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 June 30, 2000
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 July 17, 2000, there were 42,619,678 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 June 30, 2000 and
September 30, 1999...................................... 3
Consolidated Statements of Income for the three months
and nine months ended June 30, 2000 and 1999............ 4
Consolidated Statements of Cash Flows for the nine months
ended June 30, 2000 and 1999............................ 5
Notes to Consolidated Financial Statements............... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .................... 9
Item 3. Quantitative and Qualitative Disclosure of Market Risk .. 24
Part II. Other Information
-----------------
Item 1. Legal Proceedings ....................................... 25
Item 2. Changes in Securities ................................... 25
Item 3. Defaults Upon Senior Securities ......................... 25
Item 4. Submission of Matters to a Vote of Security Holders ..... 25
Item 5. Other Information ....................................... 25
Item 6. Exhibits and Reports on Form 8-K ........................ 25
Signatures.............................................................. 26
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
SAWTEK INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)
<CAPTION>
June 30, September 30,
2000 1999
-------- -------------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash, cash equivalents and short-term investments $ 135,856 $ 115,274
Accounts receivable, net 26,869 18,641
Inventories, net 16,470 8,052
Deferred income taxes 1,082 1,063
Other current assets 2,298 2,107
--------- ---------
Total current assets 182,575 145,137
Property, plant and equipment, net 60,984 46,442
--------- ---------
Total assets $ 243,559 $ 191,579
========= =========
Liabilities and shareholders' equity Current liabilities:
Accounts payable $ 4,239 $ 4,055
Accrued liabilities 6,088 5,312
Current maturities of long-term debt 289 379
Income taxes payable 2,852 191
--------- ---------
Total current liabilities 13,468 9,937
Long-term debt, less current maturities 1,574 1,790
Deferred income taxes 27,784 21,453
Shareholders' equity:
Common stock; $.0005 par value; 120,000,000 authorized
shares; 42,668,194 issued shares; 42,599,541 and 42,230,489
outstanding shares at June 30, 2000 and September 30, 1999,
respectively 21 21
Capital surplus 76,926 74,755
Unearned ESOP compensation (781) (781)
Retained earnings 125,025 87,330
Less common stock held in treasury at cost; 68,653 shares at
June 30, 2000 and 437,705 shares at September 30, 1999 (458) (2,926)
--------- ---------
Total shareholders' equity 200,733 158,399
--------- ---------
Total liabilities and shareholders' equity $ 243,559 $ 191,579
========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
SAWTEK INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $ 44,105 $ 26,045 $ 113,515 $ 71,761
Cost of sales 17,546 10,737 45,970 30,523
-------- -------- --------- --------
Gross profit 26,559 15,308 67,545 41,238
Operating expenses:
Selling expenses 1,631 1,517 4,367 4,242
General & administrative expenses 1,629 1,114 4,095 3,230
Research & development expenses 2,306 1,334 6,179 4,147
-------- -------- --------- --------
Total operating expenses 5,566 3,965 14,641 11,619
-------- -------- --------- --------
Operating income 20,993 11,343 52,904 29,619
Other income, net 1,831 1,174 4,867 3,409
-------- -------- --------- --------
Income before taxes 22,824 12,517 57,771 33,028
Income taxes 7,932 4,380 20,076 11,559
-------- -------- --------- --------
Net income $ 14,892 $ 8,137 $ 37,695 $ 21,469
======== ======== ========= ========
Net income per share:
Basic $ 0.35 $ 0.19 $ 0.89 $ 0.51
Diluted $ 0.34 $ 0.19 $ 0.86 $ 0.50
Shares used in per share calculation:
Basic 42,566 42,004 42,452 41,864
Diluted 43,808 43,066 43,661 42,674
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
SAWTEK INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended
June 30,
2000 1999
---- ----
(in thousands)
<S> <C> <C>
Operating activities:
Net income $ 37,695 $ 21,469
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 6,965 5,489
Deferred income taxes 6,312 4,003
Loss on disposal of equipment 365
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (8,228) (3,270)
Inventories (8,418) 1,154
Other current assets (191) (457)
Increase (decrease) in liabilities:
Accounts payable 184 805
Accrued liabilities 776 (462)
Income taxes payable 5,464 26
--------- ---------
Net cash provided by operating activities 40,924 28,757
Investing activities:
Purchase of property, plant and equipment, net (21,872) (3,438)
Short-term investments (3,242) 10,985
--------- ---------
Net cash provided by (used in) investing activities (25,114) 7,547
Financing activities:
Principal payments on long-term debt (306) (351)
Net proceeds from exercise of stock options 1,836 4,399
Purchase of Common stock for treasury (2,932)
--------- ---------
Net cash provided by financing activities 1,530 1,116
--------- ---------
Increase in cash and cash equivalents 17,340 37,420
Cash and cash equivalents at beginning of period 50,640 42,132
Short-term investments 67,876 31,014
--------- ---------
Cash, cash equivalents and short-term investments $ 135,856 $ 110,566
========= =========
Supplemental disclosures:
Interest paid $ 103 $ 116
Income taxes paid $ 7,860 $ 5,190
See accompanying notes to consolidated financial statements.
</TABLE>
5
<PAGE>
SAWTEK INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended June 30, 2000 and 1999
NOTE 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 position as of June 30, 2000, and the results of its
operations and its cash flows for the three and nine months ended June 30, 2000
and 1999. These financial statements should be read in conjunction with our
audited financial statements as of September 30, 1999, including the notes
thereto, and the other information included in our most recent annual report on
Form 10-K for the year ended September 30, 1999 (File No. 000-28276), which was
filed with the Securities and Exchange Commission, or SEC, on November 5, 1999,
and our registration statement filed on Form S-3A (File No. 333-92527) on
January 24, 2000. 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.
We maintain our 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. Our
first, second and third quarters normally end on the Sunday closest to the last
day of the last month of such quarter, which was July 2, 2000, for the third
quarter of fiscal 2000. However, for convenience, the financial statements are
dated as of June 30, 2000. There were no material transactions from June 30,
2000 through July 2, 2000.
Operating results for the three and nine months ended June 30, 2000 are not
necessarily indicative of the operating results that may be expected for the
year ending September 30, 2000. Certain historical accounts have been restated
to conform to the current year presentation.
Certain references made in this Form 10-Q to "Sawtek", "we", "our", and
"us" refer to Sawtek Inc., a Florida corporation.
6
<PAGE>
NOTE 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 Nine Months Ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Numerator:
Net income available to common stockholders $14,892 $ 8,137 $37,695 $21,469
======= ======= ======= =======
Denominator:
Denominator for basic earnings per share:
Weighted average shares 42,566 42,004 42,452 41,864
Effect of dilutive securities:
Employee stock options 1,242 1,062 1,209 810
------- ------- ------- -------
Denominator for diluted earnings per share:
Adjusted weighted average shares and
assumed conversions 43,808 43,066 43,661 42,674
======= ======= ======= =======
Earnings per share:
Basic $ 0.35 $ 0.19 $ 0.89 $ 0.51
======= ======= ======= =======
Diluted $ 0.34 $ 0.19 $ 0.86 $ 0.50
======= ======= ======= =======
</TABLE>
NOTE 3 INVENTORIES
--------------------
Net inventories consist of the following:
<TABLE>
<CAPTION>
June 30, 2000 September 30, 1999
------------- ------------------
(in thousands)
<S> <C> <C>
Raw material $10,500 $ 2,984
Work in process 3,248 1,993
Finished goods 2,722 3,075
------- -------
Total $16,470 $ 8,052
======= =======
</TABLE>
7
<PAGE>
NOTE 4 PROPERTY, PLANT AND EQUIPMENT
--------------------------------------
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
June 30, 2000 September 30, 1999
------------- ------------------
(in thousands)
<S> <C> <C>
Land and Improvements $ 841 $ 830
Buildings 16,500 16,500
Production and Test Equipment 63,230 39,797
Computer Equipment 3,943 3,455
Furniture and Fixtures 2,954 2,865
Construction in Progress 6,688 9,589
------- -------
94,156 73,036
Less accumulated depreciation 33,172 26,594
------- -------
Total $60,984 $46,442
======= =======
</TABLE>
NOTE 5 SHAREHOLDERS' EQUITY
-----------------------------
The consolidated changes in shareholders' equity for the nine months ended
June 30, 2000 are as follows:
<TABLE>
<CAPTION>
Unearned
Common Stock Treasury Stock Capital ESOP Retained
Shares Amount Shares Amount Surplus Compensation Earnings Total
------ ------ ------ ------ ------- ------------ -------- -----
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1999 42,668 $21 438 $(2,926) $74,755 $(781) $ 87,330 $158,399
Net proceeds from exercise of
stock options (369) 2,468 (632) 1,836
Compensatory stock option tax
benefit 2,803 2,803
Net income for the nine months
ended June 30, 2000 37,695 37,695
------ --- --- ------- ------- ----- -------- --------
Balance at June 30, 2000 42,668 $21 69 $ (458) $76,926 $(781) $125,025 $200,733
====== === === ======= ======= ===== ======== ========
</TABLE>
NOTE 6 RECLASSIFICATIONS
--------------------------
Certain amounts in prior years have been reclassified to conform to current
year presentation.
8
<PAGE>
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
our 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 our 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.
Our 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.
Overview
--------
Sawtek designs, develops, manufactures and markets a broad range of
electronic signal processing components based on surface acoustic wave, or SAW,
technology primarily for use in the wireless communications industry. Our
primary products are custom-designed, high performance bandpass filters,
resonators, delay lines, oscillators and SAW-based subsystems. These products
are used in a variety of microwave and RF systems, such as CDMA and GSM digital
wireless communications systems, digital microwave radios, wireless local area
networks, cable television equipment, Internet infrastructure, various defense
and satellite systems, and sensors.
We have a wide range of customers, but a significant percentage of our
revenue is derived from a limited number of customers. Our top three customers
during the nine months ended June 30, 2000 and 1999, accounted for approximately
44% and 45%, respectively, of total net sales. It is not uncommon for our top
three customers to change from quarter to quarter. In addition, we have
experienced significant growth in international markets over the last five
years, with international sales accounting for approximately 62% of net sales
during the first nine months of fiscal 2000.
9
<PAGE>
Results of Operations
---------------------
The following table sets forth, for the periods indicated, information
derived from our statements of operations for those periods expressed as a
percentage of net sales, and the percentage change in such items from the
comparable prior year period. Any trends illustrated in the following table are
not necessarily indicative of future results.
<TABLE>
<CAPTION>
Percent Increase
Over the Prior Period
Three Months Ended Nine Months Three Months Nine Months
Ended Ended Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999 2000 vs. 1999 2000 vs. 1999
---- ---- ---- ---- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0% 69.3% 58.2%
Cost of sales 39.8 41.2 40.5 42.5 63.4% 50.6%
----- ----- ----- -----
Gross profit 60.2 58.8 59.5 57.5 73.5% 63.8%
Operating expenses:
Selling expenses 3.7 5.8 3.9 5.9 7.5% 2.9%
General & administrative
expenses 3.7 4.3 3.6 4.5 46.2% 26.7%
Research & development
expenses 5.2 5.1 5.4 5.8 72.9% 49.0%
----- ----- ----- -----
Total operating expenses 12.6 15.2 12.9 16.2 40.4% 26.0%
----- ----- ----- -----
Operating income 47.6 43.6 46.6 41.3 85.1% 78.6%
Other income - net 4.2 4.5 4.3 4.7 56.0% 42.8%
----- ----- ----- -----
Income before taxes 51.8 48.1 50.9 46.0 82.3% 74.9%
Income taxes 18.0 16.8 17.7 16.1 81.1% 73.7%
----- ----- ----- -----
Net income 33.8% 31.3% 33.2% 29.9% 83.0% 75.6%
===== ===== ===== =====
</TABLE>
Net Sales. Net sales increased 69.3% from $26.0 million in the quarter
ended June 30, 1999, to $44.1 million in the quarter ended June 30, 2000. Net
sales for the nine months ended June 30, 2000, increased by $41.8 million or
58.2% to $113.5 million from the comparable period in 1999.
These increases were primarily the result of increased revenues from the
sale of bandpass filters for code division multiple access, or CDMA, base
stations and handsets, increased shipments of bandpass filters for both global
system for mobile communication, or GSM, and CDMA base stations and handsets,
and shipments of SAW radio frequency, or RF, filters for handsets. We first
began shipments of GSM IF and RF filters during the quarter ended December 31,
1999. Additional improvements in net sales during the quarter and nine months
ended June 30, 2000 are attributable to an increased level of sales for filters
for wireless local area networks, Internet infrastructure, video transmission
and other standard products.
10
<PAGE>
A significant percentage of our revenues continue to be generated from
international markets. Sales to international customers accounted for
approximately 62.2% and 38.3% of total revenues during the nine months ended
June 30, 2000 and 1999, respectively. However, we believe that financial turmoil
or instability in international markets, specifically, the Asian market, could
reoccur and impact us in the future. Revenues generated from Asian customers
continue to vary significantly from quarter to quarter and could decline
substantially with little or no advance notice. Revenues generated from Asian
customers accounted for approximately 27.7% and 19.2% of total revenues during
the quarters ended June 30, 2000 and 1999, respectively, and accounted for
approximately 32.5% and 15.7% of total revenues during the nine months ended
June 30, 2000 and 1999, respectively.
During the quarter ended June 30, 2000, approximately 70% of our Asian
revenue was generated from South Korea. The South Korean government recently
reduced subsidies for the purchase of cellular phones in the South Korean
market. We have recently seen delays in orders and some push out of orders to
South Korean customers as a result of this governmental action. At present, we
are uncertain what the near or mid-term impact of this action will be on our
revenues from these customers.
Our growth in revenue is highly dependent on the overall growth of the
wireless telecommunications market and on our ability to offer new and improved
products for this market. Recently, we expanded our product line of SAW filters
for this market to include SAW RF filters for handsets and intermediate
frequency, or IF, filters for GSM handsets. There is no assurance, however, that
we will continue to be successful in introducing new products for the wireless
telecommunications market.
We are experiencing increased unit orders from a number of our customers,
primarily for CDMA and GSM handset filters, which may, in the short term, create
a capacity problem. As a result, we may not be able to fill all of our orders in
a timely manner, which could impact our ability to grow revenue. We have
initiated an aggressive capital expenditure program to deal with this issue;
however, it will take several quarters before all of the new equipment and
facilities are operational. In addition, in the past, we experienced a shortage
of ceramic surface mount packages, which are used in the assembly of products
and account for approximately 50% of our revenue. We have taken an aggressive
position by increasing our raw material inventory to provide a higher level of
safety stock to mitigate the impact of potential shortages. However, there is no
assurance that shortages could not reoccur in the future. If this were to
happen, it could impact our ability to respond to customer requirements, which
could impact our ability to grow revenue.
Finally, we believe that prices for filters for CDMA base stations will
decline in the future due to the transition to smaller surface mount packages
which would reduce revenues and gross margins on these products. Sales of CDMA
base station filters accounted for approximately 21.8% and 22.0% of total
revenues during the three and nine months ended June 30, 2000, respectively.
11
<PAGE>
Gross Margin. The gross profit margin percentage increased from 58.8% in
the quarter ended June 30, 1999, to 60.2% in the quarter ended June 30, 2000.
Gross margins for the nine-months ended June 30, 2000 was 59.5% compared to
57.5% for the comparable period in 1999.
The gross margin increase was primarily due to higher than expected sales
of filters for base stations and yields on new products, improved productivity,
and lower costs, resulting from more product being produced in our facility in
Costa Rica. Our Costa Rican plant accounted for 53.1% and 52.7% of consolidated
sales during the three and nine months ended June 30, 2000, respectively. Our
Costa Rican plant accounted for 46.5% and 47.8% of consolidated sales during the
three and nine months ended June 30, 1999, respectively.
We continue to believe that gross margins will decline in the future as we
shift more of our product mix to handset filters, which are lower priced, have
lower profit margins, and are subject to more competitive pricing pressure than
our other products. In addition, the prices of ceramic surface mount packages,
which have been in short supply, could increase in price, resulting in lower
gross margins.
Selling Expenses. Selling expenses increased 7.5% from $1.5 million in the
quarter ended June 30, 1999 to $1.6 million in the quarter ended June 30, 2000.
Selling expenses for the nine months ended June 30, 2000, increased 2.9% to $4.4
million from the comparable period in 1999. As a percentage of net sales,
selling expenses decreased from 5.8% during the quarter ended June 30, 1999, to
3.7% in the quarter ended June 30, 2000, and decreased from 5.9% during the nine
months ended June 30, 1999, to 3.9% during the nine months ended June 30, 2000.
This decrease in selling expenses as a percentage of net sales is attributable
to a reduction in commissions paid to independent sales representatives,
primarily in South Korea. We opened a Korean sales office during the second
quarter of 1999, which reduced the cost of selling into the Korean market.
General and Administrative Expenses. General and administrative expenses
increased 46.2% from $1.1 million in the quarter ended June 30, 1999 to $1.6
million in the quarter ended June 30, 2000. General and administrative expenses
for the nine months ended June 30, 2000, increased 26.7% to $4.1 million from
the comparable period in 1999. As a percentage of net sales, general and
administrative expenses decreased from 4.3% during the quarter ended June 30,
1999, to 3.7% in the quarter ended June 30, 2000, and decreased from 4.5% during
the nine months ended June 30, 1999, to 3.6% during the nine months ended June
30, 2000. The absolute dollar increase in general and administrative expenses
can be attributed to increased staffing and other items related to the capacity
expansion currently under way, increased salaries and bonuses and to increased
legal and accounting services as we expand our business and evaluate various tax
and business strategies.
12
<PAGE>
Research and Development Expenses. Research and development expenses
increased 72.9% from $1.3 million in the quarter ended June 30, 1999 to $2.3
million in the quarter ended June 30, 2000. Research and development expenses
for the nine months ended June 30, 2000, increased 49.0% to $6.2 million from
the comparable period in 1999. As a percentage of net sales, research and
development expenses increased from 5.1% during the quarter ended June 30, 1999,
to 5.2% in the quarter ended June 30, 2000, and decreased from 5.8% during the
nine months ended June 30, 1999, to 5.4% during the nine months ended June 30,
2000. The increase in research and development expenses is the result of a
higher level of new product development.
Other Income. Other income increased 56.0% and 42.8% from $1.2 million and
$3.4 million during the three and nine months ended June 30, 1999, respectively,
to $1.8 million and $4.9 million during the three and nine months ended June 30,
2000, respectively. These increases are the result of higher interest income
being earned on increased levels 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 34.8% and 35.0% for the three and nine months
ended June 30, 2000 and 1999, respectively.
Liquidity and Capital Resources
-------------------------------
To date, we have financed our business through cash generated from
operations, bank borrowings, lease financing, the private sale of securities,
our May 1, 1996 initial public offering and the July 1, 1997 follow-on public
offering. We require capital principally for equipment, financing of accounts
receivable and inventory, investment in product development activities and new
technologies, expansion of our operations in Orlando and Costa Rica and
potential acquisitions of new technologies or compatible companies. For the nine
months ended June 30, 2000, we generated net cash from operating activities of
approximately $40.9 million. Cash generated from operations consisted primarily
of net income of $37.7 million, $7.0 million of depreciation and amortization,
an increase of $11.8 million in deferred taxes and income taxes payable and an
increase of approximately $1.0 million in accounts payable and accrued
liabilites. These increases were partially offset by an increase in accounts
receivable of approximately $8.2 million and an increase in inventory of
approximately $8.4 million.
We have a revolving credit agreement totaling $30.0 million from SunTrust
Bank, Central Florida, N.A. available through March 31, 2001. There were no
borrowings against the line of credit as of June 30, 2000.
During the three and nine months ended June 30, 2000, we spent
approximately $3.4 million and $21.9 million, respectively, on new equipment and
facilities. We intend to spend an additional $5 million to $10 million during
the remainder of fiscal year 2000 on capital equipment and facilities to
increase capacity. It is also our intention to order additional equipment in
late 2000, which will utilize next generation manufacturing techniques.
13
<PAGE>
In the fourth quarter of 1998, the Board of Directors authorized us to
repurchase up to 2,000,000 shares of common stock. To date, 1,129,810 shares
have been repurchased under this program. We expect to continue to repurchase
shares of 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.
We believe that our present cash position and funds expected to be
generated from operations will be sufficient to meet our projected working
capital and other cash requirements through the next twelve months. Thereafter,
we may require additional equity or debt financing to address our working
capital needs or to provide funding for capital expenditures. There can be no
assurance that events in the future will not require us to seek additional
capital sooner or, if so required, that it will be available on acceptable
terms, if at all.
Foreign Operations, Export Sales and Foreign Currency
-----------------------------------------------------
We established a subsidiary in Costa Rica in 1996. As of June 30, 2000, we
had a net investment in fixed assets of approximately $26.0 million in this
operation. During the three and nine months ended June 30, 2000, we recorded net
sales of approximately $23.4 million and $59.8 million, respectively, with
operating profits of approximately $6.9 million and $17.9 million, respectively.
The functional currency for the Costa Rican subsidiary is the U.S. dollar since
sales and most material cost and equipment are U.S. dollar denominated. The
effects of currency fluctuations of the local Costa Rican currency are not
considered significant and are not hedged.
In 1996, we established a "foreign sales corporation" pursuant to the
applicable provisions of the Internal Revenue Code to take advantage of income
tax reductions on export sales. The cost to operate this subsidiary is nominal.
In 1999, we opened a sales and service office in Seoul, South Korea to
assist in our Asian sales efforts. The cost to operate this subsidiary is
nominal.
International sales are denominated in U.S. dollars. During the nine months
ended June 30, 2000 and 1999, international sales accounted for approximately
62.2% and 38.3% of net sales, respectively. Sales to the European market
accounted for approximately 20.5% and 18.2% of net sales for these same periods,
respectively, and sales to the Asian and Pacific Rim markets, principally to
South Korea, were approximately 32.5% and 15.7% of net sales, respectively, for
these same periods.
Over the past several years, the value 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 events
experienced by these countries over the past year. A stronger U.S. dollar makes
it more difficult for us to sell our products to customers in these countries
and makes it more difficult for us to compete against SAW producers based in
these countries. A weaker U.S. dollar may make it more expensive for us to buy
certain raw materials and equipment from Japanese suppliers.
14
<PAGE>
The new common European currency, the euro, made its debut in January 1999.
During the three and nine months ended June 30, 2000, approximately 24.1% and
20.5%, respectively, of our sales were to European customers. To date, no
customers or suppliers have requested us to transact business in the euro. At
this time, the impact of this new currency is not determinable.
Recently Issued Accounting Standards
------------------------------------
Please see Note 1 to the Consolidated Financial Statements included in our
report on Form 10-K for the year ended September 30, 1999, for a discussion of
new pronouncements.
Impact of Inflation
-------------------
We believe that inflation has not had a material impact on operating costs
and earnings.
Impact of the Year 2000
-----------------------
The Year 2000 issue is the result of computer programs and other business
systems being written using two digits rather than four to represent the year.
Many of the time sensitive applications and business systems of ours and our
business partners could recognize a date using "00" as the year 1900 rather than
the year 2000, which potentially could result in system failure or disruption of
operations.
We diligently addressed the potential Year 2000 issue through remediation
projects relating to our information technology systems, non-information
technology systems and material third party relationships. We completed these
initiatives at an estimated cost of approximately $250,000. As previously
disclosed, most of our information technology systems were updated or replaced
with Year 2000 compliant applications in the normal course of business.
As of this date, we have not experienced any significant business
disruptions or system failures as a result of the Year 2000 issue. Additionally,
there has been no substantial Year 2000 related issues reported from our major
business partners.
Although the Year 2000 event has occurred, and while there can be no
assurances that there will be no problems related to the Year 2000 for a period
of time after January 1, 2000, we believe that the Company will not be adversely
impacted by the Year 2000 issue.
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Risk Factors 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:
A decline either in the growth of wireless communications or in the continued
acceptance of CDMA technology would have an adverse impact on us.
Approximately 74% of our net sales for 1999 and 1998 were derived from
sales of SAW devices for applications in wireless communications systems. This
trend continued during the first three fiscal quarters of 2000, with
approximately 73.6% of our total net sales being derived from sales of SAW
devices for applications in wireless communications systems. Any economic,
technological or other development resulting in a reduction in demand for
wireless services and products would have a material adverse effect on our
business, financial condition and results of operations.
Sales of our products for CDMA-based systems, including base stations and
subscriber handsets, accounted for approximately 56% of our net sales in 1999.
During the nine months ended June 30, 2000, approximately 45% of our net sales
were generated from sales for CDMA-based systems. CDMA technology is relatively
new to the marketplace and there can be no assurance that emerging markets will
adopt this technology. Our business and financial results would be adversely
impacted if CDMA technology does not continue to gain acceptance.
If we are unable to successfully develop and bring new products to market, our
operating results will be adversely affected.
Recently, we announced our intent to offer an expanded line of SAW filters
for the wireless handset market, including SAW RF and GSM IF filters. To date,
we have completed some designs for these filters, and we have received orders
for these products and began shipments in fiscal 2000. We have also ordered and
begun to receive the materials and equipment necessary to enter this market.
Expanding our product line and sales of these filters is an important part of
our growth strategy. There is no assurance that we will be successful in our
efforts to introduce these and other new filters for the wireless
telecommunications market.
Sustained growth of our business is dependent on our ability to develop new
or improved SAW devices in a timely fashion. Our product development resources
are limited, requiring us to allocate resources among a limited number of
product development projects. Failure by us to efficiently allocate our product
development resources to products that meet market needs could have a material
adverse effect on our future growth. The success of new products also depends on
timely completion of new product designs, quality of new products and market
acceptance of these products.
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<PAGE>
If we are unable to successfully increase our production capacity, we will not
be able to grow our revenue as planned.
We have initiated a capital expenditure program, estimated at $25 million
to $32 million for fiscal year 2000, to increase our manufacturing output to
enable us to grow our revenue. This plan includes new wafer fabrication capacity
and capability in Orlando, new assembly capacity in Orlando and Costa Rica and
expanding our building in Costa Rica. Any delay in increasing our capacity will
have a material adverse impact on our ability to meet the anticipated demand for
our new products and on our ability to grow revenue. During the nine months
ended June 30, 2000, we spent approximately $21.9 million under this plan.
Because we rely on a limited number of suppliers, our operating results would be
adversely affected if a few suppliers were unable to meet our needs.
We have a limited number of suppliers for certain critical raw materials,
components, services and equipment. There are only a few ceramic package
manufacturers and wafer producers worldwide who have the expertise and capacity
necessary to satisfy our requirements. Most of these suppliers are based in
Japan. Recently, we have experienced difficulty in obtaining ceramic surface
mount packages used in the production of bandpass filters. A failure by us to
anticipate demand for materials, or of our suppliers to provide sufficient
amounts of material, could result in raw material shortages. There can be no
assurance that we will be able to secure adequate supplies of materials,
components, services or equipment. If we are unable to satisfy our requirements
for raw materials or to obtain and maintain appropriate equipment, our business,
financial condition and results of operations would be materially adversely
affected.
Risks associated with international sales could adversely affect our operating
results.
Overall, our net sales from international sales accounted for approximately
41%, 37% and 43% of net sales for 1999, 1998 and 1997, respectively. During the
nine months ended June 30, 2000, international sales accounted for approximately
62.2% of net sales. The sale of products in foreign countries involves a number
of risks that can arise from international trade transactions, local business
practices and cultural considerations, including:
o currency exchange rate fluctuations and restrictions;
o import-export regulations;
o customs requirements;
o ability to secure credit and funding;
o longer payment cycles;
o foreign collection problems;
o political and transportation risks; and
o economic turmoil.
17
<PAGE>
Some of our major customers are relying on growth in international markets,
including Asia and Latin America, for sales of their products. The demand for
our products will be reduced if the economies in these regions decline.
We have grown our net sales over the past several years partly from
shipments to South Korean customers. For the nine months ended June 30, 2000,
our net sales from South Korean customers was approximately $28.2 million or 25%
of total net sales, and in 1999 it was approximately $16.8 million, or 17% of
net sales. However, net sales from South Korean customers fluctuates greatly as
experienced in the last quarter of 1998 when those net sales declined to $1.1
million, or approximately 5% of total net sales, compared to $4.8 million, or
approximately 18% of total net sales, in the immediately preceding quarter. The
South Korean economy and the economies of many other countries in Asia and
around the world have experienced economic turmoil and recession during the past
24 months and may continue to face economic problems which would adversely
impact our sales in these regions. In addition, the South Korean government
recently reduced subsidies for the purchase of cellular phones in the South
Korean market, which could adversely impact future sales of our product into
this market.
Because we depend on a few large customers, our operating results would be
adversely affected by the loss of one or two customers.
A few large customers have accounted for a significant portion of our net
sales. Sales to our top 10 customers accounted for approximately 70% and 76% of
net sales in 1999 and 1998, respectively. Motorola, our largest customer,
accounted for 23% of net sales in 1999 and 17% of net sales in 1998 and we
believe it will continue to account for a high percentage of net sales in 2000.
During the nine months ended June 30, 2000, sales to our top 10 customers
accounted for approximately 72% of our total net sales. We expect that sales of
our products to a limited number of customers will continue to account for a
high percentage of our net sales in the foreseeable future. Our future success
depends largely upon the decisions of our current customers to continue to
purchase our products, as well as the decisions of prospective customers to
develop and market systems that incorporate our products.
A disruption in our Costa Rican operations could have an adverse impact on our
operating results.
During 1999, net sales from our Costa Rican operation accounted for
approximately 47% of our total net sales and 40% of our operating income. During
the nine months ended June 30, 2000, net sales from our Costa Rican operation
generated approximately 53% of our total net sales and 38% of our operating
income. We expect our Costa Rican operations to account for an increasing
proportion of our overall operations in the future. Operating a production
facility in Costa Rica presents potential risks of disruption, including:
o government intervention;
o wars;
o currency fluctuations;
18
<PAGE>
o limited supplies of labor;
o labor disputes;
o earthquakes;
o volcanic eruptions;
o hurricanes;
o floods; and
o mud slides.
Any such disruptions could have a material adverse effect on our business,
results of operations and financial condition.
A continued decline in selling prices for some of our key products could have an
adverse impact on our operating results.
Selling prices for our products have declined due to competitive pricing
pressures and to the use of newer surface mount package devices that are smaller
and less expensive than previous generation filters. We have experienced
declines in prices for filters for GSM base stations due to the use of surface
mount packages, and we expect this will occur in filters for CDMA base stations.
In addition, we expect prices for handset filters to continue to decline as they
become smaller and as competitive pricing pressure increases. A continued
decline in prices could have a material adverse impact on both our revenues and
margins.
If we experience a decline in our manufacturing yields, our operating results
will be adversely affected.
The manufacture of SAW devices involves complex processes that may result
in reduced yields from time to time, the causes of which are often difficult to
determine. A reduction in yields at any stage of the manufacturing process would
have a material adverse effect on our ability to meet our quoted delivery times
and cost of production, which would have an adverse impact on our operations and
profitability.
If one or more customers cancel or terminate purchase orders or delay deliveries
with short notice, our operating results would be adversely affected.
Our customers' orders are typically subject to cancellation or modification
with very short notice. In addition, purchase orders for our products may be
large and intended to satisfy customers' long-term needs. Accordingly, our
backlog is not necessarily indicative of future product sales, and a delay or
cancellation of a small number of purchase orders may adversely impact our
operations. In addition, our expense levels are based, in part, on our
expectations of future product sales and therefore are relatively fixed in the
short term. If we were unable to reduce our expense levels correspondingly with
a reduction in sales levels, our results of operations would be further harmed.
19
<PAGE>
New competitive products or technologies may be developed which could reduce
demand for our products.
Our business is dependent upon the application of SAW-based technology.
Competing technologies, including digital filtering technology, direct
conversion or any other technology that could be developed, could replace or
reduce the use of SAW filters for certain applications. Direct conversion is a
process that converts an RF signal to baseband without the need for a SAW IF
filter. Qualcomm Inc. of San Diego, California, and Analog Devices, Inc. of
Norwood, Massachusetts, both produce integrated circuits for use in wireless
phones and have announced products or plans to produce products that utilize
direct conversion technology that could reduce or eliminate SAW filters in
certain applications. Other companies, as well, may from time to time, announce
products, patents or other claims relating to direct conversion or such other
technologies that may reduce or eliminate certain SAW filters. The product
produced by Analog Devices, Inc. may have some application in certain GSM
phones, which, if proven to be successful, could impact our GSM IF filters for
handsets. We believe that revenues generated from GSM IF filter sales could
account for up to 10% of total net revenues in the fiscal year 2001. Qualcomm
Inc. indicated that they were working on a direct conversion concept for CDMA
phones for potential production in the future, but acknowledged the extreme
difficulty of such a solution and could offer no time frame for its
introduction.
Any development of a cost-effective technology that replaces SAW filtering
technology or reduces the need for SAW filtering technology could have a
material adverse effect on our business, financial condition and results of
operations.
We expect competition to increase, which could result in lower selling prices
and have an adverse effect on our operating results.
Competition in the markets for our products is intense. We compete against
large international companies that have substantially greater financial,
technical, sales, marketing, distribution and other resources than us. In
addition, we may face competition from companies that currently manufacture SAW
devices for their own internal requirements, as well as from a number of our
customers that have the potential to develop an internal supply capability for
SAW devices. We expect competition to increase from both established and
emerging competitors, as well as from internal capabilities developed by certain
customers. Our ability to compete effectively in our target markets depends on a
variety of factors both within and outside of our control, including timing and
success of new product introductions, availability of manufacturing capacity,
the rate at which customers incorporate our components into their products, our
ability to respond to competitive pricing pressures, availability of technical
personnel, sufficient supplies of raw materials, the quality, reliability and
price of products and general economic conditions. There can be no assurance
that we will be able to compete successfully in the future.
20
<PAGE>
If we are not able to protect our intellectual property or if we infringe on the
intellectual property of others, our business and operating results could be
adversely affected.
We rely on a combination of patents, copyrights and trade secrets to
establish and protect our intellectual property rights. There can be no
assurance that patents will issue from any of our pending applications or that
any claims allowed from existing or pending patents will be sufficiently broad
to protect our technology. In addition, there can be no assurance that any
patents issued to us will not be challenged, invalidated or circumvented, or
that the rights granted will provide proprietary protection. Litigation may be
necessary to enforce our patents, trade secrets and other intellectual property
rights, to determine the validity and scope of the proprietary rights of others
or to defend against claims of infringement. Such litigation could result in
substantial costs and diversion of resources and could have a material adverse
effect on our business, results of operations and financial condition regardless
of the final outcome of the litigation. We are not currently engaged in any
patent infringement suits nor have we been threatened with any such suits in
recent years. We recently received a letter from a large Canadian telephone
equipment manufacturer claiming that it believes we are infringing on a patent
it owns that issued in 1987 and offering a license on preferred terms, without
stating the proposed terms of the license. It is our position that this patent
is unenforceable because we sold devices commercially utilizing the invention
claimed in the patent at least two years before the application for this patent
was filed and the patent owner did not attempt to exercise its rights to enforce
this patent for over 12 years. If we are incorrect in our position in this
matter and this patent is found to be enforceable, we could be required to pay a
license fee or pay damages related to sales of devices utilizing this invention
sold for the past six years and an injunction against further alleged
infringement could issue, either of which could have a material adverse effect
on our operating results. Despite our efforts to maintain and safeguard our
proprietary rights, there can be no assurances that we will be successful in
doing so or that our competitors will not independently develop or patent
technologies that are substantially equivalent or superior to our technologies.
If any of the holders of these patents assert claims that we are infringing such
patents, we could be forced to incur substantial litigation expenses. In
addition, if we were found to infringe, we would be required to pay substantial
damages, pay royalties in the future or be enjoined from infringing on such
patents in the future.
A failure to attract and retain qualified individuals for critical positions
could have an adverse impact on our business, financial condition and results of
operations.
Our success depends, in part, on the performance of a number of key
management and technical personnel, the loss of one or more of whom could have a
material adverse effect on our business. Our success also depends, in part, on
our ability to attract and retain qualified professional, technical, production,
managerial and marketing personnel, both domestically and internationally.
Competition for such personnel in our industry is very intense. While we have
not yet experienced significant problems in recruiting or retaining qualified
personnel, we cannot be certain that such problems will not arise in the future.
21
<PAGE>
Our operating results could be adversely affected by fluctuations in the value
of foreign currencies.
Our international sales are generally denominated in U.S. dollars. However,
we may be required in the future to denominate sales in the foreign currencies
of certain countries or in the new euro for some of our European customers. As a
result, fluctuations in currency exchange rates may have a significant effect on
our sales, even in the absence of an increase or decrease in unit sales to
foreign customers. A strong U.S. dollar could make our products more expensive
for foreign customers, which could have a material adverse effect on our ability
to compete internationally. We also purchase a great deal of our key raw
materials and equipment from foreign countries, primarily Japan. A weak U.S.
dollar could make our purchases more expensive.
Over the past two years, the valuations of many foreign currencies have
fluctuated significantly 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.
We have not, to date, engaged in substantial hedging transactions for our
foreign exchange risks. If any of our future international sales or purchases
are denominated in foreign currencies, we may find it necessary to engage in
rate hedging activities with respect to certain exchange rate risks. There can
be no assurance that we will engage in such exchange rate hedging or that any
such activities will successfully protect against such risks.
We could be subject to fines, suspension of production or cessation of
operations if we fail to comply with the many laws and government regulations
applicable to our business.
We are subject to a variety of federal, state and local laws, rules and
regulations relating to the discharge and disposal of toxic, volatile and other
hazardous chemicals used in our manufacturing processes and to export controls.
A failure by us to comply with present or future regulations could result in the
imposition of fines, suspension of production or a cessation of operations. Such
regulations could require us to acquire significant equipment or to incur
substantial expense in order to comply with such regulations. Any past or future
failure to control the use of or the discharge of toxic or hazardous substances
or to comply with export regulations could subject us to future liabilities and
could have a material adverse effect on our business, results of operations and
financial condition.
A number of factors affecting our customers may result in the cancellation of
orders or delays in deliveries of our products to these customers.
The increasing demand for wireless communications has exerted pressure on
regulatory bodies worldwide to adopt new standards for wireless communications
products and services. The delays inherent in this governmental approval process
have in the past, and may in the future, cause the cancellation, postponement or
rescheduling of the installation of communications systems by our customers. Any
such delays may have a material adverse effect on the sale of our products to
these customers. In addition, our customers may have difficulty in obtaining
parts from other suppliers, such as flash memory for wireless handsets, causing
these customers to cancel or delay orders for our products.
22
<PAGE>
Our manufacturing facilities are located in areas prone to natural disasters.
Our main facility is located in Orlando, Florida and we also have a
production facility in San Jose, Costa Rica. Hurricanes, tropical storms,
flooding, tornadoes, and other natural disasters are common events for the
southeastern part of the United States and in Costa Rica. We could suffer
disruptions due to natural disasters that could have an adverse effect on our
operations. Our Costa Rican facility is also prone to these disasters as well as
mud slides, earthquakes and volcanic eruptions. Any disruptions from these or
other events would have a material adverse impact on our operations and
financial results.
Year 2000 problems could have an adverse effect on our operations.
We are subject to potential Year 2000 problems affecting our internal
systems, the systems of our suppliers and our customers. If any of these were
not corrected for Year 2000 problems, our operations could be materially
impacted. We have completed an examination of these systems and a summary of our
results is included elsewhere in this Form 10-Q.
Our stock price has been volatile.
There has been significant volatility in the market price of our common
stock, as well as in the market price of securities of technology-based
companies and the U.S. stock markets overall. Some of the factors that could
affect our stock price include:
o variations in our operating results or the operating results of our
customers or competitors;
o announcements of new products by us or by our competitors;
o gain or loss of significant contracts;
o announcements of technological innovations;
o acquisitions by us or our competitors;
o changes in analysts' estimates of our financial performance;
o government regulatory action;
o developments or disputes regarding proprietary rights;
o general trends in the industry; and
o general economic or stock market conditions.
Additionally, in the past, securities class action litigation often has
been brought against companies following periods of volatility in the market
price of their securities. We may in the future be the target of similar
litigation. Securities litigation could result in substantial costs and damages
and divert management's attention and resources.
23
<PAGE>
Certain considerations could make it more difficult for others to acquire us.
Certain anti-takeover provisions of the Florida Business Corporation Act
could have the effect of making it more difficult for a third party to acquire
us or of discouraging a third party from attempting to acquire us. These
anti-takeover measures could result in a lower value to be received by our
shareholders if an acquisition was not approved by our Board of Directors. Such
provisions could limit or depress the price that certain investors might be
willing to pay in the future for shares of our stock. We are also authorized to
issue preferred stock, with rights senior to our common stock, without the
necessity of shareholder approval. We have no present plans to issue shares of
preferred stock. However, issuance of preferred stock could have the effect of
making it more difficult for a third party to acquire a majority of our
outstanding voting stock.
In addition, the Sawtek Employee Stock Ownership and 401(k) Plan, or the
ESOP, owns approximately 21% of our outstanding common stock. The ESOP trustee
has the right to vote all of these shares. The ESOP trustee generally votes the
shares allocated to participants' accounts in accordance with their voting
directions and votes in its sole discretion with respect to the unallocated
shares. If the ESOP trustee were to vote against or oppose a proposed
acquisition of us, a potential acquirer might be discouraged from acquiring us
even though the holders of a majority of the shares of our common stock were in
favor of the acquisition.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to minimal market and interest rate risk. We manage the
sensitivity of our results of operations to these risks by maintaining a
conservative investment portfolio, which is comprised solely of highly rated,
short-term investments. We do not hold or issue derivative securities,
derivative commodity instruments or other financial instruments for trading
purposes. We are exposed to currency exchange fluctuations since we sell our
products internationally and we purchase raw materials and equipment from
foreign suppliers. We are also exposed to currency fluctuations associated with
our Costa Rican operation. We manage the sensitivity of our international sales,
purchases of raw materials and equipment and our Costa Rican operation by
denominating most transactions in U.S. dollars. We do engage in limited foreign
currency hedging transactions, principally to lock in the cost of purchase
commitments that are not denominated in U.S. dollars.
We are exposed to minimal interest rate risk on debt instruments as our
outstanding debt is less than $2 million, and we do not plan to use additional
debt-based financing to fund capital expenditures in 2000.
24
<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
Not applicable.
ITEM 3. DEFAULTS IN SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Index to Exhibits
Exhibit
Number
-------
27 Financial Data Schedule (filed electronically only with the
SEC)
b) Reports on Form 8-K
None
25
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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: July 17, 2000
SAWTEK INC.
(Registrant)
/S/ Raymond A. Link
Raymond A. Link
Senior Vice President Finance, Chief Financial Officer
(Principal Financial and Accounting Officer)
26
