-----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, LrGHQ9C+TBotnyHsRtJp04EdVcF/h5J8NNjsKxJ2DAxONZKdyaXr/DY6VbFMbjox BmKyRZi9DVCeqva5Zl2YeA== 0001125282-03-004461.txt : 20030729 0001125282-03-004461.hdr.sgml : 20030729 20030729172819 ACCESSION NUMBER: 0001125282-03-004461 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030628 FILED AS OF DATE: 20030729 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANADIGICS INC CENTRAL INDEX KEY: 0000940332 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 222582106 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-25662 FILM NUMBER: 03809511 BUSINESS ADDRESS: STREET 1: 35 TECHNOLOGY DR CITY: WARREN STATE: NJ ZIP: 07059 BUSINESS PHONE: 9086685000 MAIL ADDRESS: STREET 1: 35 TECHNOLOGY DRIVE CITY: WARREN STATE: NJ ZIP: 07059 10-Q 1 b326167_10q.txt QUARTERLY REPORT 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 JUNE 28, 2003. 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 No. 0-25662 ANADIGICS, Inc. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 22-2582106 - -------------------------------- ----------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 141 Mt. Bethel Road Warren, New Jersey 07059 ------------------------------------------ ---------------------- (Address of principal executive offices) (Zip Code) (908) 668-5000 ---------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [ X ] No [ ] The number of shares outstanding of the Registrant's common stock as of July 28, 2003 was 30,674,033. INDEX ANADIGICS, Inc. Part. I. Financial Information Item 1. Financial Statements (unaudited) Condensed consolidated balance sheets - June 28, 2003 and December 31, 2002. Condensed consolidated statements of operations and comprehensive loss - Three and six months ended June 28, 2003 and June 29, 2002. Condensed consolidated statements of cash flows - Six months ended June 28, 2003 and June 29, 2002. Notes to condensed consolidated financial statements - June 28, 2003. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part II. Other Information Item 1. Legal Proceedings Item 4. Submission of Matters to a Vote of Security Holders Item 6. Exhibits and Reports on Form 8-K Signatures Certifications 2 PART I - FINANCIAL STATEMENTS ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) ANADIGICS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
June 28, 2003 December 31, 2002 --------------- ----------------- (unaudited) (Note 1) ASSETS Current assets: Cash and cash equivalents $ 24,992 $ 24,343 Marketable securities 70,675 74,038 Accounts receivable 10,019 9,016 Inventories 12,660 13,277 Prepaid expenses and other current assets 3,797 4,600 --------- --------- Total current assets 122,143 125,274 Marketable securities 39,440 57,137 Property and equipment: Equipment and furniture 124,500 123,328 Leasehold improvements 38,378 37,473 Projects in process 5,280 5,371 --------- --------- 168,158 166,172 Less accumulated depreciation and amortization 106,671 97,572 --------- --------- 61,487 68,600 Goodwill and other intangibles, net of amortization 1,280 - Other assets 4,115 4,660 --------- --------- Total assets $ 228,465 $ 255,671 --------- --------- --------- --------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 6,449 $ 7,434 Accrued liabilities 4,776 4,733 Accrued restructuring costs 2,525 2,956 Current maturities of capital lease obligations 113 - --------- --------- Total current liabilities 13,863 15,123 Long-term debt, less current portion 66,700 66,700 Other long-term liabilities 2,918 2,760 Commitments and contingencies Stockholders' equity Common stock, $0.01 par value, 144,000,000 shares authorized, 30,674,033 issued and outstanding at June 28, 2003 and December 31, 2002 307 307 Additional paid-in capital 334,169 334,162 Accumulated deficit (190,136) (164,124) Accumulated other comprehensive income 644 743 --------- --------- Total stockholders' equity 144,984 171,088 --------- --------- Total liabilities and stockholders' equity $ 228,465 $ 255,671 ========= =========
See accompanying notes. 3 ANADIGICS, Inc. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Three months ended Six months ended -------------------------------- ------------------------------- June 28, 2003 June 29, 2002 June 28, 2003 June 29, 2002 --------------- ------------- --------------- ------------- (unaudited) (unaudited) Net sales $ 18,037 $ 23,021 $ 34,124 $ 42,542 Cost of sales 17,430 18,832 33,509 37,837 ------------ ------------ ------------ ------------ Gross profit 607 4,189 615 4,705 Research and development expenses 8,170 7,699 15,327 15,277 Selling and administrative expenses 4,450 5,656 8,968 10,935 Restructuring charges -- -- 625 2,715 Asset impairment charges -- -- -- 3,244 Purchased in-process R&D 1,690 -- 1,690 -- ------------ ------------ ------------ ------------ Operating loss (13,703) (9,166) (25,995) (27,466) Interest income 874 1,735 1,887 3,416 Interest expense (940) (1,422) (1,881) (2,864) Other (expense) income (2) -- (23) 2 ------------ ------------ ------------ ------------ Loss before cumulative effect of accounting change (13,771) (8,853) (26,012) (26,912) Cumulative effect of accounting change -- -- -- (8,010) ------------ ------------ ------------ ------------ Net loss $ (13,771) $ (8,853) $ (26,012) $ (34,922) ============ ============ ============ ============ Basic and diluted loss per share Loss before cumulative effect of accounting change $ (0.45) $ (0.29) $ (0.85) $ (0.88) Net loss $ (0.45) $ (0.29) $ (0.85) $ (1.14) Weighted average common and dilutive securities outstanding 30,674,033 30,579,575 30,674,033 30,575,202
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (DOLLARS IN THOUSANDS)
Three months ended Six months ended -------------------------------- ------------------------------- June 28, 2003 June 29, 2002 June 28, 2003 June 29, 2002 --------------- ------------- --------------- ------------- (unaudited) (unaudited) Net loss $ (13,771) $ (8,853) $ (26,012) $ (34,922) Unrealized (loss) gain on marketable securities (98) 762 (127) (203) Foreign currency translation adjustment 7 33 13 (22) Reclassification adjustment: Net realized (gain) loss previously in other comprehensive income 3 (10) 15 21 ----------- ----------- ----------- ------------- Comprehensive loss $ (13,859) $ (8,068) $ (26,111) $ (35,126) =========== =========== =========== =============
See accompanying notes. 4 ANADIGICS, Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
Six months ended --------------------------------- June 28, 2003 June 29, 2002 --------------- -------------- (unaudited) (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (26,012) $ (34,922) Adjustments to reconcile net loss to net cash used in operating activities: Cumulative effect of accounting change - 8,010 Depreciation 9,361 9,906 Amortization 631 1,127 Amortization of premium on marketable securities 1,146 1,123 Purchased in-process R&D 1,690 - Impairment of long-lived assets - 3,244 Loss on disposal of equipment 27 - Changes in operating assets and liabilities: Accounts receivable (851) (1,436) Inventory 618 (1,519) Prepaid expenses and other assets 836 578 Accounts payable (1,291) 1,597 Accrued liabilities and other liabilities (405) 179 ----------- ----------- Net cash used in operating activities (14,250) (12,113) CASH FLOWS FROM INVESTING ACTIVITIES Purchases of plant and equipment (1,912) (1,662) Acquisition of business (2,933) - Purchases of marketable securities (58,205) (52,400) Proceeds from sale of marketable securities 77,993 28,893 ----------- ----------- Net cash provided by (used in) investing activities 14,943 (25,169) CASH FLOWS FROM FINANCING ACTIVITIES Payment of capital lease obligations (44) (94) Repayments of long-term debt - (131) Issuance of common stock - 108 ----------- ----------- Net cash used in financing activities (44) (117) ----------- ----------- Net increase (decrease) in cash and cash equivalents 649 (37,399) Cash and cash equivalents at beginning of period 24,343 63,102 ----------- ----------- Cash and cash equivalents at end of period $ 24,992 $ 25,703 =========== =========== Supplemental disclosures of cash flow information: Interest paid $ 1,668 $2,342 Taxes paid - 118
See accompanying notes. 5 ANADIGICS, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - JUNE 28, 2003 (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The accompanying unaudited, condensed, consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States 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 six month periods ended June 28, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003. The condensed, consolidated balance sheet at December 31, 2002 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2002. The condensed, consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. CUMULATIVE EFFECT OF ACCOUNTING CHANGE Effective January 1, 2002, the Company completed the first of the required impairment tests of goodwill required under Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (FAS 142), which was adopted as of that date. Under the new rules, goodwill is no longer subject to amortization but is reviewed for potential impairment, upon adoption and thereafter annually or upon the occurrence of an impairment indicator. As a result of completing the required test, the Company recorded a charge retroactive to the adoption date for the cumulative effect of the accounting change in the amount of $8,010 ($0.26 per share) representing the excess of the carrying value of a reporting unit (Telcom) as compared to its estimated fair value. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In June 2001, the Financial Accounting Standards Board (FASB) issued Statement No. 143, Accounting for Asset Retirement Obligations (FAS 143). FAS 143 requires that asset retirement obligations that are identifiable upon acquisition and construction, and during the operating life of a long-lived asset be recorded as a liability using the present value of the estimated cash flows. A corresponding amount would be capitalized as part of the asset's carrying amount and amortized to expense over the asset's useful life. The Company adopted the provisions of FAS 143 effective January 1, 2003 and there was no impact on the financial statements. In July 2002, the FASB issued Statement No. 146, Accounting for Costs Associated with Exit or Disposal Activities (FAS 146) which nullifies EITF Issue No. 94-3. FAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred, whereas EITF No. 94-3 had recognized the liability at the commitment date to an exit plan. The Company adopted the provisions of FAS 146 for exit or disposal activities initiated after January 1, 2003. In November 2002, the FASB issued Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN 45). FIN 45 requires the recognition of certain guarantees as liabilities at fair market value and is effective for guarantees issued or modified after December 31, 2002. The Company adopted the disclosure requirement of FIN 45 and there was no impact on the financial statements from the fair market value provisions. The Company provides for warranty obligations, by a current charge to income, an amount it estimates, by examining historical returns and other information it deems critical, will be needed to cover future warranty costs for products sold during the period. Warranty reserve movements in the six months included $145 in actual charges and $(116) in provisions resulting in the balance of $107 at June 28, 2003. In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46). FIN 46 is the interpretation of Accounting Research Bulletin No. 51 Consolidated Financial Statements, which addresses consolidation by business enterprises of variable interest entities. FIN 46 is effective immediately for all variable interest entities created after January 31, 2003 and effective for fiscal years beginning after June 15, 2003 for variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. The Company does not expect the adoption of FIN 46 to have a material impact on its financial position, results of operations and cash flows. In December 2002, the FASB issued Statement No. 148, Accounting for Stock-Based Compensation -- Transition and Disclosure (FAS 148). FAS 148 amends Statement No. 123, Stock-Based Compensation,(FAS 123) to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, FAS 148 amends the requirements of FAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The disclosure provisions of FAS 148 are effective for periods ending after December 15, 2002 and have been incorporated as below. 6 STOCK BASED COMPENSATION As permitted by FAS 123, the Company has elected to follow the intrinsic value method under Accounting Principle Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25) and related interpretations in accounting for its employee stock option plans. Under APB 25, no compensation expense is recognized at the time of option grant when the exercise price of the Company's employee stock options equals the fair market value of the underlying common stock on the date of grant. The following table illustrates the effect on net loss and loss per common share as if the Company had applied the fair value method to measure stock-based compensation, required under the disclosure provisions of FAS 123:
Three months ended Six months ended ---------------------------- ----------------------------- June 28, 2003 June 29, 2002 June 28, 2003 June 29, 2002 ------------- ------------- ------------- ------------- Net loss, as reported $ (13,771) $ (8,853) $(26,012) $(34,922) Stock based compensation expense under fair value reporting (1,774) (3,316) (3,671) (6,517) Pro-forma net loss (15,545) (12,169) (29,683) (41,439) Basic and diluted net loss per share Net loss, as reported $ (0.45) $ (0.29) $ (0.85) $ (1.14) Pro-forma net loss $ (0.51) $ (0.40) $ (0.97) $ (1.36)
RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform to the current year presentation. 2. INVENTORIES Inventories are stated at the lower of cost (first-in, first-out method) or market. Inventories consist of the following: June 28, 2003 December 31, 2002 --------------- ------------------ Raw materials $ 4,190 $ 4,316 Work in process 9,507 10,080 Finished goods 5,373 6,015 ----------- ---------- 19,070 20,411 Reserves (6,410) (7,134) ----------- ---------- Total $ 12,660 $ 13,277 =========== ========== 3. LOSS PER SHARE The reconciliation of shares used to calculate basic and diluted loss per share consists of the following:
Three months ended Six months ended ------------------------------ ----------------------------- June 28, 2003 June 29, 2002 June 28, 2003 June 29, 2002 ------------- ------------- ------------- ------------- Weighted average common shares outstanding used to calculate basic earnings per share 30,674,033 30,579,575 30,674,033 30,575,202 Net effect of dilutive securities based upon the treasury stock method using an average market price -* -* -* -* ------------- ------------- ------------- ------------ Weighted average common and dilutive securities outstanding used to calculate diluted earnings per share 30,674,033 30,579,575 30,674,033 30,575,202 ============= ============= ============= ============
7 * Any dilution arising from the Company's outstanding stock options or shares potentially issuable upon conversion of the Convertible notes are not included as their effect is anti-dilutive. On July 3, 2003, the Company announced a voluntary stock option exchange program for employees and officers. Directors were not eligible for the exchange program. Pursuant to the terms and conditions of the offer, which expires on August 4, 2003, the Company will accept for cancellation options to purchase shares of common stock having an exercise price of greater than $10.00. On or about February 6, 2004, participating employees will receive one new option for every three options cancelled. The new options will have an exercise price equal to the closing sale price of the Company's common stock on that date and will fully vest one year thereafter. 4. REVENUE SOURCES The Company classifies its revenues based upon the end application of the product in which its integrated circuits are used. Net sales by end application are regularly reviewed by the chief operating decision maker and are as follows:
Three months ended Six months ended ------------------------------ ----------------------------- June 28, 2003 June 29, 2002 June 28, 2003 June 29, 2002 ------------- ------------- ------------- ------------- Broadband $ 9,038 $ 9,924 $ 16,550 $ 20,426 Wireless 8,999 13,097 17,574 22,116 ------------- ------------- ------------- ------------- Total $ 18,037 $ 23,021 $ 34,124 $ 42,542 ============= ============= ============= =============
The Company primarily sells to three geographic regions: Asia, U.S.A. and Canada, and Other. The geographic region is determined by the destination of the shipped product. Net sales to each of the three geographic regions are as follows:
Three months ended Six months ended ------------------------------ ----------------------------- June 28, 2003 June 29, 2002 June 28, 2003 June 29, 2002 ------------- ------------- ------------- ------------ Asia $ 6,261 $ 8,312 $ 10,980 $ 15,777 U.S.A. and Canada 10,369 13,427 20,833 23,878 Other 1,407 1,282 2,311 2,887 ------------- ------------- ------------- ------------ Total $ 18,037 $ 23,021 $ 34,124 $ 42,542 ============= ============= ============= ============
5. RESTRUCTURING CHARGES During the first quarter of 2003, the Company recorded restructuring charges of $625 pertaining to severance and related benefits of workforce reductions undertaken in the quarter. The workforce reductions eliminated approximately 19 operations and administrative positions to whom $395 of benefits were paid through June 28, 2003. During the first quarter of 2002, the Company recorded restructuring charges of $5,959 after curtailing certain fiber-optic research activities and consolidating facilities at its Warren headquarters. The restructuring charges included $2,185 for facilities consolidation costs and $3,244 for an impairment of certain leasehold improvements and research fixed assets. A charge of $530 was recorded for severance and related benefits of workforce reductions. 6. LONG-TERM DEBT On November 27, 2001, the Company issued $100,000 aggregate principal amount of 5% Convertible Senior Notes ("Convertible notes" or "notes") due November 15, 2006. During the third quarter of 2002, the Company repurchased and retired $33,300 principal amount of the Convertible notes. The outstanding notes are convertible into shares of common stock at any time prior to their maturity or prior redemption by the Company. The notes are convertible into shares of common stock at a rate of 47.619 shares for each $1,000 principal amount (convertible at a price of $21.00 per share), subject to adjustment. Interest is payable semi-annually on May 15 and November 15 of each year. 7. ACQUISITION OF RF SOLUTIONS' POWER AMPLIFIER BUSINESS On March 31, 2003, the Company acquired certain assets and liabilities of the wireless LAN ("WLAN") power amplifier business of RF Solutions ("RFS"). The RFS acquisition was a strategic initiative that allows the Company to participate in the emerging and fast-growing WLAN market with a depth of experienced design personnel and cutting-edge products. The acquisition was accounted for using the purchase method of accounting. The results of operations for RFS are included in the results of operations of the Company from the date of purchase. There are no significant differences between the accounting policies of the Company and RFS. 8 The Company paid cash purchase consideration on March 31, 2003 of $2,800 and may be required to issue up to 3 million shares of the Company's common stock as contingent consideration, based on the achievement of certain revenue milestones over the 12 months ending March 31, 2004. Any contingent shares would be issued as the revenue milestones are acheived. The Company incurred $133 in acquisition-related costs. The fixed acquisition cost of $2,933 was allocated to the assets acquired and liabilities assumed, based on their fair values (as determined by an appraisal) as follows: Fair value of tangible assets $ 479 Fair value of liabilities assumed (527) In-process research and development 1,690 Process technology 169 Goodwill 1,122 Total purchase price $2,933 The contingent purchase consideration of up to 3 million shares of the Company's common stock may be payable if certain sales targets are reached over the twelve months ending March 31, 2004. Any additional purchase consideration would increase the goodwill attributed to RFS. The Company is unable to assess the probability of any contingent purchase consideration that may be due and has therefore excluded it from the fair value allocation. The Company recorded a charge of $1,690 representing the fair value of certain acquired research and development projects relating to dual band, high gain and modules applications for Wireless LAN that were determined to have not reached technological feasibility and do not have alternative future uses. The fair value of such projects was determined based on discounted net cash flows. These cash flows were based upon management's estimates of future revenues and expected profitability of each technology. The rate used to discount these projected cash flows accounted for the time value of money, as well as the risks of realization of cash flows. The following unaudited pro-forma consolidated financial information reflects the results of operations for the three and six months ended June 28, 2003 and June 29, 2002, as if the acquisition of RFS had occurred on December 31, 2001 and after giving effect to purchase accounting adjustments. The charge for purchased in-process research and development is not included in the pro-forma results, because it is non-recurring.
Three months ended Six months ended ------------------------------ ----------------------------- June 28, 2003 June 29, 2002 June 28, 2003 June 29, 2002 ------------- ------------- ------------- ------------- Pro-forma revenue $ 18,037 $ 23,060 $ 34,483 $ 42,603 Pro-forma net loss before cumulative effect of accounting change $ (12,081) $(10,700) $(25,790) $(30,366) Pro-forma net loss $ (12,081) $(10,700) $(25,790) $(38,376) Basic and diluted net loss per share Pro-forma net loss before cumulative effect of accounting change $ (0.39) $ (0.35) $ (0.84) $ (0.99) Pro-forma net loss $ (0.39) $ (0.35) $ (0.84) $ (1.25)
These pro-forma results have been prepared for comparative purposes only and do not purport to be indicative of what operating results would have been had the acquisition actually taken place on December 31, 2001. In addition, these results are not intended to be a projection of future results and do not reflect any synergies that might be achieved from the combined operations. 9 ANADIGICS, Inc. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table sets forth unaudited consolidated statements of operations data as a percent of net sales for the periods presented:
Three months ended Six months ended ------------------------------ ----------------------------- June 28, 2003 June 29, 2002 June 28, 2003 June 29, 2002 ------------- ------------- ------------- ------------- (unaudited) (unaudited) Net sales 100.0% 100.0% 100.0% 100.0% Cost of sales 96.6 81.8 98.2 88.9 ---------- ---------- ---------- --------- Gross profit (loss) 3.4 18.2 1.8 11.1 Research and development expenses 45.3 33.4 44.9 35.9 Selling and administrative expenses 24.7 24.6 26.3 25.7 Restructuring charge - - 1.8 6.4 Asset impairment charge - - - 7.6 Purchased in-process R&D 9.4 - 5.0 - ---------- ---------- ---------- --------- Operating loss (76.0) (39.8) (76.2) (64.5) Interest income 4.8 7.5 5.5 8.0 Interest expense (5.2) (6.2) (5.5) (6.7) Other income (expense) - - - - ---------- ---------- ---------- --------- Loss before cumulative effect of accounting change (76.4) (38.5) (76.2) (63.2) Cumulative effect of accounting change - - - (18.9) ---------- ---------- ---------- --------- Net loss (76.4%) (38.5%) (76.2%) (82.1%) ========== ========== ========== =========
NET SALES. Net sales decreased 21.6% during the second quarter of 2003 to $18.0 million from $23.0 million in the second quarter of 2002. For the six months ended June 28, 2003, net sales were $34.1 million, a 19.8% decrease from net sales of $42.5 million for the six months ended June 29, 2002. Sales of integrated circuits for Wireless applications decreased 31.3% during the second quarter of 2003 to $9.0 million from $13.1 million in the second quarter of 2002. For the six months ended June 28, 2003, net sales of integrated circuits for Wireless applications decreased 20.5% to $17.6 million from $22.1 million in the six-month period ended June 29, 2002. The decrease in sales of integrated circuits for Wireless applications during the second quarter was primarily due to a production ramp of CDMA power amplifiers by one of our customers in the prior year quarter. The six month decrease is primarily attributable to the continued decrease in sales of our TDMA power amplifiers. Sales of integrated circuits for Broadband applications decreased 8.9% during the second quarter of 2003 to $9.0 million from $9.9 million in the second quarter of 2002. For the six months ended June 28, 2003, net sales of integrated circuits for Broadband applications decreased 19.0% to $16.5 million from $20.4 million in the six-month period ended June 29, 2002. Sales for the three and six month periods ended June 28, 2003 decreased despite the inclusion of Wireless LAN sales following the acquisition of RF Solutions' ("RFS") power amplifier business on March 31, 2003. The decrease in sales of integrated circuits for Broadband applications was primarily due to decreased demand for our reverse amplifiers and converters used in digital set-top boxes and cable modems and to a lesser degree, a reduction in sales of integrated circuits for fiber optic applications. Generally, selling prices for same product sales were lower during the second quarter of 2003 compared to the second quarter of 2002. GROSS MARGIN. Gross margin during the second quarter of 2003 declined to 3.4% from 18.2% in the second quarter of 2002. For the six months ended June 28, 2003, gross margin decreased to 1.8% from 11.1% for the six months ended June 29, 2002. The decrease in gross margin in 2003 was primarily due to the decrease in revenues, lower production and consequent lower absorption of fixed costs, which was partially offset by reductions in our manufacturing cost base. 10 RESEARCH AND DEVELOPMENT. Company sponsored research and development expense increased 6.1% during the second quarter of 2003 to $8.2 million from $7.7 million during the second quarter of 2002. Company sponsored research and development expense was flat with the prior year during the six-month period ended June 28, 2003 at $15.3 million. The increase in the second quarter of 2003 was due to the inclusion of the operations of RFS following its acquisition on March 31, 2003. As a percentage of sales, research and development expense increased to 45.3% in the second quarter of 2003 from 33.4% in the second quarter of 2002 and 44.9% and 35.9% in the six months of 2003 and 2002, respectively. SELLING AND ADMINISTRATIVE. Selling and administrative expenses decreased 21.3% during the second quarter of 2003 to $4.4 million from $5.7 million in the second quarter of 2002. The decrease in selling and administrative expenses was primarily due to lower compensation and operating costs following our restructuring initiatives of 2002 and the first quarter of 2003. As a percentage of sales, selling and administrative expenses increased slightly to 24.7% in the second quarter of 2003 from 24.6% in the second quarter of 2002. Selling and administrative expenses decreased 18.0% during the six-month period ended June 28, 2003 to $9.0 million from $10.9 million in the six-month period ended June 29, 2002. As a percentage of sales, selling and administrative expenses increased to 26.3% during the six-month period ended June 28, 2003 from 25.7% in the six-month period ended June 29, 2002. ASSET IMPAIRMENT AND RESTRUCTURING AND OTHER CHARGES. During the first quarter of 2003, we recorded restructuring charges of $0.6 million pertaining to severance and related benefits of workforce reductions undertaken in that quarter. The workforce reductions eliminated approximately 19 positions in operations and administration to whom approximately $0.4 million of severance benefits were paid through June 28, 2003. The anticipated annual savings from these charges is expected to approximate $1.9 million. During the first quarter of 2002, we recorded restructuring charges of $6.0 million. As part of our cost reduction initiatives, we curtailed certain fiber-optic research activities and consolidated facilities at our Warren headquarters. The restructuring charges included $2.2 million for facilities consolidation costs and $3.2 million for an impairment of certain leasehold improvements and research fixed assets, which are no longer used in our ongoing business. A charge of $0.5 million was recorded for severance and related benefits of workforce reductions undertaken in the first quarter. The workforce reductions eliminated approximately 22 fiber research and marketing positions. PURCHASED IN-PROCESS RESEARCH AND DEVELOPMENT. The Company expensed purchased in-process research and development costs of $1.7 million as a result of the RFS acquisition on March 31, 2003. The charge represents the fair value of certain acquired research and development projects that were determined to have not reached technological feasibility and do not have alternative future uses. INTEREST INCOME. Interest income decreased 49.6% to $0.9 million during the second quarter of 2003 from $1.7 million during the second quarter of 2002. For the six months ended June 28, 2003, interest income decreased 44.8% to $1.9 million from $3.4 million in the six-month period ended June 29, 2002. The decreases were primarily due to lower invested funds and were compounded by lower interest rates. INTEREST EXPENSE. Interest expense decreased 33.9% to $0.9 million during the second quarter of 2003 from $1.4 million during the second quarter of 2002. For the six months ended June 28, 2003, interest expense decreased 34.3% to $1.9 million from $2.9 million in the six-month period ended June 29, 2002. The decreases were due to the lower outstanding balance of $66.7 million of our 5% Convertible notes, following their original $100.0 million issuance on November 27, 2001 and our partial repurchase and retirement in the third quarter of 2002. CUMULATIVE EFFECT OF ACCOUNTING CHANGE. Effective January 1, 2002, we completed the first of the required impairment tests of goodwill required under Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, which was adopted as of that date. As a result of completing the required test, we recorded a charge retroactive to the adoption date for the cumulative effect of the accounting change in the amount of $8.0 million representing the excess of the carrying value of a reporting unit (Telcom) as compared to its estimated fair value. LIQUIDITY AND CAPITAL RESOURCES As of June 28, 2003, we had $25.0 million in cash and cash equivalents and $110.1 million in marketable securities. We had $66.7 million of interest-bearing debt outstanding as of June 28, 2003. Operating activities used $14.3 million in cash during the six-month period ended June 28, 2003. Investing activities, which consisted of net sales of marketable securities of $19.7 million, partially offset by purchases of equipment of $1.9 million and $2.9 million paid upon the acquisition of RFS' power amplifier business, provided $14.9 million of cash during the six-month period ended June 28, 2003. As of June 28, 2003, we had purchase commitments of approximately $0.5 million for equipment, furniture and leasehold improvements. We believe that our existing sources of capital, including internally generated funds, will be adequate to satisfy operational needs and anticipated capital needs for the next twelve months and beyond. Our anticipated capital needs may include acquisitions of complimentary businesses or technologies, or investments in other companies or repurchasing our outstanding debt or equity. However, we may elect to finance all or part of our future capital requirements through additional equity or debt financing. There can be no assurance that such additional financing would be available on satisfactory terms. 11 IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In June 2001, the Financial Accounting Standards Board (FASB) issued Statement No. 143, Accounting for Asset Retirement Obligations (FAS 143). FAS 143 requires that asset retirement obligations that are identifiable upon acquisition and construction, and during the operating life of a long-lived asset be recorded as a liability using the present value of the estimated cash flows. A corresponding amount would be capitalized as part of the asset's carrying amount and amortized to expense over the asset's useful life. We adopted the provisions of FAS 143 effective January 1, 2003 and there was no impact on the financial statements. In July 2002, the FASB issued Statement No. 146, Accounting for Costs Associated with Exit or Disposal Activities (FAS 146) which nullifies EITF Issue No. 94-3. FAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred, whereas EITF No. 94-3 had recognized the liability at the commitment date to an exit plan. We adopted the provisions of FAS 146 for exit or disposal activities initiated during the period ended March 29, 2003. In November 2002, the FASB issued Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN 45). FIN 45 requires the recognition of certain guarantees as liabilities at fair market value and is effective for guarantees issued or modified after December 31, 2002. We adopted the disclosure requirement of FIN 45 and there was no impact on the financial statements from the fair market value provisions. We provide for warranty obligations, by a current charge to income, an amount it estimates, by examining historical returns and other information it deems critical, will be needed to cover future warranty costs for products sold during the period. In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46). FIN 46 is the interpretation of Accounting Research Bulletin No. 51 Consolidated Financial Statements, which addresses consolidation by business enterprises of variable interest entities. FIN 46 is effective immediately for all variable interest entities created after January 31, 2003 and effective for fiscal years beginning after June 15, 2003 for variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. We do not expect the adoption of FIN 46 to have a material impact on our financial position, results of operations and cash flows. In December 2002, the FASB issued Statement No. 148, Accounting for Stock-Based Compensation -- Transition and Disclosure (FAS 148). FAS 148 amends Statement No. 123, Stock-Based Compensation, (FAS 123) to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, FAS 148 amends the requirements of FAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The disclosure provisions of FAS 148 are effective for periods ending after December 15, 2002. RISKS AND UNCERTAINTIES Except for historical information contained herein, this Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties, including, but not limited to, order rescheduling or cancellation, changes in customers' forecasts of product demand, timely product and process development and protection of the associated intellectual property rights, individual product pricing pressure, variation in production yield, changes in estimated product lives, difficulties in obtaining components and assembly and test services needed for production of integrated circuits, change in economic conditions of the various markets we serve, as well as the other risks detailed from time to time in our reports filed with the Securities and Exchange Commission, including the report on Form 10-K for the year ended December 31, 2002 and the Registration Statement on Form S-3 (Registration No. 333-75040). These forward-looking statements can generally be identified as such because the context of the statement will include words such as "believe", "anticipate", "expect", or words of similar import. Similarly, statements that describe our future plans, objectives, estimates or goals are forward-looking statements. The cautionary statements made in this Form 10-Q should be read as being applicable to all related forward-looking statements wherever they appear in this Form 10-Q. Important factors that could cause actual results and developments to be materially different from those expressed or implied by such statements include those factors discussed herein. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to changes in interest rates primarily from our investments in certain available-for-sale securities. Our available-for-sale securities consist primarily of fixed income investments (U.S. Treasury and Agency securities, commercial paper and corporate bonds). We continually monitor our exposure to changes in interest rates and credit ratings of issuers from our available-for-sale securities. Accordingly, we believe that the effects of changes in interest rates and credit ratings of issuers are limited and would not have a material impact on our financial condition or results of operations. However, it is possible that we would be at risk if interest rates or credit ratings of issuers change in an unfavorable direction. The magnitude of any gain or loss would be a function of the difference between the fixed rate of the financial instrument and the market rate and our financial condition and results of operations could be materially affected. Our Convertible notes bear a fixed rate of interest of 5%. A change in interest rates on long-term debt is assumed to impact fair value but not earnings or cash flow because the interest rate is fixed. 12 ITEM 4. CONTROLS AND PROCEDURES Evaluation of disclosure controls and procedures. The management of the Company, including the President and Chief Executive Officer and the Chief Financial Officer, have conducted an evaluation of the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act) as of a date (the "Evaluation Date") within 90 days prior to the filing date of this report. Based on that evaluation, the President and Chief Executive Officer and the Chief Financial Officer concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures were effective in ensuring that all material information relating to the Company, including its consolidated subsidiaries, required to be filed in this quarterly report has been made known to them in a timely manner. Changes in internal controls. There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of the most recently completed evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. 13 ANADIGICS, Inc. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS ANADIGICS is a party to litigation arising out of the operation of its business. We believe that the ultimate resolution of such litigation should not have a material adverse effect on the Company's financial condition, results of operations or liquidity. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held its annual meeting of stockholders on May 22, 2003 at which the Company's stockholders voted on: (a) The election of two Class II Directors of the Company to hold office until 2006. (b) The ratification of the appointment of Ernst & Young, LLP as independent auditors of the Company for the fiscal year ending December 31, 2003 (c) To approve an amendment to the 1995 Long Term Incentive and Share Award Plan to increase the number of shares issuable thereunder by 1,000,000 to 5,912,500. (d) The approval of a one-time stock option retention grant issuable to the Chairman of the Board and each of the outside members of the Board of Directors in the amount of 30,000 shares per Director (with a 3 year vesting schedule). The four matters listed above were voted upon and approved by the shareholders of the Company as follows: (a) The election of Paul Bachow as a Class II Director was approved by holders of 26,840,438 shares of the Company's outstanding capital stock. Holders of 1,463,877 shares withheld from voting on such election. The election of Bami Bastani as a Class II Director was approved by holders of 26,678,825 shares of the Company's outstanding capital stock. Holders of 1,625,490 shares withheld from voting on such election. (b) The ratification of the appointment of Ernst & Young LLP as independent auditors was approved by holders of 27,525,786 shares of the Company's outstanding capital stock. Holders of 745,575 shares voted against the ratification, and holders of 32,954 shares abstained from voting on such ratification. (c) The approval of the increase of shares issuable under the 1995 Long Term Incentive and Share Award Plan to 5,912,500 was approved by holders of 15,510,872 shares of the Company's outstanding capital stock. Holders of 11,412,391 shares voted against the ratification, and holders of 1,381,052 shares abstained from voting on such ratification. (d) The approval of a one-time stock option retention grant issuable to the Chairman of the Board and each of the outside members of the Board of Directors was approved by holders of 15,846,672 shares of the Company's outstanding capital stock. Holders of 11,066,381 shares voted against the ratification, and holders of 1,391,262 shares abstained from voting on such ratification. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 99.1 Certification of Bami Bastani, President and Chief Executive Officer of ANADIGICS, Inc., pursuant to 18 U.S.C. 1350. 99.2 Certification of Thomas C. Shields, Senior Vice President and Chief Financial Officer of ANADIGICS, Inc., pursuant to 18 U.S.C. Section 1350. (b) Reports on Form 8-K during the quarter ended June 28, 2003. On April 4, 2003, the Company filed a current report on Form 8-K reporting that on March 31, 2003, Anadigics Acquisition Corp., a wholly owned subsidiary of the Company, acquired certain assets of RF Solutions, Inc., a privately held fabless supplier of Wireless Local Area Network semiconductor products. On April 16, 2003, the Company filed a current report on Form 8-K reporting that a press release was issued regarding the Company's financial results for the first quarter of 2003. 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. ANADIGICS, INC. By: /s/ Thomas C. Shields --------------------------- Thomas C. Shields Senior Vice President and Chief Financial Officer Dated: July 29, 2003 15 CERTIFICATION I, Bami Bastani, certify that: 1. I have reviewed this quarterly report on Form 10-Q of ANADIGICS, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: July 29, 2003 By: /s/ Bami Bastani ----------------------- Bami Bastani President and Chief Executive Officer 16 CERTIFICATION I, Thomas Shields, certify that: 1. I have reviewed this quarterly report on Form 10-Q of ANADIGICS, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: July 29, 2003 By: /s/ Thomas C. Shields --------------------------- Thomas C. Shields Senior Vice President and Chief Financial Officer 17 EX-99 3 ex_99-1.txt CERTIFICATION Exhibit 99.1 CERTIFICATION The undersigned, Bami Bastani, President and Chief Executive Officer of ANADIGICS, Inc. (the "Company") hereby certifies that the Quarterly Report of the Company on Form 10-Q for the period ended June 28, 2003 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: July 29, 2003 By: /s/ Bami Bastani ----------------------- Bami Bastani President and Chief Executive Officer A signed original of this written statement required by Section 906 has been provided to ANADIGICS, Inc. and will be retained by ANADIGICS, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. EX-99 4 ex_99-2.txt CERTIFICATION Exhibit 99.2 CERTIFICATION The undersigned, Thomas C. Shields, Senior Vice President and Chief Financial Officer of ANADIGICS, Inc. (the "Company") hereby certifies that the Quarterly Report of the Company on Form 10-Q for the period ended June 28, 2003 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: July 29, 2003 /s/ Thomas C. Shields --------------------------- Thomas C. Shields Senior Vice President and Chief Financial Officer A signed original of this written statement required by Section 906 has been provided to ANADIGICS, Inc. and will be retained by ANADIGICS, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----