<PAGE> 1
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 MAY 1, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to ________
Commission file number 1-5609
UNITRODE CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
MARYLAND 04-2271186
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7 CONTINENTAL BOULEVARD, MERRIMACK, NEW HAMPSHIRE 03054
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (603) 424-2410
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of 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 [ ]
There were 32,090,507 shares of common stock outstanding as of May 1, 1999.
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<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unitrode Corporation and Consolidated Subsidiaries
Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
May 1, 1999
Assets (Unaudited) January 31, 1999
- ------ ----------- ----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 96,600 $ 91,551
Accounts receivable, net of allowances
of $1,691 in May, 1999
and $2,206 in January, 1999 28,454 23,541
Notes receivable 586 631
Inventories:
Raw materials 1,342 1,659
Work in process 14,825 13,766
Finished goods 7,199 6,931
-------- --------
Total inventories 23,366 22,356
-------- --------
Deferred income taxes 5,295 5,232
Royalty receivable 971 6,215
Deposits 1,337 1,448
Prepaid expenses and other
current assets 3,188 2,320
-------- --------
Total current assets 159,797 153,294
-------- --------
Property, plant and equipment, at cost 159,262 156,020
Less accumulated depreciation 81,080 78,674
-------- --------
Property, plant and equipment, net 78,182 77,346
-------- --------
Deposits 2,800 2,800
Notes and other receivables, net
of discount 1,214 1,323
Restricted cash and investments 1,187 1,035
Excess of cost over net assets acquired,
net of accumulated amortization of
$2,749 in May, 1999 and
$2,678 in January, 1999 1,341 1,412
Other assets and deferred charges 1,447 2,754
-------- --------
Total assets $245,968 $239,964
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE> 3
Unitrode Corporation and Consolidated Subsidiaries
Balance Sheets
(in thousands except share data)
<TABLE>
<CAPTION>
May 1, 1999
Liabilities and Stockholders' Equity (Unaudited) January 31, 1999
- ------------------------------------ ----------- ----------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 12,624 $ 12,623
Income taxes payable 3,919 3,836
Accrued employee compensation and benefits 2,945 2,025
Accrued distributor liability 3,167 4,007
Capital lease obligations -- 701
Other current liabilities 3,670 4,059
--------- ---------
Total current liabilities 26,325 27,251
--------- ---------
Deferred income taxes 3,400 2,540
Other long-term liabilities 902 943
--------- ---------
Total liabilities 30,627 30,734
--------- ---------
Stockholders' equity:
Common stock,$.01 par value:
Authorized - 60,000,000 shares
Issued - 32,090,507 in May, 1999
and 32,018,766 in January, 1999 321 320
Additional paid-in capital 78,413 77,748
Retained earnings 137,233 131,861
--------- ---------
215,967 209,929
Less: Deferred compensation (626) (699)
--------- ---------
Total stockholders' equity 215,341 209,230
--------- ---------
Total liabilities and
stockholders' equity $ 245,968 $ 239,964
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-3-
<PAGE> 4
Unitrode Corporation and Consolidated Subsidiaries
Statements of Operations
(Unaudited)
(in thousands except share data)
<TABLE>
<CAPTION>
For the three months ended May 1, 1999 May 2, 1998
- -------------------------- ----------- -----------
<S> <C> <C>
Net revenues $44,308 $ 36,928
Cost of revenues 23,033 22,274
------- --------
Gross profit 21,275 14,654
------- --------
Operating expenses:
Research and development expenses 5,243 4,800
Selling, general and administrative
expenses 8,194 8,231
New fab pre-operating expenses -- 1,109
Merger costs -- 1,350
Restructuring and other costs -- 1,267
------- --------
Total operating expenses 13,437 16,757
------- --------
Income (loss) from operations 7,838 (2,103)
------- --------
Other income (expense):
Royalty income 920 558
Non-operating income (expense), net 630 (2,633)
Interest income, net 848 984
------- --------
Total other income (expense) 2,398 (1,091)
------- --------
Income (loss) before income tax
provision (benefit) 10,236 (3,194)
Income tax provision (benefit) 3,787 (695)
------- --------
Net income (loss) $ 6,449 $ (2,499)
======= ========
Earnings (loss) per common share:
Basic $ 20 $ (.08)
======= ========
Diluted $ .20 $ (.08)
======= ========
Shares used to compute earnings
(loss) per common share:
Basic 32,069 31,450
======= ========
Diluted 32,903 31,450
======= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-4-
<PAGE> 5
Unitrode Corporation and Consolidated Subsidiaries
Statements of Cash Flows
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
For the three months ended May 1, 1999 May 2, 1998
- -------------------------- ----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 6,449 $(2,499)
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities:
Depreciation and amortization 4,163 3,448
Deferred and other compensation 73 132
Writedown of assets -- 5,616
Deferred income taxes 797 1,688
Other, net (581) (114)
(Increase) decrease in assets:
Accounts receivable (4,913) 5,787
Inventories (1,010) (4,914)
Other current and long-term assets 4,391 (231)
Increase (decrease) in liabilities:
Accounts payable 1 (3,147)
Income taxes payable 83 (3,668)
Accrued employee compensation and benefits 920 (8,922)
Accrued distributor liability (840) (420)
Other current and long-term liabilities (430) (988)
------- -------
Total adjustments 2,654 (5,733)
------- -------
Net cash provided (used) by operating activities 9,103 (8,232)
------- -------
Cash flows from investing activities:
Property, plant and equipment and deposits (4,961) (2,089)
Proceeds on sale of assets 2,010 27
Repayment of notes receivable 161 191
Restricted cash and investments (152) 9
Maturities of short-term investments -- 7,278
Purchases of short-term investments -- (3,585)
------- -------
Net cash provided (used) by investing activities (2,942) 1,831
------- -------
Cash flows from financing activities:
Proceeds from exercise of stock options and warrants 1,293 1,291
Purchase of common stock (1,704) --
Principal payments under capital lease obligations (701) (337)
------- -------
Net cash provided (used) by financing activities (1,112) 954
------- -------
Net increase in cash and cash equivalents 5,049 (5,447)
Cash and cash equivalents at beginning of period 91,551 68,358
------- -------
Cash and cash equivalents at end of period $96,600 $62,911
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
-5-
<PAGE> 6
Unitrode Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
May 1, 1999
(Unaudited)
(in thousands except share data)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of Unitrode Corporation and its wholly owned subsidiaries, and have
been prepared in accordance with generally accepted accounting principles for
interim financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. For further information, refer to the
consolidated financial statements and footnotes included in the annual report on
Form 10-K of Unitrode Corporation (the "Company") for the year ended January 31,
1999.
In the opinion of management, all adjustments considered necessary for a fair
presentation have been included. Operating results for the three-month period
ended May 1, 1999 are not necessarily indicative of the results that may be
expected for the year ending January 31, 2000. Certain amounts for fiscal year
1999 have been reclassified to conform with presentation of similar amounts in
fiscal year 2000.
NOTE 2 - NEW ACCOUNTING STANDARDS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This new standard requires companies to
record derivatives on the balance sheet as assets or liabilities, measured at
fair value. Gains and losses resulting from changes in the values of those
derivatives should be reported in the statements of operations or as a deferred
item, depending on the use of the derivatives and whether they qualify for hedge
accounting. This standard is effective for the Company's fiscal year ending
January 31, 2002, and the Company has not yet determined the effect, if any, of
adopting the new standard.
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<PAGE> 7
NOTE 3 - EARNINGS PER SHARE
The following tables sets forth the computation of basic and diluted earnings
per share.
<TABLE>
<CAPTION>
Three months ended May 1, 1999 May 2, 1998
- ------------------ ----------- -----------
<S> <C> <C>
Net income (loss) $ 6,449 $ (2,499)
=========== ==========
Basic weighted average shares outstanding 32,069,263 31,449,654
Effect of dilutive securities-stock options 833,386 --
Effect of dilutive securities-stock warrants -- --
----------- -----------
Diluted weighted average shares outstanding 32,902,649 31,449,654
=========== ===========
Basic earnings per share $ .20 $ (.08)
========== ===========
Diluted earnings per share $ .20 $ (.08)
========== ===========
</TABLE>
Options to purchase a total of 1,662,193 shares of common stock at prices
ranging from $14.91 to $40.36 were outstanding for the three months ended May 1,
1999 but were not included in the computation of diluted earnings per share
because their exercise prices were greater than the average market price of the
common shares as of such date and were, therefore, anti-dilutive under the
Treasury stock method.
Options to purchase a total of 4,183,542 shares of common stock at prices
ranging from $.28 to $40.36 were outstanding as of May 2, 1998 but not included
in the computation of diluted earnings per share because the company reported a
net loss for this period.
NOTE 4 - NON-OPERATING INCOME (EXPENSE)
<TABLE>
<CAPTION>
Three months ended May 1, 1999 May 2, 1998
------------------ ----------- -----------
<S> <C> <C>
Foreign exchange gains (losses) $ 10 $ (244)
Gains (losses)on sale of assets 579 (10)
Net rental income 43 122
Writedown of assets -- (2,500)
Other (2) (1)
------ -------
Total $ 630 $(2,633)
====== =======
</TABLE>
NOTE 5 - SPECIAL CHARGES
Special Charges Rollforward:
<TABLE>
<CAPTION>
Balance Sheet
-----------------------------------------------------------------------------
Valuation Allowances Other Current Liabilities
Special -----------------------------------------------------------------------------
Charges Fixed Other Assets & Employee Legal Paid-in
Provision Inventory Assets Deferr.Charges Costs Costs Other Capital
--------- --------- ------ -------------- -------- ------ ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Q1 FY99 Charge $ 6,363 $2,596 $ -- $3,165 $ 520 $ -- $ 82 $ --
Q3 FY99 Charge 12,078 -- 550 627 2,411 6,841 1,001 648
FY99 Payments/Disposals -- (2,596) -- (633) (1,382) (6,841) (583) --
------- ------ ---- ------ ------- ------- ------ -----
1/31/99 Balance 18,441 -- 550 3,159 1,549 -- 500 648
FY00 Payments/Disposals -- -- -- (386) -- (76) --
------ ---- ------ ------- ------- ------ -----
5/1/99 Balance $ -- $550 $3,159 $ 1,163 $ -- $ 424 $ 648
====== ==== ====== ======= ======= ====== =====
</TABLE>
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<PAGE> 8
FIRST QUARTER OF FISCAL YEAR 1999 CHARGE
During the first quarter of fiscal year 1999, the Company recorded pre-tax
special charges totaling $6.4 million of which $2.6 million was charged to cost
of sales, $1.3 million was charged to restructuring and other costs in operating
expenses, and $2.5 million was charged to other income (expense).
The charge of $2.6 million to cost of sales was for inventory write-offs and
consisted primarily of a custom product which was manufactured in the first
quarter of fiscal year 1999 for a specific customer. The product did not meet
the customer's specifications and has been scrapped.
A charge to operating expenses of $1.3 million was for actions intended to align
the business with reduced customer demand in fiscal year 1999. These
restructuring charges consisted of $0.8 million used to writedown equipment
associated with the production of 4" bipolar wafers to net realizable value and
$0.5 million for severance costs associated with a reduction in the workforce of
about 5% or 34 employees. The annualized reduction in cost resulting from the
restructuring was anticipated to be approximately $1.8 million.
The $2.5 million charge to other income (expense) was to establish a valuation
allowance on the Company's equity investment in an outside foundry. The
significant reduction in the Company's business during the first quarter of
fiscal year 1999 and the subsequent ramp-up of the Company's 6" fab have
substantially reduced expected future demand for wafers produced at this foundry
and negatively impacted this foundry's financial condition and cash flows. The
Company currently is the primary customer of this foundry.
THIRD QUARTER OF FISCAL YEAR 1999 CHARGE
During the third quarter of fiscal year 1999, the Company recorded pre-tax
special charges totaling $12.1 million of which $5.2 million was charged to
restructuring and other costs in operating expenses, and $6.9 million was
charged to other income (expense).
The $5.2 million charged to operating expenses was primarily for costs related
to the integration of Benchmarq. These costs principally consisted of $1.2
million for equipment writedowns intended to consolidate back-end operations,
$3.0 million in severance costs to reduce redundant activities, and $1.0 million
in other integration costs which includes costs associated with relocating the
Dallas probe and test operations to the Company's Singapore facility.
The $6.9 million charge to other income (expense) consisted of costs incurred to
settle a patent infringement lawsuit between Dallas Semiconductor Corporation
and Benchmarq, as well as a patent infringement lawsuit initiated by the
Lemelson Medical Education & Research Foundation, Limited Partnership against
the Company.
NOTE 6 - BENCHMARQ MERGER
On August 3, 1998, the Company completed its acquisition of Benchmarq, a Dallas,
Texas provider of integrated circuits and electronics modules for portable and
power-sensitive electronics systems. In connection with the transaction, the
Company issued approximately 7.2 million shares of its common stock. The merger
was accounted for on a pooling-of-interests basis. Accordingly, the Company's
consolidated financial statements have been restated to include the accounts and
operations of Benchmarq for all periods presented.
-8-
<PAGE> 9
NOTE 6 - BENCHMARQ MERGER (CONTINUED)
The following table represents a reconciliation of net revenues and net income
previously reported by the combining companies to those presented in the
accompanying consolidated financial statements:
<TABLE>
<CAPTION>
Three months ended
Net Revenues May 2, 1998
------------ ------------------
<S> <C>
Unitrode $28,019
Benchmarq 8,909
-------
Combined $36,928
=======
Net Income
----------
Unitrode $(2,349)
Benchmarq (150)
-------
Combined $(2,499)
=======
</TABLE>
NOTE 7 - COMMITMENTS AND CONTINGENT LIABILITIES
LEGAL PROCEEDINGS
In June 1997, Linear Technology Corporation ("LTC") filed a complaint in the
U.S. District Court for the Northern District of California (San Jose Division)
alleging that certain products of the Company and products of four other
defendants infringe an LTC patent. The complaint seeks damages and an injunction
against infringement of the patent. The Company has denied any infringement and
has filed a counterclaim seeking that the patent be declared invalid. The
Company believes that the resolution of this action will not have a materially
adverse effect on the Company's financial condition or results of operations.
NOTE 8 - INDUSTRY SEGMENT
The Company and its subsidiaries operate within a single industry segment, the
manufacture and sale of semiconductors, and have various product categories
within that one segment that share common technologies, markets, and
applications.
Data on the Company's net revenues by product category is present below:
<TABLE>
<CAPTION>
Three months ended
---------------------------------------
May 1, 1999 May 2, 1998
----------------- -----------------
Product categories: Revenues % Revenues %
------------------- -------- ----- -------- ------
<S> <C> <C> <C> <C>
Power management $18,600 42.0% $14,600 39.5%
Data transmission/interface 15,100 34.1% 11,600 31.4%
Portable power management 8,300 18.7% 6,900 18.7%
Non-volatile and other 2,308 5.2% 3,828 10.4%
------- ----- ------- -----
Total $44,308 100.0% $36,928 100.0%
======= ===== ======= =====
</TABLE>
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<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
The following table sets forth the percentage of net revenues and the yearly
percentage change in certain financial data for the periods indicated:
<TABLE>
<CAPTION>
Items as a percentage of net revenues Percent changes year to year
------------------------------------- ----------------------------
May 1, May 2, May 2, May 1, 1999/ May 1, 1999/
Three months ended 1999 1998* 1998 May 2, 1998* May 2, 1998
- ------------------ ------ ------ ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net revenues 100.0% 100.0% 100.0% 20.0% 20.0%
Cost of revenues 52.0 53.3 60.3 17.0 3.4
----- ----- ----- ----- -----
Gross profit 48.0 46.7 39.7 23.3 45.2
Operating expenses:
Research & development expenses 11.8 13.0 13.0 9.2 9.2
Selling, general and
administrative expenses 18.5 22.3 22.3 (0.4) (0.4)
New fab pre-operating expenses -- 3.0 3.0 (100.0) (100.0)
Merger costs -- -- 3.7 -- (100.0)
Restructuring and other costs -- -- 3.4 -- (100.0)
----- ----- ----- ----- -----
Total operating expenses 30.3 38.3 45.4 (5.0) (19.8)
----- ----- ----- ----- -----
Income (loss) from operations 17.7 8.4 (5.7) 152.0 472.7
Other income (expense) 5.4 3.8 (3.0) 70.2 319.8
----- ----- ----- ----- -----
Income (loss) before income tax
provision (benefit) 23.1 12.2 (8.6) 126.5 420.5
Income tax provision (benefit) 8.5 4.6 (1.9) 122.2 644.9
----- ----- ----- ----- -----
Net income (loss) 14.6% 7.6% (6.8)% 129.1% 358.1%
===== ===== ===== ===== =====
</TABLE>
* Pro forma results exclude special charges and merger costs
Three Months ended May 1, 1999 versus Three Months Ended May 2, 1998
Net revenues in the first quarter ended May 1, 1999 were $44.3 million, an
increase of $7.4 million, or 20.0 %, compared to $36.9 million in the previous
year's first quarter. Revenues increased by 27%, 30%, and 20% year over year for
the power management, data transmission/interface, and portable power product
lines, respectively. The increases were principally due to increased demand in
the electronic data, communications, and portable PC markets as well as a
general industry-wide rebound in demand for semiconductors. International
revenues in the first quarter ended May 1, 1999 were 53%, compared to 63% in the
previous year's first quarter.
Gross profit as a percentage of net revenues was 48.0% in the current quarter,
compared to 46.7% in the prior year's first quarter excluding special charges.
The increase in the gross margin percentage, compared to the pro forma gross
margin percentage in the prior year, resulted from the benefits associated with
increased factory utilization, reduced costs of wafers supplied by an outside
foundry, and lower assembly costs from subcontractors. The Company also
completed the move of its Dallas test operation to Singapore during the first
quarter as part of the integration of the Benchmarq product line. These benefits
were somewhat offset by increased depreciation expense associated with the new
BiCMOS wafer fabrication facility ("BiCMOS fab") and pricing pressures on
selected products.
Research and development expenses were approximately 11.8% of net revenues, or
$5.2 million, compared with 13.0%, or $4.8 million, in the prior year. The
percentage decrease in research and development expenses was due to the higher
sales volume. Selling, general and administrative expenses were unchanged at
$8.2 million, but declined as a percentage of net revenues from 22.3% in the
prior year to 18.5% in the current quarter due to the higher sales volume. In
the first quarter ended May 2, 1998, the Company recorded $1.1 million in
pre-operating expenses associated with the BiCMOS fab, which became operational
in July 1998.
-10-
<PAGE> 11
RESULTS OF OPERATIONS (CONTINUED)
The Company recorded in the prior year's first quarter special charges of $6.4
million and merger-related transaction costs of $1.3 million associated with the
Benchmarq acquisition. For further information, see Notes 5 and 6 to the
Company's consolidated financial statements.
The current quarter's consolidated effective tax rate was 37.0%, compared to
37.7% in the prior year after excluding non-deductible merger-related
transaction costs. Net income in the first quarter was $6.4 million, or $.20 per
diluted share, which is an increase of 129% compared to pro forma net income in
last year's first quarter of $2.8 million, or $.09 per diluted share.
Bookings in the first quarter exceeded shipments and orders strengthened across
the Company's three principal product lines and in all geographic areas.
Compared to the previous quarter, bookings increased over 25%.
FINANCIAL CONDITION
Cash and cash equivalents at May 1, 1999 increased by $5.0 million to $96.6
million from the beginning of the fiscal year. The principal sources of cash
were $9.1 million from operating activities, $2.0 million from asset sales, and
$1.3 million in proceeds from exercises of employee stock options under the
Company's stock option plans; these were offset by $5.0 million in capital
expenditures and $1.7 million in repurchases of Company stock.
In March 1999, the Company entered into a new three-year multi-bank revolving
credit agreement that provides for borrowings of up to $50 million. Borrowings
under the credit agreement bear interest at variable spreads over LIBOR. There
were no borrowings in the first quarter.
Capital spending to support ongoing operations totaled approximately $5.0
million in the first quarter. The Company plans to spend approximately $17 to
$20 million for capital assets in fiscal year 2000. It is anticipated that the
Company's operating cash requirements for fiscal year 2000, including planned
capital expenditures, will be met by internally generated funds and available
cash.
The ratio of current assets to current liabilities was 6.07:1 at May 1, 1999
compared with 5.63:1 at January 31, 1999. Working capital of $133.5 million at
May 1, 1999 increased by $7.5 million from the beginning of the fiscal year.
Accounts receivable at May 1, 1999 increased by $4.9 million from the beginning
of the fiscal year primarily due to the higher sales volume. Receivable days
sales outstanding were 54 days in the first quarter compared with 52 days at
January 31, 1999 and 57 days in the previous year's first quarter. Royalty
receivable decreased by $5.2 million from January 31, 1999 due to the payment of
a one-time royalty benefit from International Rectifier Corporation.
On March 15, 1999, the Board of Directors of the Company authorized the
repurchase of up to one million shares of its common stock. During the first
quarter, the Company repurchased 110,000 shares at an average price of $15.48
per share for a total of $1.7 million.
NEW ACCOUNTING STANDARDS
See Note 2 in the Company's consolidated financial statements for a discussion
of recently issued accounting standards.
-11-
<PAGE> 12
IMPACT OF THE YEAR 2000 ISSUE
The Company, including the Benchmarq operations, has completed an assessment of
all computer-based software and hardware to ensure Year 2000 compliance. Certain
non-Year 2000 compliant systems and equipment are being modified, scrapped, or
replaced. In addition, the Company has begun replacement of certain business
systems with a Year 2000 compliant enterprise resource planning ("ERP") system
in order to improve reporting and productivity. Formal communications have been
established with all significant vendors to determine the extent to which the
Company could be impacted by third-parties' failure to remediate their own Year
2000 issues. The Company is currently unaware of any Year 2000 issues at the
Company or a third party that will not be compliant in a timely manner and could
result in a material effect on the Company's business, results of operations, or
financial condition. Year 2000 project expenditures, excluding capitalized costs
associated with the ERP system, have been immaterial to date and are not
anticipated to exceed $1.0 million. The Year 2000 project is expected to be
substantially completed by June 1999.
FACTORS AFFECTING FUTURE RESULTS
The Company's future operating results are difficult to predict and may be
affected by a number of factors including the timely ability to develop and
market new products, competitive pricing pressures, fluctuations in
manufacturing yields, adequate availability of processed silicon wafers from
foundry sources, insufficient or excess manufacturing and testing capacity, the
amount of product booked and shipped within a quarter, changes in product mix,
and fluctuating economic conditions in the United States, Asia and other
international markets.
The semiconductor market historically has been cyclical and subject to
significant fluctuations. As a result, orders and backlog may fluctuate widely
from time to time. Weakness in the EDP, communications or industrial markets may
affect the Company's bookings and the scheduling of existing backlog. Because of
this and other factors, there can be no assurance that the Company will not
experience material fluctuations in future operating results on a quarterly or
annual basis as a result of its inability to adjust its manufacturing capacity
or its cost structure to increased or reduced customer demand.
The Company is dependent upon a combination of its own wafer fabrication
facility in Merrimack, New Hampshire, and outside foundries for manufacturing
capacity. There can be no assurance that its internal capacity will match demand
or that the Company will provide sufficient orders to meet its contractual
obligations to its outside suppliers.
The Company's new 6" BiCMOS wafer fabrication facility became operational in
July 1998. Full qualification of manufacturing processes and products is
continuing. There can be no assurance that certain processes and products will
be qualified on time, that the added capacity will match demand for its
products, or that the ramp-up of production will result in acceptable
manufacturing yields. The Company's additional capacity has resulted in a
significant increase in operating expenses, such as depreciation, and if
revenues do not increase to offset these additional expenses, the Company's
future gross profit as a percentage of sales would be adversely affected.
Meanwhile, other semiconductor manufacturers are also expanding or planning to
expand their production capacity over the next several years. There can be no
assurance that the expansion by the Company and its competitors will not lead to
over-capacity in the industry, which could lead to price erosion that could
adversely affect the Company's operating results.
-12-
<PAGE> 13
FACTORS AFFECTING FUTURE RESULTS (continued)
The semiconductor industry is characterized by frequent litigation regarding
patent and other intellectual property rights. There can be no assurance that
future claims or assertions will not materially adversely affect the Company's
business, financial condition, results of operations, or cash flows.
FORWARD-LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 ("the Act") provides a new
"safe harbor" for forward-looking statements so long as those statements are
identified as forward-looking and are accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those discussed in the statement. The Company desires to
take advantage of the new "safe harbor" provisions of the Act. Certain
information contained herein, particularly the information appearing under the
headings "Results of Operations," "Financial Condition," "Impact of the Year
2000 Issue," and "Factors Affecting Future Results" is forward-looking.
Information regarding certain important factors that could cause actual results
of operations or outcomes of other events to differ materially from any such
forward-looking statement appears together with such statement, and/or elsewhere
herein. This information should be read in conjunction with the Company's annual
report on Form 10-K for the year ended January 31, 1999.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary exposures to market risk are the effect of fluctuations in
interest rates earned on its cash equivalents and short-term investments, and
the effect of volatility in currencies on its foreign-denominated trade
receivables and cash.
At May 1, 1999, the Company held $84.9 million in cash equivalents consisting of
taxable and tax-exempt municipal securities. Cash equivalents are classified as
held to maturity and valued at amortized cost which approximates fair market
value. A hypothetical 10 percent increase in interest rates would not have a
material impact on the fair market value of these instruments due to their short
maturity.
The Company enters into forward foreign exchange contracts as a hedge against
trade receivables and cash denominated in foreign currencies. Realized and
unrealized gains and losses on these contracts are included in net income and
offset the foreign exchange gains or losses on the hedged trade receivables and
cash. At May 1, 1999, the Company had one-month forward contracts to sell
foreign currencies of 1.8 million German marks, and 0.4 million British pounds
totaling approximately $1.6 million. The Company recorded total foreign currency
losses of $58,000 in fiscal year 1999. A hypothetical 10 percent change in
foreign currency rates would not have a material impact on the Company's results
of operations.
-13-
<PAGE> 14
Part II. Other Information
Unitrode Corporation and Consolidated Subsidiaries
May 1, 1999
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN THE RIGHTS OF THE COMPANY'S SECURITY HOLDERS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Registrant's annual meeting of stockholders was held on June 7, 1999, at
which three matters were submitted to a vote of security holders: (1) the
election of Louis E. Lataif and James T. Vanderslice as directors of the
Registrant for a three-year term ending in 2002, the election of Alan R. Schuele
as a director of the Registrant for a two-year term ending in 2001, and the
election of Dietrich R. Erdmann as a director of the Registrant for a one-year
term ending in 2000, (2) the approval of the Registrant's 1999 Equity Incentive
Plan, and (3) the approval of the Registrant's 1999 Employee Stock Purchase
Plan. As of April 9, 1999, the record date for said meeting, there were
outstanding 32,152,191 shares of the Registrant's common stock entitled to vote
at the meeting. At such meeting, the holders of 30,243,610 shares (94%) were
represented in person or by proxy, constituting a quorum. At such meeting, the
vote with respect to the matters proposed to the stockholders was as follows:
(1) ELECTION OF DIRECTORS:
<TABLE>
<CAPTION>
For Withheld
--- --------
<S> <C> <C>
Mr. Lataif 30,048,733 194,877
Mr. Vanderslice 30,046,283 197,327
Mr. Schuele 30,050,289 193,321
Mr. Erdmann 29,980,183 263,427
</TABLE>
(2) APPROVAL OF THE UNITRODE 1999 EQUITY INCENTIVE PLAN:
<TABLE>
<CAPTION>
For Against Abstain Broker Non-vote
--- ------- ------- ---------------
<S> <C> <C> <C> <C>
17,733,253 7,731,787 1,028,361 3,750,209
</TABLE>
(3) APPROVAL OF THE UNITRODE 1999 EMPLOYEE STOCK PURCHASE PLAN:
<TABLE>
<CAPTION>
For Against Abstain Broker Non-vote
--- ------- ------- ---------------
<S> <C> <C> <C> <C>
24,585,242 883,623 1,024,536 3,750,209
</TABLE>
ITEM 5. OTHER INFORMATION
None.
-14-
<PAGE> 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedules
(b) Reports on Form 8-K:
On February 16, 1999, the Registrant filed a report on Form
8-K announcing that on February 15, 1999, John L. Kokulis had
replaced Cosmo S. Trapani as Executive Vice President and
Chief Financial Officer of the Registrant. Mr. Trapani had
resigned from that position on January 31, 1999.
On March 16, 1999, the Registrant filed a report on Form 8-K
announcing that, effective March 15, 1999, the Registrant's
Board of Directors had authorized the repurchase of up to one
million shares of the Registrant's common stock from
time-to-time in the open market.
-15-
<PAGE> 16
Unitrode Corporation and Consolidated Subsidiaries
May 1, 1999
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.
UNITRODE CORPORATION
June 11, 1999 /s/ Robert J. Richardson
- ------------------ ------------------------------------
Date Robert J. Richardson
Chairman and Chief Executive Officer
June 11, 1999 /s/ John L. Kokulis
- ------------------ ------------------------------------
Date John L. Kokulis
Executive Vice President and
Chief Financial Officer
(Principal Financial and Accounting
Officer)
-16-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> FEB-01-1999
<PERIOD-END> MAY-01-1999
<EXCHANGE-RATE> 1
<CASH> 96,600
<SECURITIES> 0
<RECEIVABLES> 28,454
<ALLOWANCES> 1,691
<INVENTORY> 23,366
<CURRENT-ASSETS> 159,797
<PP&E> 159,262
<DEPRECIATION> 81,080
<TOTAL-ASSETS> 245,968
<CURRENT-LIABILITIES> 26,325
<BONDS> 0
0
0
<COMMON> 321
<OTHER-SE> 215,020
<TOTAL-LIABILITY-AND-EQUITY> 245,968
<SALES> 44,308
<TOTAL-REVENUES> 44,308
<CGS> 23,033
<TOTAL-COSTS> 23,033
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 10,236
<INCOME-TAX> 3,787
<INCOME-CONTINUING> 6,449
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,449
<EPS-BASIC> .20
<EPS-DILUTED> .20
</TABLE>
