-----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, L+FRMwefqFrIPT9pQ5tgceZQfopByuA7zzXZqu3DrW3dRAgKLhsvQQ1hL/3YWRez oopaIn72KqvErbQeMM4VRw== 0001125282-03-005864.txt : 20031103 0001125282-03-005864.hdr.sgml : 20031103 20031103172905 ACCESSION NUMBER: 0001125282-03-005864 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20030927 FILED AS OF DATE: 20031103 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: 03973808 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 b327832_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 SEPTEMBER 27, 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 October 31, 2003 was 30,674,033. INDEX ANADIGICS, Inc. Part. I. Financial Information Item 1. Financial Statements (unaudited) Condensed consolidated balance sheets - September 27, 2003 and December 31, 2002. Condensed consolidated statements of operations and comprehensive loss - Three and nine months ended September 27, 2003 and September 28, 2002. Condensed consolidated statements of cash flows - Nine months ended September 27, 2003 and September 28, 2002. Notes to condensed consolidated financial statements - September 27, 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 6. Exhibits and Reports on Form 8-K Signatures PART I - FINANCIAL STATEMENTS Item 1. Financial Statements (unaudited) ANADIGICS, Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
September 27, 2003 December 31, 2002 ------------------ ----------------- (unaudited) (Note 1) ASSETS Current assets: Cash and cash equivalents $ 14,945 $ 24,343 Marketable securities 69,991 74,038 Accounts receivable 10,879 9,016 Inventories 11,327 13,277 Prepaid expenses and other current assets 3,457 4,600 --------- --------- Total current assets 110,599 125,274 Marketable securities 43,363 57,137 Property and equipment: Equipment and furniture 126,366 123,328 Leasehold improvements 38,413 37,473 Projects in process 3,659 5,371 --------- --------- 168,438 166,172 Less accumulated depreciation and amortization 111,174 97,572 --------- --------- 57,264 68,600 Goodwill and other intangibles, net of amortization 1,351 - Other assets 3,871 4,660 --------- --------- Total assets $ 216,448 $ 255,671 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 8,248 $ 7,434 Accrued liabilities 4,367 4,733 Accrued restructuring costs 2,103 2,956 Current maturities of capital lease obligations 96 - --------- --------- Total current liabilities 14,814 15,123 Long-term debt, less current portion 66,700 66,700 Other long-term liabilities 2,913 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 September 27, 2003 and December 31, 2002 307 307 Additional paid-in capital 334,170 334,162 Accumulated deficit (202,764) (164,124) Accumulated other comprehensive income 308 743 --------- --------- Total stockholders' equity 132,021 171,088 --------- --------- Total liabilities and stockholders' equity $ 216,448 $ 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 Nine months ended -------------------------------- ------------------------------- Sept. 27, 2003 Sept. 28, 2002 Sept. 27, 2003 Sept. 28, 2002 -------------- -------------- -------------- -------------- (unaudited) (unaudited) Net sales $ 17,750 $ 21,288 $ 51,874 $ 63,830 Cost of sales 17,690 21,225 51,199 59,062 ----------- ----------- ----------- ----------- Gross profit 60 63 675 4,768 Research and development expenses 7,937 7,586 23,264 22,863 Selling and administrative expenses 4,735 5,463 13,703 16,398 Restructuring and other charges - 2,286 625 5,001 Asset impairment charges - 3,087 - 6,331 Goodwill impairment charge - 8,043 - 8,043 Purchased in-process R&D - - 1,690 - ----------- ----------- ----------- ----------- Operating loss (12,612) (26,402) (38,607) (53,868) Interest income 741 1,543 2,628 4,959 Interest expense (940) (1,307) (2,821) (4,171) Impairment on investment - (390) - (390) Gain on repurchase of Convertible notes - 12,581 - 12,581 Other income (expense) 183 (5) 160 (3) ----------- ----------- ----------- ----------- Loss before cumulative effect of accounting change (12,628) (13,980) (38,640) (40,892) Cumulative effect of accounting change - - - (8,010) ----------- ----------- ----------- ----------- Net loss $ (12,628) $ (13,980) $ (38,640) $ (48,902) =========== =========== =========== =========== Basic and diluted loss per share Loss before cumulative effect of accounting change $ (0.41) $ (0.46) $ (1.26) $ (1.34) Net loss $ (0.41) $ (0.46) $ (1.26) $ (1.60) Weighted average common and dilutive securities outstanding 30,674,033 30,585,540 30,674,033 30,578,630
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (DOLLARS IN THOUSANDS)
Three months ended Nine months ended -------------------------------- -------------------------------- Sept. 27, 2003 Sept. 28, 2002 Sept. 27, 2003 Sept. 28, 2002 -------------- -------------- --------------- -------------- (unaudited) (unaudited) Net loss $ (12,628) $ (13,980) $ (38,640) $ (48,902) Unrealized (loss) gain on marketable securities (341) 457 (468) 254 Foreign currency translation adjustment 5 1 18 (21) Reclassification adjustment: Net realized (gain) loss previously in other comprehensive income - (96) 15 (75) ---------- ----------- ---------- ------------ Comprehensive loss $ (12,964) $ (13,618) $ (39,075) $ (48,744) ========== =========== ========== ============
See accompanying notes. 4 ANADIGICS, Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
Nine months ended -------------------------------- Sept. 27, 2003 Sept. 28, 2002 -------------- -------------- (unaudited) (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (38,640) $ (48,902) Adjustments to reconcile net loss to net cash used in operating activities: Cumulative effect of accounting change - 8,010 Depreciation 13,902 14,891 Amortization 957 1,715 Goodwill impairment charge - 8,043 Gain on repurchase of Convertible notes - (12,581) Amortization of premium on marketable securities 1,786 1,659 Purchased in-process R&D 1,690 - Impairments of long lived assets and investments - 6,721 Loss on disposal of equipment 26 - Changes in operating assets and liabilities: Accounts receivable (1,711) (2,401) Inventory 1,951 1,653 Prepaid expenses and other assets 1,044 1,774 Accounts payable 481 54 Accrued liabilities and other liabilities (1,063) 1,109 ----------- ----------- Net cash used in operating activities (19,577) (18,255) CASH FLOWS FROM INVESTING ACTIVITIES Purchases of plant and equipment (2,297) (3,756) Acquisition of business (3,015) - Purchases of marketable securities (79,180) (77,134) Proceeds from sale of marketable securities 94,747 74,889 ----------- ----------- Net cash provided by (used in) investing activities 10,255 (6,001) CASH FLOWS FROM FINANCING ACTIVITIES Payment of capital lease obligations (76) (94) Repayments of long-term debt - (198) Repurchase of Convertible notes - (19,828) Issuance of common stock - 108 ----------- ----------- Net cash used in financing activities (76) (20,012) ----------- ----------- Net increase (decrease) in cash and cash equivalents (9,398) (44,268) Cash and cash equivalents at beginning of period 24,343 63,102 ----------- ----------- Cash and cash equivalents at end of period $ 14,945 $ 18,834 =========== =========== Supplemental disclosures of cash flow information: Interest paid $ 1,668 $2,881 Taxes paid - 118
See accompanying notes. 5 ANADIGICS, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - SEPT. 27, 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 nine month periods ended September 27, 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. INCOME TAXES The Company maintains a full valuation allowance on its deferred tax assets. Accordingly, the Company has not recorded a benefit for income taxes. 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 we estimate, by examining historical returns and other information we deem critical, will be needed to cover future warranty costs for products sold during the period. Warranty reserve movements in the nine months included $234 in actual charges and $10 in provisions resulting in the balance of $144 at September 27, 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 December 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 Nine months ended ------------------------------ ----------------------------- Sept. 27, 2003 Sept. 28, 2002 Sept. 27, 2003 Sept. 28, 2002 -------------- -------------- -------------- -------------- Net loss, as reported $ (12,628) $ (13,980) $ (38,640) $ (48,902) Stock based compensation expense under fair value reporting (1,510) (2,078) (5,181) (8,595) Pro-forma net loss (14,138) (16,058) (43,821) (57,497) Basic and diluted net loss per share Net loss, as reported $ (0.41) $ (0.46) $ (1.26) $ (1.60) Pro-forma net loss $ (0.46) $ (0.53) $ (1.43) $ (1.88)
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: Sept. 27, 2003 December 31, 2002 -------------- ----------------- Raw materials $ 3,247 $ 4,316 Work in process 9,601 10,080 Finished goods 4,175 6,015 ----------- ---------- 17,023 20,411 Reserves (5,696) (7,134) ----------- ---------- Total $ 11,327 $ 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 Nine months ended ------------------------------- ------------------------------ Sept. 27, 2003 Sept. 28, 2002 Sept. 27, 2003 Sept. 28, 2002 -------------- -------------- -------------- -------------- Weighted average common shares outstanding used to calculate basic earnings per share 30,674,033 30,585,540 30,674,033 30,578,630 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 30,585,540 30,674,033 30,578,630 ========== ========== ========== ==========
* 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. 7 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 expired on August 4, 2003, the Company accepted for cancellation options to purchase 1,673,931 shares of common stock having a weighted average exercise price of $19.49. 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. As of September 27, 2003, options issuable under this program are 557,954. 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 Nine months ended ------------------------------- ------------------------------ Sept. 27, 2003 Sept. 28, 2002 Sept. 27, 2003 Sept 28, 2002 -------------- -------------- -------------- ------------- Broadband $ 8,267 $ 10,263 $ 24,817 $ 30,689 Wireless 9,483 11,025 27,057 33,141 ------------ ------------ ------------- ------------ Total $ 17,750 $ 21,288 $ 51,874 $ 63,830 ============ ============ ============= ============
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 Nine months ended -------------------------------- ------------------------------ Sept. 27, 2003 Sept. 28, 2002 Sept. 27, 2003 Sept 28, 2002 --------------- -------------- -------------- ------------- Asia $ 8,662 $ 9,842 $ 19,642 $ 25,619 U.S.A. and Canada 6,995 9,982 27,828 33,860 Other 2,093 1,464 4,404 4,351 ------------- ------------- ------------- ------------ Total $ 17,750 $ 21,288 $ 51,874 $ 63,830 ============= ============= ============= ============
5. RESTRUCTURING, IMPAIRMENT and OTHER CHARGE 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 $534 of benefits were paid through September 27, 2003. During the nine months ended September 28, 2002, we recorded asset impairments, impairment on investment, and restructuring and other charges of $6,331, $390 and $5,001, respectively. 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. 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 achieved. The Company incurred $215 in acquisition-related costs. The fixed acquisition cost of $3,015 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 1,204 Total purchase price $3,015 8 If certain sales targets are reached over the twelve months ending March 31, 2004, the additional purchase consideration would increase the goodwill attributed to RFS. The Company is unable to assess the amount or 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 to 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 nine months ended September 27, 2003 and September 28, 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 Nine months ended ------------------------------- ------------------------------- Sept. 27, 2003 Sept. 28, 2002 Sept. 27, 2003 Sept. 28, 2002 -------------- -------------- -------------- -------------- Pro-forma revenue $ 17,750 $ 21,367 $ 52,233 $ 63,970 Pro-forma net loss before cumulative effect of accounting change $ (12,628) $ (15,843) $ (38,418) $ (46,209) Pro-forma net loss $ (12,628) $ (15,843) $ (38,418) $ (54,219) Basic and diluted net loss per share Pro-forma net loss before cumulative effect of accounting change $ (0.41) $ (0.52) $ (1.25) $ (1.51) Pro-forma net loss $ (0.41) $ (0.52) $ (1.25) $ (1.77)
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 Nine months ended ------------------------------- ------------------------------ Sept. 27, 2003 Sept. 28, 2002 Sept. 27, 2003 Sept. 28, 2002 -------------- -------------- -------------- -------------- (unaudited) (unaudited) Net sales 100.0% 100.0% 100.0% 100.0% Cost of sales 99.7 99.7 98.7 92.5 ---------- ---------- ---------- --------- Gross profit 0.3 0.3 1.3 7.5 Research and development expenses 44.7 35.6 44.8 35.8 Selling and administrative expenses 26.6 25.7 26.4 25.7 Restructuring and other charges - 10.7 1.2 7.9 Asset impairment charge - 14.5 - 9.8 Goodwill impairment charge - 37.8 - 12.6 Purchased in-process R&D - - 3.3 - ---------- ---------- ---------- --------- Operating loss (71.0) (124.0) (74.4) (84.4) Interest income 4.2 7.2 5.1 7.8 Interest expense (5.3) (6.1) (5.5) (6.6) Impairment on investments - (1.8) - (0.6) Gain on repurchase of Convertible notes - 59.1 - 19.7 Other income 1.0 - 0.3 - ---------- ---------- ---------- --------- Loss before cumulative effect of accounting change (71.1) (65.7) (74.5) (64.1) Cumulative effect of accounting change - - - (12.5) ---------- ---------- ---------- --------- Net loss (71.1%) (65.7%) (74.5%) (76.6%) ========== ========== ========== =========
NET SALES. Net sales decreased 16.6% during the third quarter of 2003 to $17.8 million from $21.3 million in the third quarter of 2002. For the nine months ended September 27, 2003, net sales were $51.9 million, a 18.7% decrease from net sales of $63.8 million for the nine months ended September 28, 2002. Sales of integrated circuits for Wireless applications decreased 14.0% during the third quarter of 2003 to $9.5 million from $11.0 million in the third quarter of 2002. For the nine months ended September 27, 2003, net sales of integrated circuits for Wireless applications decreased 18.4% to $27.1 million from $33.1 million in the nine-month period ended September 28, 2002. The decrease in sales of integrated circuits for Wireless applications during the third quarter was primarily due to the product mix-shift into smaller die-size products. The nine-month decrease is primarily attributable to the continued decrease in sales of our TDMA power amplifiers. Sales of integrated circuits for Broadband applications decreased 19.5% during the third quarter of 2003 to $8.3 million from $10.3 million in the third quarter of 2002. For the nine months ended September 27, 2003, net sales of integrated circuits for Broadband applications decreased 19.1% to $24.8 million from $30.7 million in the nine-month period ended September 28, 2002. Sales for the three and nine month periods ended September 27, 2003 decreased despite the inclusion of Wireless LAN sales resulting from 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. Generally, selling prices for same product sales were lower during the third quarter of 2003 compared to the third quarter of 2002. GROSS MARGIN. Gross margin during the third quarter of 2003 was 0.3%, consistent with the gross margin of 0.3% for the third quarter of 2002. For the nine months ended September 27, 2003, gross margin decreased to 1.3% from 7.5% for the nine months ended September 28, 2002. The third quarter of 2002 included an inventory charge of $2.2 million for defective raw materials purchased from a former supplier that has ceased operations. The decrease in gross margin in the three and nine month periods ended September 27, 2003 (adjusted for the aforementioned inventory charges) was primarily due to the decrease in revenues, lower production throughput and consequent lower absorption of fixed costs, which was partially offset by reductions in our manufacturing cost base. RESEARCH AND DEVELOPMENT. Company sponsored research and development expense increased 4.6% during the third quarter of 2003 to $7.9 million from $7.6 million during the third quarter of 2002. Company sponsored research and development expense increased 1.8% during the nine-month period ended September 27, 2003 to $23.3 million from $22.9 million for the nine-month period ended September 28, 2002. The increase in the third 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 44.7% in the third quarter of 2003 from 35.6% in the third quarter of 2002 and to 44.8% from 35.8% in the nine months of 2003 and 2002, respectively. 10 SELLING AND ADMINISTRATIVE. Selling and administrative expenses decreased 13.3% during the third quarter of 2003 to $4.7 million from $5.5 million in the third quarter of 2002. Selling and administrative expenses decreased 16.4% during the nine-month period ended September 27, 2003 to $13.7 million from $16.4 million in the nine-month period ended September 28, 2002. The decrease in the three and nine month periods ended September 27, 2003 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 26.6% in the third quarter of 2003 from 25.7% in the third quarter of 2002 and to 26.4% from 25.7% in the nine months of 2003 and 2002, respectively. 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 $0.5 million of severance benefits were paid through September 27, 2003. The anticipated annual benefit from these charges is expected to approximate $1.9 million. During the nine months ended September 28, 2002, we recorded asset impairments, impairment on investments, and restructuring and other charges of $6.3 million, $0.4 million and $5.0 million, respectively. 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 to not have alternative future uses. INTEREST INCOME. Interest income decreased 52.0% to $0.7 million during the third quarter of 2003 from $1.5 million during the third quarter of 2002. For the nine months ended September 27, 2003, interest income decreased 47.0% to $2.6 million from $5.0 million in the nine-month period ended September 28, 2002. The decreases were due to lower invested funds compounded by lower interest rates. INTEREST EXPENSE. Interest expense decreased 28.1% to $0.9 million during the third quarter of 2003 from $1.3 million during the third quarter of 2002. For the nine months ended September 27, 2003, interest expense decreased 32.4% to $2.8 million from $4.2 million in the nine-month period ended September 28, 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 of such notes 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 September 27, 2003, we had $14.9 million in cash and cash equivalents and $113.4 million in marketable securities. We had $66.7 million of interest-bearing debt outstanding as of September 27, 2003. Operating activities used $19.6 million in cash during the nine-month period ended September 27, 2003. Investing activities, which consisted of net sales of marketable securities of $15.6 million, partially offset by purchases of equipment of $2.3 million and $3.0 million paid upon the acquisition of RFS' power amplifier business, provided $10.3 million of cash during the nine-month period ended September 27, 2003. As of September 27, 2003, we had purchase commitments of approximately $0.8 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. 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. 11 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 we estimate, by examining historical returns and other information we deem 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 December 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, changes 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. ITEM 4. CONTROLS AND PROCEDURES Under the supervision and with the participation of certain members of the Company's management, including the President and Chief Executive Officer and Chief Financial Officer, the Company completed an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) to the Securities Exchange Act of 1934, as amended, (the "Exchange Act")). Based on this evaluation, the Company's President and Chief Executive Officer and Chief Financial Officer believe that the disclosure controls and procedures were effective as of the end of the period covered by this report with respect to timely communicating to them and other members of management responsible for preparing periodic reports all material information required to be disclosed in this report as it relates to the Company and its consolidated subsidiaries. There was no change in the Company's internal control over financial reporting during the Company's last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. 12 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 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 31.1 Rule 13a-14(a)/15d-14(a) Certification of Bami Bastani, President and Chief Executive Officer of ANADIGICS, Inc. 31.2 Rule 13a-14(a)/15d-14(a) Certification of Thomas C. Shields, Senior Vice President and Chief Financial Officer of ANADIGICS, Inc. 32.1 Section 1350 Certification of Bami Bastani, President and Chief Executive Officer of ANADIGICS, Inc. 32.2 Section 1350 Certification of Thomas C. Shields, Senior Vice President and Chief Financial Officer of ANADIGICS, Inc. (b) Reports on Form 8-K during the quarter ended September 27, 2003. On July 28, 2003, the Company furnished on Form 8-K a press release announcing the Company's financial results for its second quarter of 2003. 13 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: November 3, 2003 14 EX-31.1 3 b327832_ex311.txt CERTIFICATION Exhibit 31.1 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 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared; b) Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 3, 2003 By: /s/ Bami Bastani ------------------------------ Bami Bastani President and Chief Executive Officer 15 EX-31.2 4 b327832_ex312.txt CERTIFICATION Exhibit 31.2 CERTIFICATION I, Thomas Shields, certify that: 1. I have reviewed this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared; b) Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 3, 2003 By:/s/ Thomas C. Shields -------------------------------- Thomas C. Shields Senior Vice President and Chief Financial Officer 16 EX-32.1 5 b327832_ex321.txt CERTIFICATION Exhibit 32.1 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 September 27, 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: November 3, 2003 By: /s/ Bami Bastani ------------------------------ Bami Bastani President and Chief Executive Officer This certification shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any registration statement filed under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated by reference. A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version 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. 17 EX-32.2 6 b327832_ex322.txt CERTIFICATION Exhibit 32.2 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 September 27, 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: November 3, 2003 /s/ Thomas C. Shields -------------------------------- Thomas C. Shields Senior Vice President and Chief Financial Officer This certification shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any registration statement filed under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated by reference. A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version 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. 18 -----END PRIVACY-ENHANCED MESSAGE-----