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 January 1, 1995
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 29, 1995 was 37,786,927.
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
Jan. 1, 1995 Dec. 26, 1993
Revenues $105,765 $85,330
Cost of revenues 45,237 39,911
Gross profit 60,528 45,419
Operating expenses:
Research and development 18,882 16,564
Selling, general and
administrative 15,817 13,663
Total operating expenses 34,699 30,227
Operating income 25,829 15,192
Interest expense (708) (1,209)
Interest income and
other, net 1,286 556
Income before provision
for income taxes 26,407 14,539
Provision for income taxes 6,608 2,914
Net income $19,799 $11,625
Net income per share $ .54 $ .35
Shares used in computing
net income per share 36,877 33,560
The accompanying notes are an integral part of these financial statements.
INTEGRATED DEVICE TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
( In thousands, except per share data)
(Unaudited)
Nine months Ended Nine months Ended
Jan. 1, 1995 Dec. 26, 1993
Revenues $296,393 $238,391
Cost of revenues 125,659 119,057
Gross profit 170,734 119,334
Operating expenses:
Research and development 54,418 47,746
Selling, general and
administrative 46,185 38,969
Total operating expenses 100,603 86,715
Operating income 70,131 32,619
Interest expense (2,562) (3,987)
Interest income and
other, net 4,007 1,351
Income before provision
for income taxes 71,576 29,983
Provision for income taxes 17,893 5,997
Net income $53,683 $23,986
Net income per share $ 1.48 $ .74
Shares used in computing
net income per share 36,313 32,213
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)
Jan. 1, 1995 April 3, 1994
ASSETS
Current assets:
Cash and cash equivalents $168,878 $ 88,490
Short-term investments 49,310 33,351
Accounts receivable, net 68,621 40,643
Inventory (Note 2) 32,495 29,855
Deferred tax assets 24,068 26,276
Prepayments and other
current assets 9,239 3,858
Total current assets 352,611 222,473
Property, plant and
equipment, net 153,557 120,838
Other assets 6,933 6,260
TOTAL ASSETS $513,101 $349,571
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 28,890 $ 15,925
Accrued compensation
and related expense 14,400 16,528
Deferred income on
shipments to distributors 24,869 17,592
Income taxes payable 9,144 1,964
Other accrued liabilities 8,222 13,032
Current portion of
long term obligations 6,848 14,184
Total current liabilities 92,373 79,225
Long term obligations 32,982 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;
37,684,421 and 33,405,552 shares
issued and outstanding 38 33
Additional paid-in
capital 261,165 160,221
Retained earnings 118,200 64,517
Cumulative translation
adjustment (174) (404)
Total shareholders' equity 379,229 224,367
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $513,101 $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)
Nine months Ended Nine months Ended
Jan. 1, 1995 Dec. 26, 1993
Increase (decrease) in cash
- ---------------------------
Operating activities:
Net income $ 53,683 $ 23,986
Adjustments:
Depreciation and
amortization 28,671 27,989
Provision for losses
on accounts receivable 290 481
Changes in assets and liabilities:
Accounts receivable (28,268) 4,845
Inventory ( 2,640) (498)
Other assets ( 7,683) (1,734)
Accounts payable 12,965 2,346
Accrued compensation
and related expense ( 2,128) 3,250
Deferred income
to distributors 7,277 3,944
Income taxes including
deferred 9,224 1,509
Other accrued
liabilities ( 3,998) 2,327
Net cash provided by
operating activities 67,393 68,445
Investing activities:
Purchases of property,
plant and equipment (60,162) (28,133)
Proceeds from sale
of equipment 401 763
Purchases of
short-term investments (44,511) (30,940)
Proceeds from sales of
short-term investments 28,552 1,082
Net cash used for
investing activities (75,720) (57,228)
Financing activities:
Issuance of common
stock, net 100,949 51,611
Proceeds from borrowings 0 2,731
Payment on capital
leases and other debt (12,234) (16,912)
Net cash provided for
financing activities 88,715 37,430
Net increase in cash
and cash equivalents 80,388 48,647
Cash and cash equivalents
at beginning of period 88,490 22,529
Cash and cash equivalents
at end of period $168,878 $71,176
Supplemental disclosure of cash flow information:
Interest paid 2,120 3,562
Income taxes paid 8,240 4,350
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 sheets and the condensed
consolidated statements of operations and cash flows and the accompanying
notes 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
January 1, 1995 are not necessarily indicative of the results to be expected
for the year ending April 2, 1995.
This report on Form 10-Q for the quarter ended January 1, 1995 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):
January 1, 1995 April 3, 1994
Raw materials $ 4,112 $ 2,834
Work-in-process 12,355 10,201
Finished Goods 16,028 16,820
__________ ________
$ 32,495 $ 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 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.
5. The Company adopted Statement of Financial Accounting Standards (FAS) 115,
"Accounting for Certain Investments in Debt and Equity Securities" effective
April 4, 1994 as required by that pronouncement. The Statement requires
reporting of investments as either held to maturity, trading or available
for sale. The Company's investments have been classified as available for
sale. The effect of adoption was not material.
6. On December 13, 1994 the Company completed a public offering of 3.8
million shares of its Common Stock and received net proceeds of $97.5
million. The Company will use the net proceeds of the offering for
construction of a new eight-inch wafer fabrication facility in Hillsboro,
Oregon, expansion of existing wafer fabrication facilities in San Jose and
Salinas, California, acquisition of capital equipment and general corporate
purposes, including working capital.
7. Subsequent to the third quarter of fiscal 1995, the Company has entered
into a Tax Ownership Operating Lease transaction to finance $60 million
of Oregon facility building improvements. The Company's obligations
under the lease are secured by a line of credit trust deed on the building
improvements and collateralized with cash securities up to 105% of financing
until completion of the building scheduled around September 1995 and 85%
thereafter. The Company is contingently liable under a first-loss clause
for up to 85% of the constructed building improvements. Management believes
that this contingent liability will not have a material adverse effect
on the Company's financial position or results of operations.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
All references are to the company's fiscal periods ended January 1,
1995, and December 26, 1993, unless otherwise indicated.
RESULTS OF OPERATIONS
Revenues for the quarter and nine months of fiscal 1995 increased to
$105.8 million and $296.4 million respectively, increases of 24.0% for the
quarter and 24.3% for the nine-month period, respectively. The increases
in the quarter were attributable to higher volume unit sales across most
product families, geographic regions and sales channels. Significant unit
volume growth was experienced in SRAM memories, particularly 3.3 volt
devices, RISC based microprocessors, and specialty memory products. For the
nine-month period significant unit volume growth across all product lines,
geographic regions and sales channels were responsible for the increase from
the same period in the prior year. The higher unit volumes were offset in
the quarter and the nine-month period in part by lower unit selling prices
on certain products due to competitive market pricing and maturation of
certain products.
Gross profit in the quarter increased by $15.1 million to 57.2% as a
percentage of revenue (gross margin) from 53.2% in the same quarter of the
prior year. For the nine-month period gross profit increased to $170.7
million or to 57.6% of revenues as compared to $119.3 million or 50.1%,
respectively, for the comparable period of the prior year. The improvements
in gross margin were primarily attributable to higher capacity utilization
as a result of increased unit volumes. In addition, the Company continued a
shift to more advanced designs and wafer fabrication processes which resulted
in increased die per wafer yields and therefore lower unit costs. More
efficient test and burn-in procedures also contributed to improved yields
and reduced manufacturing costs. In addition, continued strong demand,
strengthening of prices in SRAM markets and selective acceptance of new
orders allowed the Company to shift manufacturing capacity to higher-margin
products. Due to the Company reaching a cap on certain royalty obligations,
gross profit benefited in the first nine months of fiscal 1995 compared to
the first nine months of fiscal 1994 from a $2.1 million reduction in patent
and royalty expenses relating to cross-license agreements. However, the
Company's industry is characterized by patent claims and license agreements,
and there can be no assurance royalty expenses will not increase in the
future.
Research and development (R&D) expenses increased in absolute dollars
but declined as a percentage of revenues for the quarter and the first nine
months of fiscal 1995 as compared to the same periods of fiscal 1994. R&D
grew $2.3 million in the quarter but declined as a percentage of revenues
to 17.9% from 19.4% in the same quarter a year ago. For the nine-month
period R&D expenses increased 14.0% to $54.4 million, but decreased to 18.4%
of revenues from 20.0% in the corresponding period of the prior year. The
Company continues to invest in the development of new products and process,
both of which are critical elements in offering proprietary products. The
Company expects that it will continue to increase R&D spending in the future,
although such expenses may vary as a percentage of revenues.
Selling, general and administrative (S,G&A) expenses increased by $2.2
million in the quarter, decreasing to 15.0% of revenues from 16.0% in the
same quarter of the prior year. S,G&A expenses increased 18.5% to $46.2
million for the first nine months of fiscal 1995, but declined as a
percentage of revenues to 15.6% from 16.4% in the comparable period of the
prior year. The increase in S,G&A expenses was attributable to higher costs
associated with higher levels of sales and profitability, including higher
sales commissions, employee profit sharing and management bonuses, although
SG&A expenses did not increase as rapidly as sales. The Company anticipates
that absolute SG&A expenses will continue to increase, but may vary as a
percentage of revenues.
Interest expense in the quarter decreased by 41.4% to $.7 million
compared with $1.2 million in the prior year. For the nine-month period
interest expense decreased 35.7% to $2.6 million as compared to $4.0 million
in the same period of the prior year. The decrease in both the quarter and
nine-month period was the result of lower debt balances.
Interest income and other, net, increased to $1.3 million in the quarter
and $4.0 million for the nine-month period as contrasted with $.6 million
and $1.4 million, respectively, for the same period of the prior year. The
increase in interest income was attributable to significantly higher average
cash balances and higher interest rates.
Income taxes for the quarter and nine months of fiscal 1995 are
provided at an effective rate of 25%. This compares to an effective rate of
20% provided in fiscal 1994. The increase in the effective tax rate in
fiscal 1995 as compared to fiscal 1994 is primarily due to higher utilization
in fiscal 1994 of certain deferred tax benefits. The Company believes that
its effective tax rate will increase as the tax holiday associated with the
Company's Malaysia facility expires and the Company exhausts its deferred
tax benefits.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and liquid investments of $218.2 million at
January 1, 1995, an increase of $96.3 million during the first nine months
of fiscal 1995. Working capital increased from $143.2 million at April 3,
1994 to $260.2 million at January 1, 1995. As of January 1, 1995, the
Company had $4.4 million available under unsecured lines of credit, all of
which were overseas. The Company generated $67.4 million of cash flows from
operations during the first nine months of fiscal 1995. The Company's net
cash used in investing activities was $75.7 million, of which $60.2 million
was used for capital equipment and property and plant improvements. On
December 13, 1994 the Company completed a public offering of 3.8 million
shares of its Common Stock and received net proceeds of $97.5 million. For
the nine months ended January 1, 1995, the Company generated $88.7 million
in net cash from financing activities, including net repayments of $12.2
million relating to capital equipment financing and other debt repayment.
In view of current and anticipated capacity requirements, the Company
anticipates total fiscal 1995 capital expenditures of $90 million to $100
million. For the last three months of fiscal 1995 capital expenditures of
$30 to $40 million are anticipated. Principal requirements are for
incremental production equipment at the Company's San Jose' wafer
fabrication facility and the completion of the conversion of the Salinas
wafer fabrication facility from five-inch to six-inch wafer manufacturing.
The Company is constructing a new building, planned at $3.1 million,
adjacent to it's existing Penang, Malaysia facility. Incremental production
test equipment at the Company's San Jose' and Salinas facilities is also
included in the planned fiscal 1995 capital expenditures.
In addition, construction of a new eight-inch wafer fabrication facility
has begun in Hillsboro, Oregon. The new facility is planned to be
operational late in fiscal 1996. The Company is financing $60 million
for the construction of building improvements through a Tax Ownership
Operating Lease. See Note # 7 of the Condensed Consolidated Financial
Statements.
For fiscal 1996, capital expenditures of approximately $275 million
are anticipated. The Company believes that existing cash and cash
equivalents, cash flow from operations, existing credit facilities and the
operating lease arrangement for the Oregon facility will be adequate
to fund anticipated capital expenditures and working capital needs through
fiscal 1996. There can be no assurance, however, that the Company will not
be required to seek other financing sooner or that such financing, if
required, will be available on terms satisfactory to the Company.
FACTORS AFFECTING FUTURE RESULTS
The Company has experienced improvements in revenues, bookings and
profitability during the first nine months of fiscal 1995. However, the
Company's future operating results are subject to a variety of uncertainties.
The Company's quarterly operating results may be subject to fluctuations
due to a number of factors, including the semiconductor industry's
volatility, 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, industry-wide wafer processing capacity, various
geographic area economic conditions, or the costs of other events, such as
the expansion of existing production capacities, delays in new facility
construction or litigation. Periodically, the Company is advised that
processes or technology utilized in the design or manufacture of some or
all of the Company's products may infringe on product or process technology
rights held by others. Adverse resolution of such claims could have a
material impact on the Company's results of operations and financial
position, and could result in material changes in production processes and
products. While the Company's business conditions appear to be improved,
intense semiconductor industry 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. If the Company is unable to transition to
future generation products in a timely manner or at gross margins comparable
to the Company's current primary products the future results of operations
could be adversely impacted. 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 operating its wafer fabrication facilities in Salinas and
San Jose and its assembly operations in Malaysia near installed equipment
capacity. As a result, the Company has not been able to take advantage of
all market opportunities. Due to long production lead times and current
capacity constraints, any failure by the Company to adequately forecast the
mix of product demand could adversely affect the Company's sales and
operating results. To address its capacity requirements, 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 longer term delays in the Company realizing the revenue
production capability of the converted facility. The Company's capacity
additions will result in a significant increase in fixed and operating
expenses. If revenue levels do not increase sufficiently to offset these
additional expense levels, the Company's operating results could be adversely
impacted in future periods. In addition, there can be no assurance that
capacity expansion by the Company and its competitors will not lead to
overcapacity in the Company's target markets, which could cause declines in
product prices that would adversely affect the Company's operating results.
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 9, 1995 /s/ Leonard C. Perham
_______________________________
Leonard C. Perham
Chief Executive Officer
Date: February 9, 1995 /s/ William D, Snyder
_________________________________
William D. Snyder
Vice President Finance (principal
financial and accounting officer)
<TABLE> <S> <C>
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THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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