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 July 3, 1994
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: 0-12695
INTEGRATED DEVICE TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-2669985
________________________________________________________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2975 Stender Way, Santa Clara, California 95054
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 727-6116
NONE
_________________________________________________________________________
(Former name, former address and former fiscal year, if changed since
last report)
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
____ ____
The number of outstanding shares of the registrant's Common Stock, $.001
par value, as of July 31, 1994 was 33,596,890.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
INTEGRATED DEVICE TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
( In thousands, except per share data)
(Unaudited)
Quarter Ended Quarter Ended
July 3, 1994 June 27, 1993
Revenues $95,043 $72,766
Cost of revenues 40,411 38,818
Gross profit 54,632 33,948
Operating expenses:
Research and development 17,580 15,467
Selling, general and administrative 14,830 11,777
Total operating expenses 32,410 27,244
Operating income 22,222 6,704
Interest expense (959) (1,438)
Interest income and other,net 1,241 519
Income before provision for
income taxes 22,504 5,785
Provision for income taxes 5,626 1,157
Net income $16,878 $4,628
Net income per share $.47 $.15
Shares used in computing
net income per share 36,107 31,039
The accompanying notes are an integral part of these financial statements.
INTEGRATED DEVICE TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
( In thousands, except share data)
(Unaudited)
July 3, 1994 April 3, 1994
ASSETS
Current assets:
Cash and cash equivalents $89,589 $88,490
Short-term investments 31,168 33,351
Accounts receivable, net 54,165 40,643
Inventory (Note 2) 32,339 29,855
Deferred tax assets 26,276 26,276
Prepayments and other current assets 4,051 3,858
Total current assets 237,588 222,473
Property, plant and equipment , net 126,302 120,838
Other assets 7,860 6,260
TOTAL ASSETS $371,750 $349,571
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $23,016 $15,925
Accrued compensation and related expense 12,818 16,528
Deferred income on shipments to distributors 20,719 17,592
Income taxes payable 7,083 1,964
Other accrued liabilities 9,522 13,032
Current portion of long term obligations 12,270 14,184
Total current liabilities 85,428 79,225
Long term obligations 35,447 37,462
Deferred tax liabilities 8,517 8,517
Commitments and contingencies
Shareholders' equity :
Preferred stock;$.001 par value:
5,000,000 shares authorized; no shares issued
Common stock; $.001 par value: 65,000,000
shares authorized; 33,559,386 and
33,405,552 shares issued and outstanding 34 33
Additional paid-in capital 161,194 160,221
Retained earnings 81,395 64,517
Cumulative translation adjustment (265) (404)
Total shareholders' equity 242,358 224,367
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $371,750 $349,571
The accompanying notes are an integral part of these financial statements.
INTEGRATED DEVICE TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Quarter Ended Quarter Ended
July 3, 1994 June 27, 1993
Increase (decrease) in cash
- - -----------------------------------------
Operating activities:
Net income $16,878 $4,628
Adjustments:
Depreciation and amortization 9,492 9,509
Provision for losses on accounts receivable 197 36
Changes in assets and liabilities:
Accounts receivable (13,719) (5,701)
Inventory (2,484) (1,007)
Other assets (2,243) (88)
Accounts payable 7,091 3,273
Accrued compensation and related expense (3,710) 2,529
Deferred income to distributors 3,127 749
Income taxes payable 5,119 965
Other accrued liabilities (3,178) (596)
Net cash provided by operating activities 16,570 14,297
Investing activities:
Additions to property, plant and
equipment, net (14,506) (6,086)
Purchases of short-term investments (5,947)
Proceeds from sales of short-term investments 8,130
Net cash used for investing activities (12,323) (6,086)
Financing activities:
Issuance of common stock, net 974 1,961
Proceeds from borrowings 2,705
Payment on capital leases and other debt (4,122) (7,771)
Net cash used for financing activities (3,148) (3,105)
Net increase in cash and cash equivalents 1,099 5,106
Cash and cash equivalents at beginning of period 88,490 22,529
Cash and cash equivalents at end of period $89,589 $27,635
Supplemental disclosure of cash flow information:
Interest paid 787 1,305
Income taxes paid (refunded) 463 (57)
The accompanying notes are an integral part of these financial statements.
INTEGRATED DEVICE TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying condensed consolidated balance sheet at July 3,
1994, the condensed consolidated statements of operations and cash flows
for the fiscal quarter are unaudited. In the opinion of management, these
financial statements have been prepared on the same basis as the audited
consolidated financial statements and reflect all adjustments, consisting
of normal recurring adjustments, necessary to present fairly the financial
data of Integrated Device Technology, Inc. and its subsidiaries for such
periods. The results of operations for the three month period ending
July 3, 1994 are not necessarily indicative of the results to be expected
for the year ending April 2, 1995. The data disclosed in the notes to the
condensed consolidated financial statements for these periods is unaudited.
This report on Form 10-Q for the quarter ended July 3, 1994 should
be read in conjunction with the Company's Annual Report to Stockholders and
Annual Report on Form 10-K for the year ended April 3, 1994.
2. Inventory consists of the following (in thousands):
July 3, 1994 April 3, 1994
Raw materials $ 3,395 $ 2,834
Work-in-process 14,657 10,201
Finished Goods 14,287 16,820
__________ _________
$ 32,339 $ 29,855
========= =========
3. The provision for income taxes reflects the estimated annualized
effective tax rate applied to earnings for the interim period. The
effective rate differs from the U.S. statutory rate of 35% primarily due
to earnings of foreign subsidiaries being taxed at lower rates, utilization
of research and development credits and realization of certain deferred tax
benefits for which a valuation allowance was previously required.
4. Net income per share is based on the weighted average number of
shares of common stock and common stock equivalents outstanding, if
dilutive.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
All references are to the Company's fiscal periods ended July 3, 1994,
and June 27, 1993, unless otherwise indicated.
RESULTS OF OPERATIONS
Revenues increased 31% to $95.0 million in the first quarter of fiscal
1995 compared to $72.8 in the same quarter of fiscal 1994. The increase was
attributable to higher unit sales in most product families and in all
geographic regions, particularly SRAM memories, logic and specialty memory
products. Lower average selling prices partially offset the unit volume
growth.
Gross profit in the quarter increased by $20.7 million, or to 57.5% as
a percentage of revenue (gross margin) from 46.7% in the same quarter a year
ago. The improvement in gross margin was primarily attributable to higher
capacity utilization as a result of increased unit volumes. In addition,
the Company continued a shift to its most advanced wafer fabrication
processes, as well as more efficient test and burn-in procedures, leading
to improved yields that further reduced manufacturing costs. Continued
strong demand has allowed the Company to be more selective in new order
acceptance thereby shifting manufacturing capacity to higher-margin products.
The increase in gross margin was partially offset by declining average
selling prices on certain products due to competition and maturing product
life cycles. In addition, patent and royalty expenses relating to
cross-license agreements decreased significantly in the quarter.
Research and development (R&D) expenses increased $2.1 million in the
quarter but declined as a percentage of revenues to 18.5% from 21.3% in the
same quarter a year ago. IDT continued development of its new .65 micron
CMOS process technology during the quarter. New product development resulted
in the introduction of 14 new products or product functions during the
quarter, including 2 MIPS-based data communications RISC microprocessors,
3.3 volt versions of 3 FIFO specialty memories, and 3 logic low skew dual
bank clock drivers. In addition, on June 2, 1994, the Company announced
the establishment of an IDT Remote Design Center, located in the Advanced
Technology Development Center (ATDC) at Georgia Institute of Technology in
Atlanta. The center will be staffed, in part, by graduates and students of
Georgia Tech and will concentrate on the design of advanced memory products.
IDT expects that R&D expenses may increase in absolute spending during the
remainder of fiscal 1995 but will remain relatively constant as a percentage
of revenues.
Selling, general and administrative (S,G&A) expenses increased by
$3.0 million in the quarter but declined as a percentage of revenues to
15.6% from 16.2% in the prior year period. Certain variable S,G&A costs
that are functions of revenues and profitability, such as profit sharing
and management bonuses, increased in the quarter. The Company anticipates
that although absolute S,G&A expenses will be likely to increase, S,G&A
expenses will decline slightly as a percentage of revenues during the
remainder of fiscal 1995, as compared to fiscal 1994.
Interest expense decreased by 28.6% to $1.0 million compared with
$1.4 million for the same quarter a year ago. The decrease was the result
of lower debt balances coupled with lower interest rates.
Interest income and other, net, increased to $1.2 million in the quarter
as contrasted with $0.5 million in the same quarter a year ago. The
increase in interest income was attributable to significantly higher average
cash balances resulting from a secondary stock offering in October 1993,
partially offset by lower interest rates. The Company expects that interest
income will likely increase slightly as a result of higher average cash
balances for the remainder of fiscal 1995.
Income taxes for the quarter are provided at an effective rate of 25%.
This compares to an effective rate of 20% provided in the same quarter a
year ago. The increase in the effective tax rate is the result of the
Company's anticipated improved profitability in fiscal 1995 as compared to
1994. The effective rate differs from the U.S. statutory rate of 35%
primarily due to earnings of foreign subsidiaries being taxed at lower
rates, utilization of research and development credits and realization of
certain deferred tax benefits for which a valuation allowance was previously
required.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated $16.6 million of funds from operations in the
quarter. At July 3, 1994, cash and cash equivalents and short-term
investments were $120.8 million.
During the first quarter of fiscal 1995 the Company incurred $14.5
million in capital expenditures and repaid an aggregate of $4.1
million of debt.
In view of current capacity requirements, the Company anticipates
total fiscal 1995 capital expenditures of $70.0 million. Principal
requirements are for incremental production equipment at the Company's
San Jose' wafer fabrication facility and completion of the conversion of
the Salinas wafer fabrication facility from five-inch to six-inch wafer
manufacturing. The Company has begun construction of a new building,
planned at $3.1 million, adjacent to its existing Penang, Malaysia facility.
The new building will allow further expansion of the assembly and test
capabilities and capacities of the Penang facility. Incremental production
test equipment at the Company's San Jose and Salinas facilities is also
included in the planned capital expenditures.
In addition, the Company has announced construction of a new eight-inch
wafer fabrication facility. The new plant, to be located in Hillsboro,
Oregon, is planned to be operational late in fiscal 1996. The incremental
effect on fiscal 1995 capital expenditures is not expected to exceed
$20.0 million.
The Company believes that existing cash and cash equivalents, cash flow
from operations and existing credit facilities, will be sufficient to meet
its working capital, mandatory debt repayment and anticipated capital
expenditure requirements for the remainder of fiscal 1995.
FACTORS AFFECTING FUTURE RESULTS
The Company has experienced improvements in revenues, bookings and
profitability during the first quarter of fiscal 1995. Nevertheless, the
Company's future operating results are subject to a variety of uncertainties.
The Company's quarterly operating results may be subject to fluctuations
including the semiconductor industry's typically slower growth pattern
during the summer quarter, the timing of new product and process technology
announcements by the Company or competitors, competitive pricing pressures,
capacity constraints, fluctuations in manufacturing yields, changes in the
mix of products sold, availability and costs of raw materials, various
geographic area economic conditions or the costs of other events, such
as the expansion of production capability or litigation. While the Company's
business conditions appear to be improved, intense semiconductor competition
and the world economy, as well as the rapid pace of technological change,
make profitability trends difficult to predict.
New products and process technology continue to require significant
R&D investments by the Company but there can be no assurance that those
efforts will result in market acceptance. A significant number of the
Company's growth opportunities are targeted at the emerging market demand
in computer and communications industries and depend on customer preference
for IDT products and capabilities in lieu of competitive alternatives.
There is no assurance that market acceptance and demand will continue or
that customer preference will be realized. The Company is converting its
Salinas wafer fabrication facility from the existing five-inch wafer
capability to six-inch wafers. Should the Company encounter production
difficulties during the conversion, quality problems and delivery delays
could result. In addition, the Company's operating results could also be
adversely affected by the increase in fixed costs and operating expenses
related to the planned construction of the new eight-inch wafer fabrication
facility in Oregon if revenues do not increase sufficiently.
From time to time, the Company is made aware of various patent-related
and other claims arising in the normal course of business. The Company
evaluates such claims and negotiates license agreements with claimants as
necessary. In the opinion of management, there are no known claims that
would have a material adverse effect on the results of operations of the
Company. However, the failure to obtain licenses or other rights or the
initiation of litigation arising out of any future claims could have a
material adverse effect on the results of operations of the Company.
PART II OTHER INFORMATION
None.
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.
INTEGRATED DEVICE TECHNOLOGY, INC.
Date: August 15, 1994 /s/ Leonard C. Perham
____________________________________
Leonard C. Perham
Chief Executive Officer
Date: August 15, 1994 /s/ William D. Snyder
____________________________________
William D. Snyder
Vice President Finance (principal
financial and accounting officer)
