10,339 4,695 Related party note receivable 2,825 1,225 Other assets 11,829 6,236 -------- -------- Total assets $109,284 $100,801 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current portion of capital lease obligations $ 1,218 $ 1,059 Accounts payable 6,488 9,541 Accrued payroll costs 2,253 1,762 Income taxes payable 319 - Deferred revenue - 133 Other accrued liabilities 3,821 4,878 -------- -------- Total current liabilities 14,099 17,373 Capital lease obligations, less current portion 3,402 3,814 Deferred lease expense 622 649 -------- -------- Total liabilities 18,123 21,836 -------- -------- Shareholders' equity: Common Stock 79,640 77,839 Retained earnings 11,521 1,126 -------- -------- Total shareholders' equity 91,161 78,965 -------- -------- Total liabilities and shareholders' equity $109,284 $100,801 ======== ========
The accompanying notes are an integral part of these statements. 3 LEVEL ONE COMMUNICATIONS, INCORPORATED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (Unaudited)
Three Months Ended Nine Months Ended ------------------------------ ------------------------------ Sept. 29, 1996 Sept. 30, 1995 Sept. 29, 1996 Sept. 30, 1995 -------------- -------------- -------------- -------------- Revenues $27,363 $21,680 $82,384 $51,503 Cost of sales 11,756 9,459 34,865 21,942 ------- ------- ------- ------- Gross margin 15,607 12,221 47,519 29,561 Research & development 5,249 4,604 16,663 11,491 Sales & marketing 4,219 3,146 12,209 7,885 General & administrative 1,595 1,403 5,126 3,823 ------- ------- ------- ------- Total operating expenses 11,063 9,153 33,998 23,199 ------- ------- ------- ------- Operating income 4,544 3,068 13,521 6,362 Other income, net 1,084 511 1,825 1,580 ------- ------- ------- ------- Income before provision for income taxes 5,628 3,579 15,346 7,942 One time charge for SFT Acquisition - - - 750 Provision for income taxes 1,857 1,086 5,065 1,944 ------- ------- ------- ------- Net income $ 3,771 $ 2,493 $10,281 $ 5,248 ======= ======= ======= ======= Net income per share (Note 2) $ 0.27 $ 0.18 $ 0.75 $ 0.39 ======= ======= ======= ======= Weighted average common shares and equivalents 13,803 13,632 13,723 13,425 ======= ======= ======= =======
The accompanying notes are an integral part of these statements. 4 LEVEL ONE COMMUNICATIONS, INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited)
Nine Months Ended ------------------------------ Sept. 29, 1996 Sept. 30, 1995 -------------- -------------- Cash flows from operating activities: Net income $10,281 $ 5,248 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 4,805 4,140 Purchased Research & Development expenses - 750 (Increase) decrease in acocunts receivable (1,614) (7,025) (Increase) decrease in inventories 3,583 (1,330) (Increase) decrease in prepaid expenses 186 (2,173) Increase (decrease) in accounts payable and accrued liabilities (3,299) 9,024 Increase (decrease) in deferred liabilities 1,652 (36) Increase (decrease) in deferred lease expense (280) 14 ------- -------- Total adjustments 5,033 3,364 ------- -------- Net cash provided by operating activities 15,314 8,612 ------- -------- Cash flows from investing activities: Purchase of short-term investments (7,985) 20,519 Purchase of long-term investments (5,644) 200 Capital expenditures (4,288) (12,820) Payments for related party notes receivable (1,600) - Payments for other assets (5,593) (3,133) ------- -------- Net cash used in investing activities (25,110) 4,766 Cash flows from financing activities: Principal payments under capital lease obligations - (220) Proceeds from issuance of stock, net of repurchases and costs of issuance 1,915 356 ------- -------- Net cash provided by financing activities 1,915 136 ------- -------- Net increase (decrease) in cash and cash equivalents (7,881) 13,514 Cash and cash equivalents, beginning of period 21,628 9,260 ------- -------- Cash and cash equivalents, end of period $13,747 $ 22,774 ======= ======== Supplementary disclosure of cash and noncash transactions Cash payments for: Interest $ 300 $ 65 ======= ======== Income taxes $ 2,103 $ 739 ======= ========
The accompanying notes are an integral part of these statements. 5 LEVEL ONE COMMUNICATIONS, INCORPORATED ___________ NOTES TO FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 29, 1996, are not necessarily indicative of the results that may be expected for the year ending December 29, 1996. The information reported in this Form 10-Q should be read in conjunction with the financial statements and footnotes contained in the Company's Form 10-K filed with the Securities and Exchange Commission for the year ended December 30, 1995, and subsequent filings with the Securities and Exchange Commission. NOTE 2 - NET INCOME PER SHARE Net income per share is computed using the weighted average number of shares of common stock outstanding, and the dilutive common equivalent shares outstanding from stock options and warrants (using the treasury stock method). 6 LEVEL ONE COMMUNICATIONS, INCORPORATED __________ NOTE 3 - INVENTORIES Inventories, stated at the lower of cost (first in, first out) or market, consist of:
(in thousands) September 29, 1996 December 30, 1995 ------------------ ----------------- Raw materials $ 18 $ 26 Work-in-process 10,544 14,281 Finished goods 1,627 1,465 -------- -------- $ 12,189 $ 15,772 ======== ========
NOTE 4 - PROPERTY AND EQUIPMENT Property and equipment, net is comprised of the following:
(in thousands) September 29, 1996 December 30, 1995 ------------------ ----------------- Machinery & equipment $ 22,556 $ 22,557 Furniture & fixtures 12,533 8,244 -------- -------- $ 35,089 $ 30,801 Accumulated depreciation (15,168) (10,363) -------- -------- $ 19,920 $ 20,438 ======== ========
7 LEVEL ONE COMMUNICATIONS, INCORPORATED _____ ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following information should be read in conjunction with the unaudited interim financial statements and the notes thereto included in Item 1 of this Quarterly Report on Form 10-Q, the Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the Company's Form 10-K filed with the Securities and Exchange Commission on March 29, 1996, and subsequent filings with the Securities and Exchange Commission. This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results could differ materially from those projected in the forward-looking statements as a result of the factors set forth in "Factors that May Affect Future Results" and elsewhere in this Report. REVENUES Revenues increased 26.2% to $27.4 million in the third quarter of 1996 compared to revenues of $21.7 million for the same quarter of 1995. For the first nine months of 1996, revenues increased 60.0% to $82.4 million from $51.5 million for the same period of 1995. Networking product revenues were $12.9 million and $10.6 million for the third quarter of 1996 and 1995, respectively, an increase of 21.7%. Transmission product revenues were $14.5 million and $11.1 million, respectively, for the third quarter of 1996 and 1995, an increase of 30.6%. For the first nine months of 1996, networking product revenues were $37.1 million and transmission product revenues were $45.3 million, an increase of 60.0% and 59.9%, respectively, over the first nine months of 1995. The increases during the third quarter and first nine months of 1996 reflect the substantial unit sales growth due to the continued market acceptance of the Company's products in both the networking and transmission markets, and the broadening of the Company's customer base. International sales were $9.7 million or 35.4% and $6.8 million or 31% of sales, respectively, for the third quarter of 1996 and 1995. For the first nine months of 1996 and 1995, international sales were $31.0 million or 37.6% and $16.1 million or 31% of sales, respectively. The increase in international sales in the third quarter and first nine months of 1996 over the same periods of 1995 is attributable to the Company's increased international marketing efforts, which included the addition of sales and application engineering personnel. All sales are denominated in U.S. dollars, thereby eliminating the impact of foreign currency exchange rate fluctuations on revenues. The Company's profit margin on international sales is not materially different from that realized on its sales in the United States. 8 GROSS MARGIN The Company's cost of sales includes the cost of wafer fabrication, packaging and assembly performed by third party vendors, and costs associated with the procurement, scheduling, product engineering, testing and quality assurance functions performed by the Company. Gross margin as a percentage of revenues in the third quarter of 1996 was 57.0% versus 56.4% in the third quarter of 1995. During any period, the Company's gross margin is affected by several factors, including the mix of products, test equipment utilization, foundry and assembly manufacturing yields, selling prices, and the cost benefits achieved through die size and other cost reductions. The Company conducts ongoing product enhancement and cost reduction programs. RESEARCH AND DEVELOPMENT Research and development expenses were $5.2 million or 19.2% of revenues in the third quarter of 1996 versus $4.6 million, or 21.2% of revenues in the second quarter of 1995. For the first nine months of 1996, research and development expenses were $16.7 million or 20.2% of revenues versus $11.5 million, or 22.3% of revenues in the same period of 1995. The research and development expense increase in absolute dollars on a year-to-year basis is due primarily to additions to the Company's design engineering staff and related new product design expenses. The markets for the Company's products are characterized by continuing technological change, evolving industry standards, and frequent new product introductions. The Company believes that the continued introduction of new products is essential to its success and is committed to continued investment in new product research and development. The Company anticipates increased investment in research and development in absolute dollars in future years, although research and development costs as a percentage of revenues may decline over time. SALES AND MARKETING Sales and marketing expenses were $4.2 million or 15.4% of revenues in the third quarter of 1996 versus $3.1 million or 14.5% of revenues in the third quarter of 1995. For the first nine months of 1996, sales and marketing expenses were $12.2 million or 14.9% of revenues compared to $7.9 million or 15.3% of revenues in the first nine months of 1995. The increased expenditures are primarily attributable to the continued expansion of the Company's international sales efforts, sales commissions associated with increased revenues, and the expansion of the Company's sales and marketing staffs. The Company anticipates that sales and marketing expenses will continue to increase as revenues grow and as a result of the expansion of sales and support offices worldwide. GENERAL AND ADMINISTRATIVE In the third quarter of 1996, general and administrative expenses were $1.6 million or 5.8% of revenues versus $1.4 million or 6.5% of revenues in the same period of 1995. For the first nine months general and administrative expenses were $5.1 million or 6.2% of revenues in 1996 versus $3.8 million or 7.4% of revenues in 1995. The increased expenses are primarily attributable to additional headcount associated with the Company's growth. 9 LIQUIDITY AND CAPITAL RESOURCES The Company's principal sources of liquidity as of September 29, 1996, consisted of $30.0 million of cash, cash equivalents and short-term investments, and $10 million available under the Company's revolving line of credit. At September 29, 1996, the Company had no outstanding balance under this line of credit. Working capital as of September 29, 1996, was $50.3 million. During the first nine months of 1996, the Company generated $15.3 million of cash from operating activities, as compared to $13.5 million in the same period in 1995. In both years, net cash generated from operations in the third quarter was primarily due to net income before depreciation and amortization expense. During the first nine months of 1996, financing activities provided net cash of $1.9 million versus net cash used of $136,000 for the same period a year ago. The primary source of cash in both periods was the issuance of common stock upon exercise of employee stock options. During the first nine months of 1996, the Company used net cash of $25.1 million for investing activities. The Company used $9.9 million for the purchase of capital equipment and other assets, including a deposit with a third party semiconductor foundry. During the first nine months of 1995, the Company used net cash of $13.6 million for investing activities, primarily for the purchase of short-term investments of $8.0 million and the purchase of long-term investments of $5.6 million. During 1995, the Company entered into five-year arrangements with three of its suppliers for committed foundry capacity in consideration for equipment financing or a cash deposit. Under one of these agreements, the Company is subject to a penalty if it fails to purchase specified minimum quantities of wafers. Through 1998, these arrangements provide for additional expenditures aggregating $18 million, which the Company expects to fund using cash generated from operations. The Company expects to fund its remaining 1996 capital equipment requirements using a combination of cash and equipment leasing. The Company believes that its existing cash resources combined with cash generated from operations, equipment lease arrangements and its line of credit will be sufficient to meet the Company's cash requirements through the end of 1997. However, the Company may from time to time seek additional equity or debt financing as a result of the capital intensive nature of the semiconductor industry. ONE-TIME GAIN FROM SALE OF PORTION OF MINORITY INTEREST During the third quarter of 1996, in connection with a financing for Maker Communications, Inc. ("Maker"), the Company sold a portion of its minority interest in Maker for an aggregate of approximately $675,000. This sale was accounted as a one-time gain in the third quarter. The Company continues to hold a minority interest in Maker and to license certain Maker technology. Other contractual rights and obligations, including the obligation to lend Maker up to $3,000,000, were terminated in the transaction. After the end of the third quarter, Maker repaid the Company approximately $2,875,000, the total balance under an outstanding note. 10 FACTORS THAT MAY AFFECT FUTURE RESULTS The following risk factors may be associated with the outlook for the Company's business: DEPENDENCE UPON INDEPENDENT MANUFACTURERS The Company does not manufacture the wafers used for its products. To date, the Company's wafers have been manufactured by foundries located in the United States, Europe, and the Far East. The Company depends upon these suppliers to produce wafers at acceptable yields and to deliver them to the Company in a timely manner at competitive prices. The Company may sustain an adverse impact on operating results from problems with the cost, timeliness, yield and quality of wafer deliveries from suppliers. From time to time, the available industry- wide foundry capacity fluctuates significantly. During periods of constrained supply, the Company may experience difficulty in securing an adequate supply of wafers, and/or its suppliers may increase wafer prices which must be paid by the Company. When foundry and assembly lead times are short, the Company may experience less predictability in customer ordering patterns, as the shorter lead times cause customers to place orders nearer to their planned delivery dates. The Company's operating results depend in substantial part on its ability to maintain or increase the capacity available to it from its existing or new foundries. The Company is also dependent upon third-party assembly companies that package the semiconductor die. The Company depends upon these suppliers to produce products in a timely manner and at competitive prices. The Company has in the past and may in the future sustain a negative financial impact due to problems with the cost, timeliness, yield and quality of product deliveries from these suppliers. FACTORS AFFECTING QUARTERLY OPERATING RESULTS The semiconductor industry is characterized by rapid technological change, intense competitive pressure and cyclical market patterns. The Company's results of operations are affected by a wide variety of factors, including general economic conditions, conditions specific to the semiconductor industry, decreases in average selling price, the timing of new product introductions (both by the Company and its competitors), use of new manufacturing technologies, the ability to safeguard patents and intellectual property, and rapid escalation or decline of demand for its products. The level of revenues in any specific quarter can also be affected by the level of orders placed during that quarter. The Company attempts to respond to changes in market conditions as soon as possible; however, the suddenness of their onset may make the prediction of and reaction to such events difficult. Due to the foregoing and other factors, past results, such as those described in this report, may not be predictive of future performance. DEPENDENCE ON NEW PRODUCTS The Company's future success depends on its ability to develop and introduce new products on a timely basis. These new products need to compete effectively on the basis of price, performance and features. During the third quarter of 1996, the Company introduced four new products. Because of the complexity of its products, the Company may experience delays from time to time in completing development and introduction of new products, and, as a result, may not achieve the market share anticipated for such products. The Company conducts its own analysis 11 of market trends and uses forecasts and information provided by industry analysts. Market conditions may change rapidly as technology, economic, or user- preference conditions cause different communications technologies to experience different growth cycles from those forecast by the Company or others. There can be no assurance that the Company will successfully identify new product opportunities and bring new products to market in a timely manner, that products or technologies developed by others will not render the Company's products or technologies obsolete or noncompetitive, or that the Company's products will be selected for design into the products of its targeted customers. In addition, the average selling price for any particular product may decrease rapidly over the product's life. To offset such decreases, the Company relies primarily on obtaining yield improvements and cost reductions for existing products and on introducing new products which incorporate advanced features and other price/performance factors such that higher average selling prices and higher margins are initially achieved relative to existing products. To the extent that such cost reductions and new product introductions do not occur in a timely manner, or the Company's products do not achieve market acceptance, the Company's operating results could be adversely affected. INTELLECTUAL PROPERTY The Company relies upon patent, trademark, trade secret and copyright law to protect its intellectual property. There can be no assurance that such intellectual property rights can be successfully asserted in the future or will not be invalidated, circumvented or challenged. Litigation, regardless of its outcome, could result in substantial cost and diversion of resources of the Company. Any infringement claim or other litigation against or by the Company could have a material adverse effect on the Company's financial condition and results of operations. In November 1995 the Company commenced infringement litigation against a competitor. See Part II, Item 1, "Litigation". SEMICONDUCTOR INDUSTRY The semiconductor industry has historically been cyclical and subject to significant economic downturns at various times, characterized by diminished product demand, accelerated erosion of average selling prices and over or under capacity. The Company may experience substantial period-to-period fluctuations in future operating results due to general semiconductor industry conditions, overall economic conditions or other factors. In addition, the securities of many high technology companies have historically been subject to extreme price and volume fluctuations, a factor which may affect the market price of the Company's Common Stock. Due to the number of weeks in the Company's accounting months within a quarter, the Company generally receives bookings for and ships more product in the third month of each quarter than in either of the first two months of the quarter. This concentration of shipments in the last month of the quarter may cause the Company's quarterly results of operations to be more difficult to predict. Moreover, if a disruption in the Company's production or shipping occurs near the end of a quarter, the Company's revenues for that quarter could be adversely affected. The Company must order wafers and build inventory in advance of product shipments. There is risk that the Company may order incorrectly and produce excess or insufficient inventories of 12 particular products because the Company's markets are volatile and subject to rapid technology and price changes, which could affect shipments. Inventory risk is heightened because certain of the Company's customers place orders with lead times that make such orders subject to cancellation or rescheduling by that customer. To the extent the Company produces excess or insufficient inventories of particular products, the Company's revenues and earnings could be adversely affected. In the third quarter of 1996, sales to customers who placed orders for shipment within the quarter represented a larger portion of the Company's revenues than the Company had generally experienced in the past. This was the second consecutive quarter in which the Company experienced such a level of sales with such short lead times. To the extent the Company continues to be subject to such shorter ordering cycles, it may decrease the Company's visibility of the mix of products that will be shipped in the current quarter. In the future, increases in the general demand for semiconductor products may result in a reduction in the availability of wafers from foundries. Such capacity limitations may adversely affect the Company's ability to deliver products to its customers on a timely basis, and may also adversely impact the Company's margins. Additionally, the Company believes that during periods of strong demand and/or restricted semiconductor capacity, customers will over order to attempt to assure an adequate supply. Accordingly, certain of the Company's customers may cancel or postpone orders without notice if parts become available. These characteristics may result in volatility of the Company's backlog. Even if the Company has products available for sale to its customers, many of the Company's products could be affected in the event the Company's customers encounter shortages in other parts necessary to build and ship their products. Shortages of components from other suppliers could cause the Company's customers to cancel or delay programs incorporating the Company's parts, resulting in the cancellation or delay of orders of the Company's products. The Company's business is intensely competitive and is characterized by new product cycles, price erosion, and rapid technological change. Competition typically occurs at the design stage, where the customer evaluates alternative design approaches that require integrated circuits. Because product life and design-in cycles can be short, the Company and its competitors have opportunities to achieve design wins in next generation systems. Because of the foregoing factors that may affect future results, investors should not use historical trends to anticipate results or trends for future periods. In addition, the Company participates in a highly dynamic industry that may result in significant volatility of the Company's common stock price. 13 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On November 28, 1995, the Company initiated a patent infringement suit against Seeq Technologies, Inc. in United States District Court for the Northern District of California. The suit relates to two Level One patents, No. 5,267,269 and No. 5,249,183, and to certain Seeq products used in Ethernet system products. The suit seeks damages and injunctive relief. Seeq has denied the allegations. Although the Company does not believe such litigation will have a material impact on the Company, litigation, regardless of its outcome, could result in substantial cost and diversion of resources of the Company. See "Factors Affecting Quarterly Operating Results". There are no other material pending legal proceedings, other than routine litigation incidental to the Company's business, to which the Company is a party or of which any of its property is the subject. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On July 18, 1996, the Company held its annual meeting of shareholders, at which the following matters were submitted to shareholder vote: Election of Directors: Robert S. Pepper For: 11,270,590 Against: 154,114 Thomas J. Connors For: 11,271,280 Against: 153,424 Paul Gray For: 11,271,430 Against: 153,274 Martin Jurick For: 11,267,176 Against: 157,528 Henry Kressel For: 11,271,280 Against: 153,424 Joseph P. Landy For: 11,271,280 Against: 153,424 Amendment to Employee Stock Purchase Plan: For: 10,970,572 Against: 151,219 Abstain: 20,379 No Vote: 282,534 Amendments to 1993 Stock Option Plan: For: 6,317,451 Against: 2,100,257 Abstain: 22,231 No vote: 2,984,765 Ratification of Appointment of Arthur Andersen LLP as auditor: For: 11,407,344 Against: 8,663 Abstain: 8,697 14 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits - 27.1--Financial Data Schedule, September 29, 1996 (b) Reports on Form 8-K - None. 15 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. LEVEL ONE COMMUNICATIONS, INCORPORATED Date: November 12, 1996 By: /s/ Robert S. Pepper ------------------------------------- Robert S. Pepper, Ph.D. Chairman of the Board of Directors, President and Chief Executive Officer (Principal Executive Officer) Date: November 12, 1996 By: /s/ John Kehoe ------------------------------------- John Kehoe Vice President and Chief Financial Officer (Principal Financial Officer) S-1 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE PERIOD ENDED SEPTEMBER 29, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-30-1995 SEP-29-1996 13,747 16,208 17,111 107 12,189 64,371 35,089 15,169 109,284 14,099 0 0 0 79,640 11,521 109,284 82,384 82,384 34,865 34,865 33,998 0 300 15,346 5,065 10,281 0 0 0 10,281 0 .75
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