UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-Q
--------------------
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
- ----- Exchange Act of 1934
For the quarterly period ended December 31, 1998
OR
- ----- Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 000-28276
SAWTEK INC.
(Exact name of registrant as specified in its charter)
Florida 59-1864440
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1818 South Highway 441
Apopka, Florida 32703
(Address of principal executive offices)
Telephone Number (407) 886-8860
(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
------ ------
As of January 15, 1999, there were 20,890,524 shares of the
Registrant's Common stock outstanding, par value $.0005.
<PAGE>
Sawtek Inc.
TABLE OF CONTENTS
Part I. Financial Information Page Number
--------------------- -----------
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets as of December 31, 1998
and September 30, 1998 ........................................... 3
Consolidated Statements of Income for the three months
ended December 31, 1998 and 1997.................................. 4
Consolidated Statements of Cash Flows for the three months
ended December 31, 1998 and 1997.................................. 5
Notes to Consolidated Financial Statements........................ 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ........... 8
Part II. Other Information
-----------------
Item 1. Legal Proceedings .......................................15
Item 2. Changes in Securities ...................................15
Item 3. Defaults Upon Senior Securities .........................15
Item 4. Submission of Matters to a Vote of Security Holders .....15
Item 5. Other Information ........................................15
Item 6. Exhibits and Reports on Form 8-K ........................15
Signatures.................................................................15
<PAGE>
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
<TABLE>
SAWTEK INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
<CAPTION>
December 31, September 30,
1998 1998
------------ -------------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash, cash equivalents and short-term investments $ 92,417 $ 84,131
Accounts receivable net of allowance for doubtful accounts and returns of
$1,379 at December 30, 1998 and $1,399 at September 30, 1998 9,940 11,569
Inventories 7,650 8,453
Deferred income taxes 1,039 1,179
Other current assets 1,158 1,075
-------- --------
Total current assets 112,204 106,407
Other assets 100 109
Property, plant and equipment, net 40,979 42,194
-------- --------
Total assets $153,283 $148,710
======== ========
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 1,048 $ 1,830
Accrued wages and benefits 1,582 3,198
Other accrued liabilities 1,584 1,912
Current maturities of long-term debt 469 469
Income taxes payable 1,005 69
-------- --------
Total current liabilities 5,688 7,478
Long-term debt, less current maturities 2,052 2,169
Deferred income taxes 16,742 15,186
Shareholders' equity:
Common stock; $.0005 par value; 120,000,000 authorized shares; issued and
outstanding shares 21,415,429 at December 31, 1998 and 21,334,097 at
September 30, 1998 11 11
Capital surplus 73,136 72,816
Unearned ESOP compensation (975) (975)
Retained earnings 62,963 56,646
Less common stock held in treasury at cost; 504,904 shares at
December 31, 1998 and 385,500 at September 30, 1998 (6,334) (4,621)
-------- --------
Total shareholders' equity 128,801 123,877
-------- --------
Total liabilities and shareholders' equity $153,283 $148,710
======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
SAWTEK INC.
Consolidated Statements of Income
(unaudited)
<CAPTION>
Three Months Ended
December 31,
----------------------
1998 1997
---- ----
(in thousands, except per share data)
<S> <C> <C>
Net sales $ 22,219 $ 24,694
Cost of sales 9,958 11,371
-------- --------
Gross profit 12,261 13,323
Operating expenses:
Selling expenses 1,385 1,769
General & administrative expenses 1,079 1,431
Research & development expenses 1,197 868
-------- --------
Total operating expenses 3,661 4,068
-------- --------
Operating income 8,600 9,255
Other income - net (1,119) (818)
-------- --------
Income before taxes 9,719 10,073
Income taxes 3,402 3,727
-------- --------
Net income $ 6,317 $ 6,346
======== ========
Net income per share - basic $ 0.30 $ 0.30
Net income per share - diluted $ 0.30 $ 0.29
Shares used in computing net income per share - basic 20,882 21,023
Shares used in computing net income per share - diluted 21,231 21,733
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
SAWTEK INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
<CAPTION>
Three Months Ended
December 31,
------------------
1998 1997
---- ----
(in thousands)
<S> <C> <C>
Operating activities:
Net income $ 6,317 $ 6,346
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 1,601 1,618
Deferred income taxes 1,696 1,391
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 1,629 1,936
Inventories 803 (3,765)
Other current assets (83) (201)
Increase (decrease) in liabilities:
Accounts payable (782) 1,307
Accrued liabilities (1,944) (1,555)
Income taxes payable 936 1,942
------- -------
Net cash provided by operating activities 10,173 9,019
Investing activities:
Purchase of property, plant and equipment, net (377) (3,813)
Short-term investments 19,561 (3,005)
Other 94
------- -------
Net cash provided by (used in) investing activities 19,184 (6,724)
Financing activities:
Principal payments on long-term debt (117) (313)
Net proceeds from sale of Common stock 320 270
Purchase of Common stock for treasury (1,713)
------- -------
Net cash used in financing activities (1,510) (43)
------- -------
Increase in cash and cash equivalents 27,847 2,252
Cash and cash equivalents at beginning of period 42,132 42,300
Short-term investments 22,438 18,769
------- -------
Cash, cash equivalents and short-term investment at end of period $92,417 $63,321
======= =======
Interest paid $ 42 $ 65
Income taxes paid $ 770 $ 450
See accompanying notes to consolidated financial statements.
</TABLE>
5
<PAGE>
SAWTEK INC.
Notes to Consolidated Financial Statements - December 31, 1998 (unaudited)
1. Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information in response to the requirements of Article 10 of
Regulation S-X. Accordingly, they do not contain all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the accompanying unaudited
consolidated financial statements reflect all adjustments (consisting only of
normal recurring adjustments) considered necessary for a fair presentation of
the Company's financial condition as of December 31, 1998, and the results of
its operations and its cash flows for the three-month periods ended December 31,
1998 and 1997. These financial statements should be read in conjunction with the
Company's audited financial statements as of September 30, 1998, including the
notes thereto, and the other information set forth therein included in the
Company's most recent annual report on Form 10-K for the year ended September
30, 1998 (File No. 000-28276), which was filed with the Securities and Exchange
Commission (the "SEC") on November 10, 1998. The following discussion may
contain forward looking statements which are subject to the risk factors set
forth in "Risks and Uncertainties" as stated in Item 2 of this Form 10-Q.
The Company maintains its records on a fiscal year ending on September 30 of
each year and all references to a year refer to the year ending on that date.
The Company's first, second and third quarters normally end on the Sunday
closest to the last day of the last month of such quarter, which was January 3,
1999, for the first quarter of fiscal 1999. However, for convenience, the
financial statements are dated as of December 31, 1998. There were no material
transactions from December 31, 1998 through January 3, 1999.
The Company reviewed the application of SFAS No. 130, "Reporting Comprehensive
Income", and SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information", and has determined that neither pronouncement is material
to the Company's reported results or footnote disclosures. The Company does not
have any material transactions to be reported under SFAS No. 130 and
substantially all of its operations are in one business segment, the manufacture
and sale of SAW-based products, with respect to the segment disclosure
requirements of SFAS No. 131.
Operating results for the three-month period ended December 31, 1998 are not
necessarily indicative of the operating results that may be expected for the
year ending September 30, 1999. Certain historical accounts have been restated
to conform to the current year presentation.
6
<PAGE>
2. Earnings Per Share
------------------
The following table sets forth the computation of basic and diluted earnings per
share in accordance with the Statement of Financial Accounting Standard Number
128:
<TABLE>
<CAPTION>
Three Months Ended
December 31,
------------------
1998 1997
---- ----
(in thousands, except per share data)
<S> <C> <C>
Numerator:
Net income available to common stockholders $ 6,317 $ 6,346
======= =======
Denominator:
Denominator for basic earnings per share:
Weighted average shares 20,882 21,023
Effect of dilutive securities:
Employee stock options 349 710
------- -------
Denominator for diluted earnings per share:
Adjusted weighted average shares and
assumed conversions 21,231 21,733
======= =======
Basic earnings per share $ 0.30 $ 0.30
======= =======
Diluted earnings per share $ 0.30 $ 0.29
======= =======
</TABLE>
Options to purchase 446,000 shares at prices ranging from $22.125 to $35.00 per
share were outstanding during the quarter but were not included in the
computation of diluted earnings per share because the option exercise price was
greater than the average market price of the common shares and, therefore, the
effect would be anti-dilutive.
3. Inventories - Inventories are composed of the following:
-----------
<TABLE>
<CAPTION>
December 31, 1998 September 30, 1998
----------------- ------------------
(in thousands)
<S> <C> <C>
Raw Material $3,872 $3,809
Work in Process 1,271 1,969
Finished Goods 2,507 2,675
------ ------
Total $7,650 $8,453
====== ======
</TABLE>
7
<PAGE>
4. Property, Plant and Equipment - Property, plant and equipment are composed
----------------------------- of the following:
<TABLE>
<CAPTION>
December 31, 1998 September 30, 1998
----------------- ------------------
(in thousands)
<S> <C> <C>
Land and Improvements $ 830 $ 830
Buildings 16,519 16,595
Production and Test Equipment 37,970 37,235
Computer Equipment 3,254 3,239
Furniture and Fixtures 2,676 2,666
Construction in Progress 736 1,043
------- -------
61,985 61,608
Less Accumulated Depreciation 21,006 19,414
------- -------
Total $40,979 $42,194
======= =======
</TABLE>
5. Shareholders' Equity - The consolidated changes in shareholders' equity for
-------------------- the three months ended December 31, 1998 are as
follows:
<TABLE>
<CAPTION>
(in thousands)
Unearned Treasury
Common Stock Capital ESOP Retained Stock
Shares Amount Surplus Compensation Earnings Shares Amount
------ ------ ------- ------------ -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at October 1, 1998 21,334 $11 $72,816 $(975) $56,646 386 (4,621)
Net income 6,317
Sale of common stock 81 320
Purchase of treasury stock 119 (1,713)
------ --- ------- ----- ------- --- -----
Balance at December 31, 1998 21,415 $11 $73,136 $(975) $62,963 505 (6,334)
====== === ======= ====== ======== === =====
</TABLE>
Item 2. Management's discussion and analysis of financial condition and results
of operations
The following discussion and analysis should be read in conjunction with the
Company's Consolidated Financial Statements and Notes thereto included elsewhere
in this Form 10-Q. Except for the historical information contained herein, the
discussion in this Form 10-Q contains certain forward-looking statements such as
statements of the Company's plans, objectives, expectations and intentions that
involve risks and uncertainties. The cautionary statements made herein should be
read as being applicable to all related forward-looking statements wherever they
appear. The Company's actual results could differ materially from those
discussed here. Factors that could cause or contribute to such differences
include those discussed in "Risks and Uncertainties," as well as those discussed
elsewhere herein.
8
<PAGE>
Overview
========
The Company was incorporated in 1979 to design, develop, manufacture and market
a broad range of electronic components based on surface acoustic wave ("SAW")
technology used in telecommunications, data communications, video transmission,
military and space systems and other markets. The Company's focus has been on
the high-end performance spectrum of the market, and its primary products are
SAW bandpass filters, resonators, delay lines, oscillators and SAW-based
sub-systems. Initially, the Company's products were concentrated in the military
and space systems market. The Company has since shifted its attention to
commercial markets which accounted for approximately 93% of net sales in the
first three months of fiscal 1999. The Company has also experienced significant
growth in its international markets over the last five years, with international
sales accounting for approximately 34% of net sales for the first three months
of fiscal 1999. However, sales to South Korean customers have declined from 21%
of revenue in the quarter ended December 31, 1997 to 9% in the current quarter
due to the economic recession in that country and the corresponding slow down in
consumer and industrial demand.
The Company has a wide range of customers, but a significant portion of its
revenue is derived from the top three customers which accounted for
approximately 50% of net revenue for the quarter ended December 31, 1998 and
1997.
Results of Operations
=====================
The following table sets forth, for the periods indicated, the percentage
relationship of certain items from the Company's statements of income to total
net sales:
<TABLE>
<CAPTION>
Three Months Ended
December 31,
------------------
1998 1997
---- ----
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales 44.8 46.0
----- -----
Gross profit 55.2 54.0
Operating expenses:
Selling expenses 6.2 7.2
General & administrative expenses 4.9 5.8
Research & development expenses 5.4 3.5
----- -----
Total operating expenses 16.5 16.5
----- -----
Operating income 38.7 37.5
Other income - net 5.0 3.3
----- -----
Income before taxes 43.7 40.8
Income taxes 15.3 15.1
----- -----
Net income 28.4% 25.7%
===== =====
</TABLE>
9
<PAGE>
Net Sales. Net sales decreased 10% from $24.7 million in the quarter ended
December 31, 1997 to $22.2 million in the quarter ended December 31, 1998 due to
reduced sales into the South Korean market as a result of the economic recession
in that country and due to lower average selling prices for high volume filters
for telephone handsets based on Code Division Multiple Access ("CDMA")
technology and filters for base station applications based on Global System for
Mobile ("GSM) communications technology.
Revenue from South Korean customers declined from 21% of total revenue in the
quarter ended December 31, 1997 to 9% in the quarter ended December 31, 1998
reflecting the slow down in demand from these customers due to the economic
turmoil in South Korea.
The Company believes that the financial turmoil in Asia will continue to impact
the Company in fiscal 1999 and that revenue from Asian customers will likely be
below the revenue from these customers in fiscal 1998.
In addition, the Company believes that prices for filters for CDMA base stations
may decline in the future due to the conversion to smaller surface mount
packages which would reduce revenue and reduce gross margins on these products.
Sales of CDMA base station filters accounted for approximately 24% of total
revenue in the quarter ended December 31, 1998.
Gross Margin. Gross margin increased from 54.0% for the quarter ended December
31, 1997 to 55.2% in the quarter ended December 31, 1998 due to improved yields,
lower manufacturing labor costs, and higher than expected margins for bandpass
filters for base station and handset applications and for chemical sensor
products. The Company believes gross margins will decline as the Company shifts
more of its product mix to handset filters which are lower priced, have lower
profit margins, and are subject to more competitive pricing pressure than the
Company's other products.
Operating Expenses. Operating expenses overall remained at 16.5% of net sales
for the quarter ended December 31, 1998 compared to the same period one year
ago. Selling expenses decreased as a percentage of net revenue due to lower
commissions paid to independent sales representatives. General and
administrative expenses decreased as a percentage of net sales due to less
administrative personnel. Research and development expenses increased due to
more expenditures for programs, particularly for SAW-based chemical sensors.
Other Income. Other income primarily represents interest income which increased
for the three-month period as the Company recorded increased interest income on
its investment of cash, cash equivalents and short-term investments.
Income Tax Expense. The provision for income taxes as a percentage of income
before income taxes was 37% for the quarter ended December 31, 1997 and 35% for
the quarter ended December 31, 1998. The lower effective tax rate relates to tax
benefits received from the Company's foreign sales corporation, tax exempt
interest income, a lower effective rate for state income taxes, and other
factors. The Company expects that its effective tax rate will remain at
approximately 34% to 36% during fiscal 1999.
10
<PAGE>
Liquidity and Capital Resources
- -------------------------------
The Company has financed its operations to date through cash generated from
operations, bank borrowings, lease financing, the private sale of securities,
its May 1, 1996 initial public offering, and the July 1, 1997 follow-on public
offering. The Company requires capital principally for equipment, financing of
accounts receivable and inventory, investment in product development activities
and new technologies, expansion of its operation in Costa Rica, and potential
acquisitions of new technologies or compatible companies. For the three months
ended December 31, 1998, the Company generated net cash from operating
activities of $10.2 million, consisting primarily of net income of $6.3 million,
$1.6 million of depreciation and amortization, a $1.6 million reduction in
accounts receivable and $1.7 million in deferred taxes, offset by the net
decrease in accounts payable and accruals of $2.7 million.
The Company has a revolving credit agreement totaling $20.0 million from
SunTrust Bank, Central Florida, N.A. available through March 31, 2000. There
were no balances outstanding on this credit line at December 31, 1998.
The Company made capital expenditures of approximately $377,000 during the
quarter ended December 31, 1998. The Company intends to spend approximately $8
million to $10 million in fiscal 1999 on capital equipment and facilities.
The Company repurchased 119,405 shares of its Common stock for $1.7 million in
the quarter ended December 31, 1998. In the fourth quarter of fiscal 1998, the
Board of Directors authorized the Company to repurchase up to 1,000,000 shares
of Common stock which includes the 504,905 purchased through December 31, 1998.
The Company expects to continue to repurchase shares of its Common stock from
time to time in the future. The repurchased shares will be used to satisfy stock
option exercises and issuance of shares under other stock-related benefit
programs.
The Company believes that its present cash position, together with its credit
facility and funds expected to be generated from operations, will be sufficient
to meet its projected working capital and other cash requirements through the
next 12 months. Thereafter, the Company may require additional equity or debt
financing to address its working capital needs or to provide funding for capital
expenditures. There can be no assurance that events in the future will not
require the Company to seek additional capital sooner or, if so required, that
it will be available on terms acceptable to the Company, if at all.
Impact of Inflation on the Company
- ----------------------------------
Management does not believe that inflation has had a material impact on
operating costs and earnings of the Company.
New Accounting Pronouncements
- -----------------------------
There were no new pronouncements issued that would have a material impact on the
Company's financial statements that have not already been adopted by the
Company.
11
<PAGE>
Year 2000 Compliance
- --------------------
The Year 2000 relates to the method used by computer systems and software for
recognizing the two-digit year code as the year 1900, instead of 2000. Computer
hardware and software describes traditional information technology systems such
as enterprise resource planning systems, accounting systems, fax servers, print
servers, desktop computers and applications, telephone/PBX systems, as well as
other systems such as manufacturing equipment, facilities equipment and security
systems. Some of Sawtek's computer hardware and software may recognize a year
represented by "00" as 1900, instead of 2000. This could result in unexpected
behavior in the affected hardware or software. These systems will need to be
able to accept four-digit entries to distinguish years beginning with 2000 from
prior years. As a result, systems that do not accept four-digit year entries
will need to be upgraded or replaced to comply with such Year 2000 requirements.
Sawtek's State of Readiness - Year 2000
- ---------------------------------------
Sawtek's Year 2000 inventory, assessment, remediation and testing began in
January 1998 and is planned to be completed by June 1999. As of December 31,
1998, it is estimated that 70% of the issues that are necessary for a successful
Year 2000 transition are resolved. The remaining 30% of the issues are in
progress and are planned to be completed by June 1999.
To certify Year 2000 compliance, Sawtek employed two methods. Vendor
certification was the primary method utilized. In order for a system to be
considered compliant from vendor certification, Sawtek required a written
statement from the vendor, as well as a description of the testing methods used.
If this information was not available or was not considered thorough enough,
Sawtek performed an internal test. These tests include the use of a certified
hardware test program, the examination of the software source code by Sawtek's
Software Engineering Department or Information Systems Department and advancing
the date past January 1, 2000.
Sawtek also surveyed key suppliers. As of January 20, 1999, 100% of those
surveyed have responded. Of those surveyed, 50% are already compliant. The
remainder expect to be compliant some time in 1999. No suppliers responded that
they would fail to be Year 2000 compliant.
Sawtek is in the process of surveying its key customers and the results are
expected to be completed by the end of February 1999.
Costs to Address the Company's Year 2000 Issues
- -----------------------------------------------
The bulk of the Company's costs to address Year 2000 issues are internal staff
time estimated at less than $100,000 for the past fiscal year and the cost to
upgrade its main MRP software which is certified as Year 2000 compliant. The
cost of this upgrade, which was purchased in fiscal 1998, was $48,000. The
estimated cost to complete the Year 2000 compliance and transition is less than
$200,000 for fiscal 1999, which will be funded out of fiscal 1999 operating cash
flow.
12
<PAGE>
The Risks of the Company's Year 2000 Issues
- -------------------------------------------
The Company's products are not date sensitive and, therefore, are not subject to
year 2000 defects or problems. The Company believes that its primary
manufacturing, engineering, financial and administrative systems are Year 2000
compliant. The greatest potential risk from Year 2000 issues relates to a major
supplier or customer whose systems are not Year 2000 compliant and who may be
unable to meet delivery requirements for an important raw material or equipment
or who may not be able to accept shipment of the Company's products until they
correct their Year 2000 problem.
The Company presently believes that the Year 2000 issue will not pose
significant operational problems for the Company. However, if all Year 2000
issues are not properly identified, or assessment, remediation and testing are
not effected timely, there can be no assurance that the Year 2000 issue will not
materially adversely impact the Company's results of operations or adversely
affect relationships with customers, vendors, or others. Additionally, there can
be no assurance that the Year 2000 issues of other entities will not have a
material adverse impact on the Company's systems or results of operations.
The Company's Contingency Plans - Year 2000
- -------------------------------------------
The Company has begun, but not yet completed, a comprehensive analysis of the
operational problems and costs (including loss of revenues) that would be
reasonably likely to result from the failure by the Company and certain third
parties to complete efforts necessary to achieve Year 2000 compliance on a
timely basis. A contingency plan has not been developed for dealing with the
most reasonably likely worst-case scenario, and such scenario has not yet been
clearly identified. The Company currently plans to complete such analysis and
contingency planning by June 30, 1999.
Foreign Currency
- ----------------
The Company generates approximately 30% to 40% of its revenue from sales outside
of the United States. In addition, approximately 40% to 50% of its product is
produced in Costa Rica. To date, substantially all of the Company's sales have
been denominated in U.S. dollars and the vast majority of costs incurred are in
U.S. dollars. As a result, the Company has not engaged in significant
transactions involving foreign currency management.
Over the past year, the valuations of many foreign currencies have fluctuated
relative to the U.S. dollar. The Korean won and Japanese yen, in particular,
have fluctuated in value due in part to the economic problems experienced by
these countries over the past year. A stronger U.S. dollar makes it more
difficult for companies in these countries to purchase U.S. products and it has
made it more difficult for Sawtek to compete against SAW producers based in
these countries.
The new common European currency, the euro, made its debut in January 1999.
Approximately 20% of the Company's sales are in Europe. To date, none of the
Company's customers or suppliers have requested the Company to transact business
in the euro. As a result, the impact of this new currency on the Company is not
determinable at this time.
13
<PAGE>
Risks and Uncertainties
- -----------------------
This Form 10-Q contains certain forward-looking statements which are made
pursuant to the Safe Harbor provisions of the Private Securities Litigation Act
of 1995. Investors are cautioned that forward-looking statements such as
statements of the Company's plans, objectives, expectations and intentions
involve risks and uncertainties. The cautionary statements made in this report
should be read as being applicable to all related forward-looking statements
wherever they appear. Statements containing terms such as "believes," "does not
believe," "no reason to believe," "expects," "plans," "intends," "estimates" or
"anticipates" are considered to contain uncertainty and are forward-looking
statements. The Company's actual results could differ materially from those
discussed. Factors that could cause or contribute to such differences include
the following: the Company's dependence on continuing demand for wireless
communications services and CDMA technology, particularly CDMA handset units;
economic turmoil in South Korea and other Asia-Pacific countries (as experienced
during the past year) or other geographic areas of the world and risks
associated with international operations; fluctuations in the value of foreign
currency; pressure on revenues and gross profit margins due to competition;
change in product mix and other factors; lower average selling prices of
Sawtek's products; dependence on a limited number of customers, which are
expected to continue to account for a high percentage of the Company's future
net sales; fluctuations in the Company's quarterly results and backlog which may
be caused by such factors as product mix changes, price competition,
availability of manufacturing capacity, and customer order cancellation or
rescheduling; the Company's dependence on its timely development of new or
improved SAW products (such as SAW chemical sensors) to meet changing market
needs and the risk of competing technologies which could replace or reduce the
use of SAW technology for certain applications; risks associated with Costa Rica
operations, as well as other risks discussed in Sawtek's SEC reports, including
Form 10-K for the fiscal year ended September 30, 1998 filed with the SEC on
November 10, 1998.
A reader of this Form 10-Q should understand that it is not possible to predict
or identify all such risk factors. Consequently, the reader should not consider
this list to be a complete statement of all potential risks or uncertainties.
The Company does not assume the obligation to update any forward-looking
statement.
14
<PAGE>
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings. The Company is not subject to any legal
proceedings that, if adversely determined, would cause a
material adverse effect on the Company's financial condition,
business or results of operations.
Item 2. Changes in Securities. None.
Item 3. Defaults Upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders. None.
Item 5. Other Information. None.
Item 6. (a) Exhibits and Reports on Form 8-K. None
(b) Exhibit 27 - Financial Data Schedule.
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.
Dated: January 22, 1999
SAWTEK INC.
(Registrant)
/s/ Raymond A. Link
Raymond A. Link
Vice President Finance, Chief Financial Officer
(Principal Financial and Accounting Officer)
15
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 001009675
<NAME> Sawtek Inc.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
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0
0
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<CGS> 9,958
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<EPS-PRIMARY> .30
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</TABLE>
