SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 26, 1993
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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 January 30, 1994 was 32,878,758.
PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements
INTEGRATED DEVICE TECHNOLOGY, INC.
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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( In thousands, except per share data)
(Unaudited)
Quarter Ended Quarter Ended
Dec. 26, 1993 Dec. 27, 1992
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Revenues $85,330 $60,590
Cost of revenues 39,911 33,356
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Gross profit 45,419 27,234
Operating expenses:
Research and development 16,564 13,975
Selling, general and administrative 13,663 10,440
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Total operating expenses 30,227 24,415
Operating income 15,192 2,819
Interest expense (1,209) (1,477)
Interest income and other,net 556 522
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Income before provision for
income taxes 14,539 1,864
Provision for income taxes 2,914 371
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Net income $11,625 $1,493
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Net income per share $ .35 $ .05
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Shares used in computing
net income per share 33,560 29,275
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The accompanying notes are an integral part of these financial statements.
INTEGRATED DEVICE TECHNOLOGY, INC.
------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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( In thousands, except per share data)
(Unaudited)
Nine months Ended Nine months Ended
Dec. 26, 1993 Dec. 27, 1992
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Revenues $238,391 $171,827
Cost of revenues 119,057 96,493
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Gross profit 119,334 75,334
Operating expenses:
Research and development 47,746 40,036
Selling, general and administrative 38,969 28,302
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Total operating expenses 86,715 68,338
Operating income 32,619 6,996
Interest expense (3,987) (4,390)
Interest income and other,net 1,351 896
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Income before provision for
income taxes 29,983 3,502
Provision for income taxes 5,997 696
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Net income 23,986 2,806
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Net income per share $ .74 $ .10
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Shares used in computing
net income per share 32,213 28,446
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The accompanying notes are an integral part of these financial statements.
INTEGRATED DEVICE TECHNOLOGY, INC.
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CONDENSED CONSOLIDATED BALANCE SHEETS
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( In thousands, except share data)
(Unaudited)
Dec. 26, 1993 March 28, 1993
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ASSETS
Current assets:
Cash and cash equivalents $71,176 $22,529
Short-term investments 31,735 1,877
Accounts receivable, net 37,864 43,190
Inventory (Note 2) 27,735 27,237
Deferred tax assets 15,009 15,270
Prepayments and other current assets 4,452 2,825
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Total current assets 187,971 112,928
Property, plant and equipment , net 119,784 118,837
Other assets 6,770 8,229
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TOTAL ASSETS $314,525 $239,994
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $18,165 $15,819
Accrued compensation and related expense 10,649 7,399
Deferred income on shipments to distributors 14,394 10,450
Income taxes payable 2,252 878
Other accrued liabilities 9,913 8,030
Current portion of long term obligations 17,494 19,467
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Total current liabilities 72,867 62,043
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Long term obligations 31,143 42,828
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Deferred tax liabilities 17,237 17,363
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Commitments and contingencies
Shareholders' equity :
Preferred stock;$.001 par value:
5,000,000 shares authorized; no shares issued
Common stock; $.001 par value: 65,000,000
shares authorized; 32,507,818 and
28,377,721 shares issued and outstanding 33 28
Additional paid-in capital 145,395 94,114
Retained earnings 48,338 24,352
Cumulative translation adjustment (430) (351)
-------- --------
193,336 118,143
Treasury stock; 8,769 and 41,654 shares at cost (58) (383)
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Total shareholders' equity 193,278 117,760
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $314,525 $239,994
========= ==========
The accompanying notes are an integral part of these financial statements.
INTEGRATED DEVICE TECHNOLOGY, INC.
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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( In thousands)
(Unaudited)
Nine months Ended Nine months Ended
Dec. 26, 1993 Dec. 27, 1992
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Increase (decrease) in cash
- ---------------------------
Operating activities:
Net income $23,986 $2,806
Adjustments:
Depreciation and amortization 27,989 27,639
Provision for losses on
accounts receivable 481 251
Changes in assets and liabilities:
Accounts receivable 4,845 (1,089)
Inventory (498) (3,845)
Prepaid income taxes 135 2,660
Other assets (1,734) (1,987)
Accounts payable 2,346 134
Accrued compensation and
related expense 3,250 641
Deferred income to distributors 3,944 106
Income taxes payable 1,374 161
Other accrued liabilities 2,327 (960)
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Net cash provided by operating activities 68,445 26,517
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Investing activities:
Purchases of property, plant and
equipment (28,133) (18,702)
Proceeds from sale of equipment 763 184
Purchases of short-term investments (30,940) (4,258)
Proceeds from sales of
short-term investments 1,082 3,084
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Net cash used for investing activities (57,228) (19,692)
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Financing activities:
Issuance of common stock, net 51,611 1,356
Proceeds from borrowings 2,731 22,121
Payment on capital leases and
other debt (16,912) (30,843)
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Net cash provided (used) for
financing activities 37,430 (7,366)
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Net increase (decrease) in cash and
cash equivalents 48,647 (541)
Cash and cash equivalents at
beginning of period 22,529 20,026
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Cash and cash equivalents at end of period $71,176 $19,485
======== =========
Supplemental disclosure of cash flow information:
Interest paid 3,562 4,563
Income taxes paid 4,350 2,138
Issue of Common Stock for
acquisition of technology 7,738
The accompanying notes are an integral part of these financial statements.
INTEGRATED DEVICE TECHNOLOGY, INC.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
1. The accompanying consolidated balance sheet at December 26, 1993,
the consolidated statements of operations for the fiscal quarters
and nine months period ended December 26, 1993 and December 27,
1992 and the consolidated statements of cash flows for the nine
months 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 and nine months
period ending December 26, 1993 are not necessarily indicative of
the results to be expected for the year ending April 3, 1994. The
data disclosed in the notes to the consolidated financial
statements for these periods is unaudited.
This report on Form 10-Q for the quarter ended December 26, 1993
should be read in conjunction with the Company's Annual Report
to Stockholders and Annual Report on Form 10-K for the year
ended March 28, 1993.
2. Inventories consist of the following (in thousands):
December 26, 1993 March 28, 1993
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Raw materials $ 3,137 $ 3,117
Work-in-process 11,754 13,494
Finished Goods 12,844 10,626
__________ ___________
$ 27,735 $ 27,237
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3. The provision for income taxes reflects the estimated annualized
effective tax rate applied to earnings for the interim period.
4. Net income per share is based on the weighted average number of
shares of common stock and common stock equivalents outstanding,
if dilutive. Primary and fully diluted earnings per share are the
same.
5. 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, these
proceedings will not have a material adverse effect on the results
of operations of the Company.
Item 2. Management's Discussion and Analysis of Financial Condition and
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Results of Operations
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All references are to the company's fiscal periods ended December
26, 1993 and December 27, 1992, unless otherwise indicated.
RESULTS OF OPERATIONS
Revenues for the quarter and nine months increased to $85.3 million
and $238.4 million, respectively, representing increases of 41% for the
quarter and 39% for the nine-month period. The increases in revenues in
both the current quarter and nine months was attributable to higher unit
sales in most product families, particularly SRAM cache memory modules,
RISC microprocessors and specialty memory products. The Company's total
average selling price in the quarter and in the nine-month period was
higher as a result of product mix shifts to SRAM cache memory components,
high performance RISC microprocessors, double-wide logic products and
multi-port and synchronous FIFO memory products. These favorable mix
shifts were partially offset by declining average selling prices resulting
from competition and product life cycles in the Company's older products.
Gross profit in the quarter increased $18.2 million, or as a
percentage of revenues (gross margin), to 53.2% from 45.0%. For the nine
months gross profit increased significantly to $119.3 million or 50.1% of
revenues from $75.3 million or 43.8%, respectively. The Company's continued
shift in manufacturing to the most advanced wafer fabrication processes
led to improved yields and higher capacity utilization, thereby reducing
manufacturing costs as a percentage of revenues. Additionally, more
efficient test and burn-in procedures contributed to the gross margin
improvement for the quarter and nine months. Continued strong demand has
also allowed the Company to continue to be more selective in new order
acceptance and to shift manufacturing capacity to higher-margin products.
The improvement in gross margin was partially offset by declining average
selling prices on certain older products due to competition and maturing
product life cycles. Patent and royalty expenses relating to cross-license
agreements increased significantly in the quarter and nine-month period
to $1.9 million and $4.3 million, respectively, compared to $0.4 million
and $0.9 million in the comparable periods of the prior year.
Research and development (R&D) expenses increased by $2.5 million,
or 18.5%, in the quarter but declined as a percentage of revenues to 19.4%
from 23.1% in the comparable period. R&D expenses for the nine months
increased to $47.7 million as compared to $40.0 million in the prior
nine-month period. However, as a percentage of revenues R&D declined
to 20.0% compared to 23.3% for the prior nine-month period. IDT continued
the development of its new .65 micron CMOS process technology during the
quarter. New product development resulted in the introduction of 4 new
products in the current quarter - the R4600 Orion microprocessor,
a MIPS- based RISC processor offering 100MHz performance, a phase-locked
loop logic clock driver and an SRAM cache memory module. The Company
expects that R&D expenses may increase in absolute spending during the
remainder of fiscal 1994 but will remain relatively constant as a
percentage of revenues.
Selling, general and administrative (S,G&A) expenses increased by
$3.2 million for the quarter and $10.7 million for the nine months compared
to the comparable periods of the prior year. As a percentage of revenues,
S,G&A declined to 16.0% and 16.4% in the quarter and nine months as
contrasted with 17.2% and 16.5%, respectively, for the prior periods.
Certain variable costs that are a function of revenues and profitability,
such as profit sharing and management bonuses, increased in the quarter
and nine months of fiscal 1994 as compared to the same periods a year ago.
In addition, during the comparable quarter and nine months of fiscal 1993
cost cutting measures had been implemented which reduced profit sharing,
executive salaries and bonuses. Those cost cutting measures were
rescinded in the first quarter of fiscal 1994. The Company anticipates
that although absolute spending will be likely to increase, SG&A expenses
will decline as a percentage of revenues during the remainder of fiscal 1994.
Interest expense decreased by $0.3 million, or 18%, to $1.2 million
for the quarter compared with $1.5 million for the same quarter a year ago
and declined 9% to $4.0 million from $4.4 million for the nine-month period.
The Company continued to incur interest on a long-term obligation associated
with a patent cross-license. This obligation did not exist in the
comparable periods of the prior fiscal year. This increase was more
than offset by reduced interest as a result of lower debt balances and
lower interest rates. The Company anticipates that interest expense in
fiscal 1994 may decrease as reduced debt balances and lower interest
rates will more than offset accretion of the long term obligation.
Interest income and other, net, increased to $556,000 in the
quarter and by 51% to $1.4 million for the nine-month period as
contrasted to $522,000 and $896,000 in the comparable periods. The
increase in interest income is attributable to significantly higher
average cash balances, in part resulting from receipt of the cash
proceeds of the public offering in October 1993. The interest income
is partially offset by lower interest rates. The Company expects that
interest income will increase as a result of significantly higher cash
balances for the remainder of fiscal 1994.
Income taxes for the quarter as well as the nine-month period
and for the same periods a year ago are provided at an effective rate of
20%. The effective rate differs from the U. S. statutory rate of 35%
primarily due to earnings of foreign subsidiaries being taxed at lower
rates and realization of certain deferred tax benefits for which a
valuation allowance was previously required.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial condition improved significantly in the
first nine months of fiscal 1994. The Company generated $68.4 million
of funds from operations in the nine-month period compared to $26.5 million
in the prior year. During the third quarter of fiscal 1994, the Company
generated $33.1 million of cash flow from operations. Approximately $4.6
million in cash flow in the nine-month period has been provided by equity
sales through various employee benefit plans, primarily employee exercise
of stock options. On October 25, 1993 the Company completed a public
offering of 3 million shares of its Common Stock and received net cash
proceeds of $46,764,000. At December 26, 1993, cash and cash equivalents
and short-term investments were $102.9 million, an increase of $78.5
million in the nine-month period from March 28, 1993, the end of fiscal
1993.
During the third quarter of fiscal 1994 the Company made cash
payments of $12.1 million for capital equipment and repaid an aggregate
of $4.2 million of debt. For the nine-month period the Company made cash
payments of $28.1 million for capital equipment and repaid an aggregate
of $16.9 million of debt.
Capital expenditures for the remainder of fiscal 1994 are
projected at $12 million, principally for production equipment at the
Company's San Jose and Salinas wafer fabrication facilities and additional
test equipment at its San Jose, Salinas and Penang facilities. These
capital expenditures will be financed by cash flow from operations,
existing cash balances and a portion of the net proceeds of the public
offering.
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
planned capital expenditure requirements for at least the next 12 months.
However, the Company may convert fully its Salinas wafer fabrication line
from five-inch to six-inch wafer manufacturing. This conversion may cause
the Company to require additional debt financing.
FACTORS AFFECTING FUTURE RESULTS
The Company has experienced significant improvements in revenues,
bookings and profitability during the first nine months of fiscal 1994 as
compared to fiscal 1993. The Company's future results, are, however
subject to a variety of uncertainties. The Company's quarterly operating
results may be subject to fluctuations as a result of a number of factors,
including the timing of new product and process technology announcements
by the Company or competitors, competitive pricing pressures, fluctuations
in manufacturing yields, changes in the mix of products sold, availability
and costs of raw materials, the cyclical nature of the semiconductor
industry, 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
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 of new products.
A significant number of the Company's growth opportunities are targeted
at the emerging market demand in the 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 may, dependent on product
demand, convert its Salinas wafer fabrication facility from the existing
five-inch wafer capability to six-inch wafers. Should the Company decide
to implement a conversion of its Salinas wafer facility, the Company may
encounter production difficulties which could cause quality problems and
delivery delays.
PART II OTHER INFORMATION
Item 6. Report on Form 8-K
A Current Report on Form 8-K (Item 5) relating to Other Events and
Financial Statements and Exhibits (Item 7) was filed with the Securities
and Exchange Commission on October 19, 1993.
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: February 8, 1994 /s/ Leonard C. Perham
____________________________________
Leonard C. Perham
Chief Executive Officer
Date: February 8, 1994 /s/ William D. Snyder
____________________________________
William D. Snyder
Vice President Finance (principal
financial and accounting officer)
