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 September 28, 1997
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 No. 0-12695
INTEGRATED DEVICE TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-2669985
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
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 November 7, 1997, was 80,632,539.
<PAGE>
2
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
INTEGRATED DEVICE TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Three Months Ended
September 28, 1997 September 29, 1996
------------------------------------------
Revenues $ 143,807 $ 120,485
Cost of revenues 88,643 82,291
----------------------------------
Gross profit 55,164 38,194
----------------------------------
Operating expenses:
Research and development 30,632 37,753
Selling, general and administrative 20,048 18,262
----------------------------------
Total operating expenses 50,680 56,015
----------------------------------
Operating income (loss) 4,484 (17,821)
Interest expense (3,512) (2,812)
Interest income and other, net 2,641 4,854
----------------------------------
Income (loss) before income taxes 3,613 (15,779)
Provision (benefit) for income taxes 1,012 (5,445)
----------------------------------
Net income (loss) $ 2,601 ($ 10,334)
==================================
Net income (loss) per share:
Primary $ 0.03 ($ 0.13)
Fully Diluted $ 0.03 ($ 0.13)
Weighted average shares:
Primary 83,669 77,898
Fully Diluted 84,110 77,898
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
<PAGE>
INTEGRATED DEVICE TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Six Months Ended Six Months Ended
September 28, 1997 September 29, 1996
------------------------------------------
Revenues $ 292,680 $ 263,024
Cost of revenues 181,180 153,907
---------------------------------
Gross profit 111,500 109,117
---------------------------------
Operating expenses:
Research and development 60,454 76,838
Selling, general and administrative 42,412 39,199
---------------------------------
Total operating expenses 102,866 116,037
---------------------------------
Operating income (loss) 8,634 (6,920)
Interest expense (7,255) (4,738)
Interest income and other, net 4,860 8,921
---------------------------------
Income (loss) before income taxes 6,239 (2,737)
Provision (benefit) for income taxes 1,747 (1,272)
---------------------------------
Net income (loss) $ 4,492 ($ 1,465)
=================================
Net income (loss) per share:
Primary $ 0.05 ($ 0.02)
Fully Diluted $ 0.05 ($ 0.02)
Weighted average shares:
Primary 83,412 77,797
Fully Diluted 83,907 77,797
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
<TABLE>
INTEGRATED DEVICE TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
September 28, 1997 March 30, 1997
--------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 177,738 $ 155,149
Short-term investments 47,485 35,747
Accounts receivable, net 64,007 77,600
Inventory 52,135 47,618
Deferred tax assets 44,493 44,493
Income tax refund receivable 442 34,055
Prepayments and other current assets 20,009 19,148
-----------------------------
Total current assets 406,309 413,810
Property, plant and equipment, net 443,447 424,217
Other assets 75,728 65,557
-----------------------------
TOTAL ASSETS $ 925,484 $ 903,584
=============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 48,144 $ 44,875
Accrued compensation and related expenses 16,559 15,612
Deferred income on shipments to distributors 50,191 42,084
Other accrued liabilities 29,478 25,022
Current portion of long-term obligations 5,480 6,049
-----------------------------
Total current liabilities 149,852 133,642
5.5% Convertible Subordinated Notes, net of issuance costs 183,455 183,157
Long-term obligations 49,917 52,622
Deferred tax liabilities 9,925 9,925
-----------------------------
Total liabilities 393,149 379,346
Commitments and contingencies
Stockholders' equity:
Preferred stock; $.001 par value:
10,000,000 shares authorized; no shares issued
Common stock; $.001 par value: 200,000,000
shares authorized; 80,173,331 and
79,654,104 shares issued and outstanding 80 80
Additional paid-in capital 307,919 304,840
Retained earnings 225,209 220,717
Cumulative translation adjustment (884) (886)
Unrealized gain (loss) on available-for-sale securities, net 11 (513)
-----------------------------
Total stockholders' equity 532,335 524,238
-----------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 925,484 $ 903,584
=============================
<FN>
The accompanying notes are an integral part of these condensed consolidated financial statements.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
INTEGRATED DEVICE TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Six Months Ended Six Months Ended
September 28, 1997 September 29, 1996
---------------------------------------
<S> <C> <C>
Operating activities:
Net income (loss) $ 4,492 ($ 1,465)
Adjustments:
Depreciation and amortization 55,109 46,039
Changes in assets and liabilities:
Accounts receivable 13,593 17,937
Inventory (4,517) (2,780)
Income tax refund receivable 33,613 (12,503)
Prepayments and other assets 365 154
Accounts payable 3,269 5,846
Accrued compensation and related expense 947 (14,250)
Deferred income on shipments to distributors 8,107 3,193
Income taxes payable 465 (5,626)
Other accrued liabilities 3,678 (545)
------------------------------
Net cash provided by operating activities 119,121 36,000
------------------------------
Investing activities:
Purchases of property, plant and equipment (73,540) (152,868)
Proceeds from sales of property, plant and equipment 192 49,714
Purchases of short-term investments (16,119) (16,710)
Proceeds from sales of short-term investments 4,905 42,925
Purchases of equity investments (12,090) (6,960)
Proceeds from sales of investments
collateralizing facility lease 0 10,662
------------------------------
Net cash used for investing activities (96,652) (73,237)
------------------------------
Financing activities:
Proceeds from issuance of common stock, net 3,079 3,507
Proceeds from secured equipment financing 0 20,959
Payments on capital leases and other debt (2,959) (2,250)
------------------------------
Net cash provided by financing activities 120 22,216
------------------------------
Net increase (decrease) in cash and cash equivalents 22,589 (15,021)
Cash and cash equivalents at beginning of period 155,149 157,228
------------------------------
Cash and cash equivalents at end of period $ 177,738 $ 142,207
==============================
Supplemental disclosures:
Interest paid $ 6,421 $ 5,701
Income taxes paid (refunded), net (33,375) 11,514
<FN>
The accompanying notes are an integral part of these condensed consolidated financial statements.
</FN>
</TABLE>
5
<PAGE>
INTEGRATED DEVICE TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of Integrated Device Technology, Inc. (IDT or the
Company), the accompanying unaudited condensed consolidated financial
statements contain all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial information
included therein. These financial statements should be read in
conjunction with the audited consolidated financial statements and
accompanying notes included in the Company's Annual Report on Form 10-K
for the year ended March 30, 1997. The results of operations for the
three and six month periods ended September 28, 1997, are not
necessarily indicative of the results to be expected for the full year.
2. Inventory consisted of the following:
September 28, 1997 March 30, 1997
------------------------------------------
(in thousands)
Raw materials $ 5,706 $ 4,800
Work-in-process 32,342 29,375
Finished goods 14,087 13,443
==========================================
$ 52,135 $ 47,618
==========================================
3. The provision for income taxes reflects management's estimated
annualized effective tax rate of 28%, applied to earnings for the
interim periods. The rate used differs from the U.S. statutory rate of
35% primarily due to total earnings of foreign subsidiaries, considered
permanently reinvested, being taxed at lower average rates than the
U.S. statutory rate. Income taxes in state jurisdictions are not
significant due to available investment tax credits and research and
development credits.
4. Primary net income per common share is computed using the weighted
average number of common shares and the dilutive effects of common
stock equivalent shares outstanding during the period. Common stock
equivalent shares include shares issuable under the Company's stock
option plans. Common stock equivalents for the current periods were
computed using the Modified Treasury Stock Method and previous periods
were computed using the Treasury Stock Method. Fully diluted net income
per share is computed by adjusting the primary shares outstanding for
the potential effect of the conversion of the 5.5% Convertible
Subordinated Notes (the Notes) outstanding and net income for the
elimination of the related interest and deferred debt issue costs (net
of income taxes), when the effect of such potential conversion would be
dilutive to net income per primary share. For both the quarters and the
six months ended September 28, 1997, and September 29, 1996, the
potential effect of the conversion of the Notes has not been included
in the fully diluted share calculation because the results are
anti-dilutive.
6
<PAGE>
INTEGRATED DEVICE TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
5. In February, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per
Share." This statement is effective for the Company's fiscal quarter
ending December 28, 1997. The Statement redefines earnings per share
under generally accepted accounting principles. Under the new standard,
primary earnings per share is replaced by basic earnings per share and
fully diluted earnings per share is replaced by diluted earnings per
share. If the Company had adopted this Statement for each of the
quarters and the six months presented, the Company's pro forma net
income (loss) per share would have been as follows:
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
September 28, September 29, September 28, September 29,
1997 1996 1997 1996
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic net income (loss) per .03 (.13) .06 (.02)
share
Diluted net income (loss) per .03 (.13) .05 (.02)
share
</TABLE>
6. In June 1997, the Financial Accounting Standards Board issued two new
Statements of Financial Accounting Standards ("SFAS"). SFAS No. 130,
"Reporting Comprehensive Income," establishes standards for reporting
and display of comprehensive income within a financial statement. This
Statement requires the Company to report additional information on
comprehensive income to supplement the reporting of income. SFAS No.
130 is effective for both interim and annual periods beginning after
December 15, 1997. Comparative financial statements provided for
earlier periods are required to be reclassified so that comprehensive
income is displayed in a comparative format for all periods presented.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," establishes standards for reporting information about
operating segments in annual and interim financial statements. This
Statement also establishes standards for related disclosures about
products and services, geographic areas and major customers. SFAS No.
131 is effective for financial statements for periods beginning after
December 15, 1997. The Company will adopt SFAS No. 130 for the first
quarter of fiscal year 1999 and does not expect its provisions to have
a material effect on the Company's presentation of its consolidated
financial statements. The Company will also adopt SFAS No. 131 in
fiscal year 1999 and is currently studying its provisions.
7
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
All references are to the Company's fiscal periods ended September 28, 1997, and
September 29, 1996, unless otherwise indicated. Quarterly financial results may
not be indicative of the financial results of future periods. The following
discussion contains forward looking statements that involve a number of risks
and uncertainties, including but not limited to operating results, marketplace
competitive conditions, capital expenditures and capital resources,
manufacturing capacity utilization, customer demand and customer inventory
levels. Factors that could cause actual results to differ materially are
included in, but are not limited to, those identified in "Factors Affecting
Future Results". The Company undertakes no obligation to publicly release the
results of any revisions to these forward-looking statements which may be made
to reflect events or circumstances after the date hereof.
Results of Operations
Revenues
Revenue in the second quarter of fiscal 1998 of $143.8 million increased $23.3
million, or 19.4%, over the same fiscal quarter of last year. Revenue increased
primarily due to gains associated with 62% growth in product units shipped over
the same quarter of fiscal 1997, partially offset by a decrease of 26% in the
weighted average selling price (ASP) for all products over the same period last
year. The largest increase in revenues and in units shipped were in SRAM,
specialty memory and logic products. The greatest ASP decline was in SRAM
products.
Revenue for the six months ended September 28, 1997, of $292.7 million was up
$29.7 million over the $263.0 million reported for the comparable fiscal 1997
period. Consistent with the comparison of the second fiscal quarters above,
revenue increased primarily due to gains associated with 69% growth in product
units shipped for fiscal 1998 over the comparable period for fiscal 1997,
partially offset by a decrease of 34% in the weighted average selling price for
all products. Increases in revenue were realized primarily in SRAM, specialty
memory and logic products.
Revenue in the second quarter of fiscal 1998 versus the first quarter of fiscal
1998 decreased from $148.9 million to $143.8 million or 3.4%. Net units shipped
during the same periods decreased 2.3%. The Company's ASP realized across all
products was stable in the second quarter of fiscal 1998, with a decline of only
2% when compared to the ASP realized for the first quarter of fiscal 1998. As
noted above, when comparing revenue for Specialty Memory Products in current
fiscal periods with corresponding periods of the previous fiscal year, revenue
increases were realized. However, revenue realized for the sale of these
products in the second quarter of fiscal 1998 decreased when compared to revenue
of the first quarter of fiscal 1998. The Company believes this decline in
revenue is due to reduced demand associated with customers adjusting inventory
carrying levels. Demand for SRAM products was strong in the second quarter of
fiscal 1998.
During late fiscal 1996 and into fiscal 1997, SRAM average selling prices
experienced market price declines of as much as 80% over twelve months. ASP's
for other products declined over the same period as existing products matured,
although not as significantly. In the second quarter of fiscal 1998, prices in
all major product lines were essentially stable in comparison to the first
quarter of fiscal 1998. In the future, as described below, market prices and
customer demand for the Company's products may change, especially during periods
of seasonal demand weaknesses.
In the second quarter of fiscal 1998, the Company manufactured and shipped its
first WinChip C6(TM) units for revenue. The WinChip C6 is IDT's first of a
planned x86 microprocessor product family. The products shipped are compatible
with similar products manufactured and sold by Intel Corporation, Advanced Micro
Devices, Inc. and Cyrix Corporation. The Company believes that revenues and
costs associated with this product family will increase in future quarters as
the Company executes its product introduction strategy. Information on risks
associated with this expansion of IDT's product families is included below in
"Factors Affecting Future Results". See "Risks Associated with Expansion of
Product Families - x86 Microprocessors."
- --------
(TM) C6 and WinChip are trademarks of Integrated Device Technology, Inc.
8
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Cont.)
The semiconductor industry is highly cyclical and is subject to significant
downturns. Such downturns are characterized by diminished product demand,
production over-capacity and accelerated average selling price erosion. The
price the Company receives for its industry standard SRAM and other products, is
therefore dependent upon industry-wide demand and capacity, and such prices have
been historically subject to rapid change. While current SRAM prices are
essentially stable, new SRAM orders continue to be at low prices, and the
Company expects that these prices will continue to adversely affect the
Company's operating results.
Gross Profit
Gross profit for the current quarter increased $16.9 million over the same
fiscal quarter last year to $55.2 million. As a percentage of revenue (gross
margin), gross margin improved in the second quarter of fiscal 1998, compared to
the second quarter of fiscal 1997, from 31.7% to 38.4%. Corresponding with
slightly lower sales, gross profit for the second fiscal 1998 quarter was down
$1.2 million compared to the first quarter of fiscal 1998. The gross margin
percentage, when comparing the same periods, improved from 37.8% to 38.4%.
For the six months ended September 28, 1997, gross profit of $111.5 million was
up $2.4 million over the $109.1 million reported for the same period in fiscal
1997. Gross margin of 38.1% for the first six month period in fiscal 1998 was
slightly lower than the 41.5% for the same period one year ago.
During the first quarter of fiscal 1997, substantially all operating expenses
associated with the then new Hillsboro, Oregon facility were classified as
process engineering research and development expense, as production of salable
die was not significant. IDT's policy is to expense new plant startup costs as
process engineering research and development (R&D) until a facility is ready to
begin commercial production. Beginning in the second quarter of fiscal 1997, the
Oregon facility began its production ramp. For the first time, a majority of the
facility's total operating costs were allocated to the manufacture of salable
products, the costs of which were charged to cost of goods sold. Remaining
operating costs were charged to process engineering research and development
expense, based on activities performed. The additional manufacturing cost
associated with products produced at the Oregon facility, along with the then
declining prices of SRAM products, were the primary reasons for the decrease in
the Company's gross margin from 49.8% in the first quarter of fiscal 1997 to
31.7% in the second quarter of the same year. In the second quarter of fiscal
1998, increased revenue associated with increased units produced and shipped,
without commensurate increases in manufacturing cost, led to a $16.9 million, or
44%, increase in gross profit compared to the second quarter of fiscal 1997.
The increase in gross profit of $2.4 million for the first six months in fiscal
1998 versus the same period of fiscal 1997 was also primarily attributable to
increases in revenues without commensurate increases in manufacturing cost.
However, when compared to the prior fiscal year, increased gross profit for the
first six month period of fiscal 1998 was not proportional to the increase in
gross profit for the second quarter of fiscal 1998, because gross profit in the
first quarter of fiscal 1997 was greater than in the first quarter of fiscal
1998. The decrease in gross profit in the first quarter of fiscal 1998 compared
to the first quarter of fiscal 1997 was primarily attributable to the
significant erosion of average selling prices for SRAM and related module
products which took place throughout fiscal 1997. Despite the Company's efforts
to shift to smaller die designs and its most advanced wafer fabrication
processes, resulting in increased die per wafer and lower unit costs, declining
average selling prices for primarily SRAM products more than offset
manufacturing efficiencies gained.
Costs associated with the eight-inch wafer fabrication facility in Oregon
continued to adversely impact gross margin for both the current quarter and the
six months ended September 28, 1997, as these costs were not fully absorbed by
additional revenues. Over the remainder of fiscal 1998, in an effort to achieve
more efficient and effective capacity utilization, the level of expense
associated with the Oregon fabrication facility is expected to increase on a
quarterly basis over the levels of each comparable quarter of fiscal 1997. The
anticipated increase in expenses is mostly associated with the installation of
new equipment. Additionally, in the current quarter and in future quarters, the
percentage of these costs recorded as cost of revenues, versus process
engineering research and development, has and may continue to change based upon
production volumes and activities performed.
The Oregon facility provides the Company with significant additional available
production capacity, but, as a result of current market conditions, the
Company's production volumes at its wafer fabrication facilities have not
increased sufficiently to take full advantage of the additional capacity.
Further, the Company is unable to predict whether demand for industry standard
SRAM products or IDT's share of the available market will improve. Should IDT's
production volumes, especially at its fabrication facilities, remain constant or
decline and should the Company be unable to otherwise decrease costs per unit
sold, the Company's gross profit will continue to be adversely impacted.
9
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Cont.)
Further, if prices on industry standard SRAM products do not improve, or recent
improvements in market demand for SRAM production volumes do not continue, or
the Company is not able to manufacture and sell other products at comparable or
better margins, and if a greater percentage of the Oregon facility's operating
costs are allocated to cost of goods sold based on activities performed, then
gross margin may not improve, or may decrease, for the remainder of fiscal 1998.
Research and Development
Research and development (R&D) expenses decreased in absolute spending and as a
percentage of revenues for the second quarter of fiscal 1998, and for the first
six months then ended, when compared to the same periods for fiscal 1997. R&D
expenses for the current quarter of $30.6 million and for the first six months
then ended of $60.4 million, were down $7.2 million and $16.4 million,
respectively, compared to $37.8 million and $76.8 million in the comparable
fiscal 1997 periods. As a percentage of revenue, R&D expenses were 21.3% in the
current quarter and 20.7% for the first six months then ended. Respectively,
these percentages were down 10% and 8.5% from the same periods one year ago.
Second quarter fiscal 1998 R&D expenses were up $.8 million from the first
quarter in fiscal 1998 and also increased as a percentage of revenue from 20.0%
to 21.3%.
The Company's policy is not to capitalize pre-operating costs associated with
new manufacturing facilities, and in fiscal 1997, significant facility start-up
and staffing expenses were incurred at the new eight-inch wafer fabrication
facility in Hillsboro, Oregon. Operating expenditures associated with the start
up of the Oregon fabrication facility were classified in part as process
engineering R&D expense and, in part, as cost of revenues, based upon the nature
of the activities performed. In the second quarter of fiscal 1998 and for the
first six months then ended, total R&D expense, both in absolute dollars and as
a percentage of revenue, declined principally because a greater proportion of
manufacturing facility operating costs, including Oregon facility costs, were
classified as cost of goods sold, rather than process engineering R&D.
Other continuing R&D activities include developing x86 microprocessors for use
in personal computer applications, conducting research into applications of high
speed DRAM technology for the communications market, developing RISC
microprocessors for primarily communications and embedded control applications,
developing an advanced SRAM architecture that significantly improves performance
of communications applications requiring frequent switches between reads and
writes, and developing a family of specialty memory products for the
communications and networking markets.
IDT believes that high levels of R&D investment are required to support its
strategy of providing products to its customers which are not readily available
from its competitors. However, there can be no assurance that additional
research and development investment will result in new product offerings or that
any new offerings will achieve market acceptance.
Selling, General and Administrative Expenses
Selling, general and administrative (SG&A) expenses increased by $1.7 million
from $18.3 million in the second quarter of fiscal 1997, to $20.0 million in the
second quarter of fiscal 1998, but decreased as a percentage of revenues to
13.9% from 15.2%. SG&A expenses increased 8.2% to $42.4 million for the first
six months of fiscal 1998, but decreased as a percentage of revenues to 14.5%
from 14.9% in the comparable period of the prior year. SG&A for the current
fiscal quarter decreased $2.3 million, or 10.4%, from the first quarter of
fiscal 1998.
A portion of SG&A expenses, such as sales commissions, management bonuses and
employee profit sharing, vary with sales and Company profitability and increase
or decrease as sales and profitability change. In addition, IDT continues with
initiatives to implement and upgrade enterprise-wide management information
systems, as well as marketing efforts associated with new products. The $2.3
million decline in SG&A in the current quarter over the immediately preceding
quarter is mostly attributable to a $2 million recovery on bad debt expense.
10
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Cont.)
With the anticipated increased spending in connection with marketing and selling
new products, including the WinChip C6(TM) x86 microprocessor product, the
Company anticipates SG&A expenses for the remainder of fiscal 1998 will increase
slightly both in absolute spending and as a percentage of revenues. Should
revenues decrease, SG&A as a percentage of revenues will likely increase more
significantly.
Interest Expense
Interest expense of $3.5 million for the second quarter of fiscal 1998 was
essentially flat relative to the first quarter of fiscal 1998 and up $.7 million
when compared to the $2.8 million for the same quarter a year ago. For the six
months ended September 28, 1997, interest expense was up $2.5 million to $7.2
million from $4.7 million reported in the same period in fiscal 1997.
Interest expense is primarily associated with the 5.5% Convertible Subordinated
Notes, due in 2002, (the "Notes") and $21.0 million of secured equipment
financing agreements completed in September 1996. The increase in interest
expense in the second quarter of fiscal 1998, and for the first six months then
ended, over the same periods one year ago is primarily attributable to the
cessation of capitalizing interest in connection with the construction of the
eight-inch wafer fabrication plant in Oregon. Interest capitalized during the
second quarter of fiscal 1997 was $.5 million and for the six months ended
September 29, 1996, was $1.7 million. Additionally, interest expense increased
because of incremental interest associated with secured equipment financing
agreements, which were not completed until the third quarter of fiscal 1997.
Management expects that, in the remainder of fiscal 1998, interest expense will
remain constant.
Interest Income and Other
Interest income and other, net, of $2.6 million in the second quarter of fiscal
1998 was down $2.2 million over the same period last fiscal year and up $.4
million over the first quarter in fiscal 1998. For the six months ended
September 28, 1997, Interest income and other, net, was down $4.1 million to
$4.9 million from $9.0 million reported in the same period in fiscal 1997.
Interest income and other, net, decreased $2.2 million from the second quarter
of fiscal 1997 primarily due to a gain in the amount of $1.9 million realized on
the sale of an equity investment in the second quarter of fiscal 1997. Interest
income was up $.8 million in the second quarter of fiscal 1998 compared to the
same quarter in fiscal 1997 due to higher cash equivalent balances in the
current quarter. Also included in interest income and other, net, is the
Company's share of net earnings or losses of unconsolidated affiliates. In
addition to the $1.9 million gain realized in fiscal 1997, Interest income and
other, net, decreased $4.9 million in the six months ended September 28, 1997
compared to the same period last year, primarily due to an increase of $1.6
million in IDT's share of net losses realized on these affiliate investments
(which offset interest and other income) and a decrease in gains realized on the
disposal of capital assets of $.8 million.
Taxes
Income taxes have been provided in the current quarter, and for the six months
then ended, at a rate of 28% versus 32% for the entire year of fiscal 1997. The
provision for income taxes reflects management's estimated annualized effective
tax rate applied to earnings for the interim period. The fiscal 1998 effective
rate utilized is lower than the effective rate for fiscal 1997 primarily because
the earnings of foreign subsidiaries, taxed at a lower average rate, are
expected to comprise a proportionally higher percentage of the Company's
anticipated world-wide income for the current fiscal year. The rate used differs
from the U.S. statutory rate of 35% primarily due to earnings of foreign
subsidiaries, considered permanently reinvested, being taxed at lower average
rates than the U.S. statutory rate. Income taxes in state jurisdictions are not
significant due to available investment tax credits and research and development
credits.
- --------
(TM) C6 and WinChip are trademarks of Integrated Device Technology, Inc.
11
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Cont.)
Liquidity and Capital Resources
At September 28, 1997, cash and cash equivalents were $177.7 million, an
increase of $22.6 million from $155.1 million at March 30, 1997 and an increase
of $28.8 million from June 29, 1997. The Company generated $119.1 million of
funds from operations in the first six months of fiscal 1998, up $83.1 million
from the $36.0 million of funds generated from operations during the same period
for fiscal 1997. Cash provided by operating activities for the first six months
of fiscal 1998 reflected net income of $4.5 million, adjusted mostly for
depreciation and amortization of $55.1 million, $33.6 million in tax refunds
received, $13.6 million from lower accounts receivable balances, $8.1 million
from increases in deferred income on shipments to distributors and various other
changes to working capital. Increased depreciation and amortization charges in
the current quarter were associated with new facilities, improvements to
existing facilities and new equipment.
During the first six months of fiscal 1998, the Company's net cash used for
investing activities was $96.7 million, with $73.5 million used to purchase
capital equipment and property and plant improvements. In addition, during the
current period, the Company increased its equity investment in an affiliate by
$12.1 million. Cash used for the purchase of short-term investments, net of
sales of short-term investments, was $11.2 million.
During the first six months of fiscal 1997, the Company's net cash used in
investing activities was $73.2 million. $152.9 million was used for capital
equipment and property and plant improvements. Cash proceeds from the equipment
sale and lease back arrangements in September 1996 amounted to $49.7 million.
Cash generated from the sale of short-term investments, net of purchases of
short-term investments, was $26.2 million.
Cash provided by financing activities during the six month period ended
September 28, 1997 was $.1 million as compared to $22.2 million for the same
period one year ago. Financing activity in the current period consisted
primarily of issuance of common stock through employee benefit plans offset by
payments on capital leases and other debt.
In view of current and anticipated capacity requirements, IDT anticipates
capital expenditures of approximately $70 million for the remainder of fiscal
1998, principally in connection with continued installation of equipment in the
Oregon facility, the Philippines plant and ongoing investments to maintain
current technology equipment.
The Company's ability to invest to satisfy its capacity requirements is in part
dependent on the Company's ability to generate cash from operations. Cash flow
from operations depends significantly on the average selling prices of the
Company's products, variable cost per unit and other industry conditions which
the Company cannot predict. Future declines in selling prices for industry
standard SRAM products or other products manufactured by the Company, which
cannot be otherwise offset, will adversely impact the Company's ability to
generate funds from operations. If the Company is not able to generate
sufficient funds from operations or other sources to fund its capacity and R&D
requirements, the Company's results from operations, cash flows and financial
condition will be adversely impacted.
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 next twelve months. There can be no assurance 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.
If the Company is required to seek additional financing sooner, the
unavailability of financing on terms satisfactory to IDT could have a material
adverse effect on the Company.
12
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Cont.)
Factors Affecting Future Results
The Company's results of operations and financial condition are subject to the
following risk factors:
Fluctuations in Operating Results
IDT's operating results have been, and in the future may be, subject to
fluctuations due to a wide variety of factors including the timing of or delays
in new product and process technology announcements and introductions by the
Company or its competitors, competitive pricing pressures, particularly in the
SRAM memory market, fluctuations in manufacturing yields, changes in the mix of
product sold, availability and costs of raw materials, the cyclical nature of
the semiconductor industry, industry-wide wafer processing capacity, economic
conditions in various geographic areas, and costs associated with other events,
such as underutilization or expansion of production capacity, intellectual
property disputes, or other litigation. Additionally, many of the preceding
factors also impact the recoverability of the cost of manufacturing and other
assets, and as business conditions change, writedowns or abandonment of these
assets may occur. Further, there can be no assurance that the Company will be
able to compete successfully in the future against existing or potential
competitors or that the Company's operating results will not be adversely
affected by increased competition.
Cyclicality of the Semiconductor Industry
The semiconductor industry is highly cyclical. Early in fiscal 1996, markets for
some of the Company's SRAMs were characterized by excess demand relative to
supply and the resulting favorable pricing. During the later part of fiscal
1996, however, a number of companies, principally foreign, shifted manufacturing
capacity to SRAMs causing rapid adjustments to supply and consequently impacting
market prices. The resulting significant downward trend in prices in an
extremely short period negatively affected SRAM gross margins, and adversely
affected the Company's operating results which historically have been dependent
on SRAM revenues. Market conditions characterized by excess supply of SRAMs
relative to demand and resultant pricing declines have occurred in the past and
may occur in the future. Although some competitors have recently made
adjustments to the rate at which they will implement capacity expansion
programs, the Company is unable to accurately estimate the amount of worldwide
production capacity dedicated to industry standard products which it produces. A
material increase in industry-wide production capacity, shift in industry
capacity toward products competitive with the Company's products, reduced
demand, or other factors could result in a further decline in product pricing
and could adversely affect the Company's operating results. The Company seeks to
manage costs, but there can be no assurance that these efforts will be
sufficient to sustain profitability.
The Company ships a substantial portion of its products in the last month of a
quarter. If anticipated shipments in any quarter do not occur, the Company's
operating results for that quarter could be adversely affected. In addition, a
substantial percentage of the Company's products, which include SRAM products,
are incorporated into computer and computer-related products, which have
historically been characterized by significant fluctuations in demand. Demand
for certain of the Company's products is dependent upon growth in the
communications market. Any slowdown in the computer and related peripherals or
communications markets could adversely affect the Company's operating results.
In order to achieve more efficient and effective capacity utilization of the
facilities, the Company continues to install new equipment at all of its
fabrication and test and assembly facilities. Additional production capacity and
future yield improvements by the Company's competitors could dramatically
increase the worldwide supply of products which compete with the Company's
products and could thereby create further downward pressure on pricing.
13
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Cont.)
Factors Affecting Future Results (Cont.)
Risks Associated with Expansion of Product Families - x86 Microprocessors
The Company recently commenced limited shipments of the WinChip C6(TM), IDT's
first member of its x86 microprocessor product family. This product represents
the Company's first offering to the personal computer (PC) microprocessor
market, which is characterized as a large market dominated by Intel Corporation
(Intel), with a very limited number of other competitors. IDT's success in
competing in this market, and therefore the financial results associated with
selling products to this market, are subject, but not limited to, the following
significant risks and uncertainties :
Competition. As noted above, Intel holds a dominant position in the
market for PC microprocessors. Intel has held its dominant position
over all other x86 microprocessor competitors for a substantial period
of time, and has significantly greater financial, technical,
manufacturing and marketing strength than does IDT. Currently, Intel's
dominant market position allows it to set and control x86
microprocessor standards and, therefore, dictate many aspects of the
products which PC manufacturers require in this market.
In addition, IDT's initial x86 microprocessor product is targeted at
the low cost desktop and mobile product categories of the
microprocessor market. Intel also offers products which are purchased
by PC manufacturers in this market category. Intel's financial strength
has enabled it to reduce prices on its microprocessor products within a
short period of time following their introduction, which reduces the
margins and profitability of its competitors. Further, Intel's
marketing resources are far greater than IDT's. Therefore, Intel's
pricing and marketing strategies in the category of the microprocessor
market targeted by IDT may significantly impact the financial results
of IDT's efforts to serve this market.
In order for customers to purchase IDT's x86 microprocessors, IDT's
products must be compatible with other components supplied to PC
manufacturers such as core-logic chip sets, motherboards, basic
input/output system (BIOS) software and others which are manufactured
or produced by other companies, including Intel. In addition, these
companies are able to produce chip sets, motherboards, BIOS software
and other components to support each new generation of Intel's
microprocessors only to the extent that Intel makes its related
proprietary technology available. Intel has announced that the new
versions of its microprocessor product will be sold only in the form of
a chip module that is not compatible with "Socket 7" motherboards
currently used with most x86 microprocessors. Therefore, Intel will
cease supporting the Socket 7 motherboard infrastructure as it
transitions to its latest generation microprocessors. Because IDT's
processor is designed to be Socket 7 compatible, and will not work with
motherboards designed for Intel's new chip module, should IDT and other
companies serving the x86 microprocessor market not be successful in
offering products which extend the life of the Socket 7 infrastructure,
IDT would be required to expend potentially significant resources to
redesign its microprocessor product offerings. There can be no
assurance that the Company would be successful in such efforts.
In addition to Intel, Advanced Micro Devices, Inc. and Cyrix
Corporation also currently offer commercial quantities of x86
microprocessors for sale. From time to time, intellectual property
rights disputes have arisen between companies competing in the x86
microprocessor markets (See Intellectual Property Risks discussion
below).
Manufacturing. The pace at which IDT is able to enter its target market
category for x86 microprocessors depends, in part, on how quickly it is
able to ramp production of its microprocessor products in its wafer
fabrication and assembly and test facilities. The Company has not
previously manufactured x86 microprocessors and, therefore, may
encounter unexpected production problems or delays as a result of,
among other things, changes required to process technologies, product
design limitations, installation of equipment, and development of
programs and methodologies which test overall product quality. If IDT
is unable to ramp production of its x86 microprocessor successfully,
the Company's operating results would be adversely affected.
- --------
(TM) C6 and WinChip are trademarks of Integrated Device Technology, Inc.
14
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Cont.)
Factors Affecting Future Results (Cont.)
Compatibility With Software and Performance Certifications. For its
current product offering, IDT has obtained certifications from
Microsoft and other appropriate certifications from recognized testing
organizations. Failure to obtain and maintain such certifications for
future microprocessor products could substantially impair the Company's
ability to market and sell its x86 products.
PC Market. Because IDT's target market for its x86 microprocessor
product is initially limited to a certain segment of the PC industry,
the growth and acceptance of the product is closely tied to trends in
and growth of the PC industry. The Company believes that PC
manufacturers will continue their trend towards accepting and using
microprocessor products manufactured by companies other than Intel and
that generally the market for PCs and related components will continue
to grow. However, should these industry trends and growth patterns not
occur, for whatever reason, IDT's ability to sell x86 microprocessor
products could be impaired.
Rights of Others. In exchange for payments towards product development
costs, IDT licensed the right to make, use and sell the WinChip C6(TM)
microprocessor to a third party. Further, the license with the third
party limits the number of additional licenses that IDT may grant.
Thus, the Company may face competition from the third party in the
future and may be limited in its ability to license the part to others.
Future Products. IDT's ability to bring future x86 products to market
depends on three primary factors. First, it must be able to finance
such future development. Second, to compete with Intel and other
competitors in the market for future generation x86 microprocessors,
IDT must be able to design and develop the microprocessors themselves,
and must ensure they can be used in PC platforms designed to support
future Intel or other microprocessors. Third, a failure, for whatever
reason, of the designers and producers of motherboards, chip sets and
other system components to support IDT's x86 microprocessor offerings
would limit IDT's ability to sell products to the PC market.
Risks Associated with Planned Expansion; Manufacturing Risks
In fiscal 1997, the Company began producing salable products at the Oregon
fabrication and Philippines assembly and test facilities. Historically, the
Company has utilized subcontractors for the majority of its incremental assembly
requirements, typically at higher costs than its own Malaysian assembly and test
operations. The Company expects to continue utilizing subcontractors extensively
as its Philippines assembly and test plant continues to ramp its production
volumes. Due to production lead times, any failure by the Company to adequately
forecast the mix of product demand could adversely affect the Company's sales
and operating results. These capacity expansion programs in Oregon and the
Philippines continue to face a number of substantial risks including, but not
limited to, equipment delays or shortages, power interruptions or failures,
manufacturing start-up or process problems or difficulties in hiring key
personnel. In addition, before fiscal 1997, the Company had never operated an
eight-inch wafer fabrication facility. Accordingly, the Company could incur
unanticipated process or production problems. From time to time, the Company has
experienced production difficulties that have caused delivery delays and quality
problems. There can be no assurance that the Company will not experience
manufacturing problems and product delivery delays in the future as a result of,
among other things, changes to its process technologies, ramping production and
installing new equipment at its facilities, including the facilities in Oregon
and the Philippines. Further, the Company's older wafer fabrication facilities
are located relatively near each other in Northern California. If the Company
were unable to use these facilities, as a result of a natural disaster or
otherwise, the Company's operations would be materially adversely affected until
the Company was able to obtain other production capability. In response to
reduced protection offered by the Company's insurance carrier at economically
justifiable rates, in fiscal 1997, the Company eliminated earthquake insurance
coverage on all facilities.
The Company's capacity additions have resulted in a significant increase in
fixed and variable operating expenses which may not be fully offset by
additional revenues for some time. Historically, the Company has expensed the
operating expenses associated with bringing a new fabrication facility to
commercial production status as R&D in the period such expenses were incurred.
However, as commercial production at a new fabrication facility commences, the
operating costs are classified as cost of revenues, and the Company begins to
recognize depreciation expense
- --------
(TM) C6 and WinChip are trademarks of Integrated Device Technology, Inc.
15
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Cont.)
Factors Affecting Future Results (Cont.)
relating to the facility. Accordingly, as the Oregon fabrication facility now
contributes to revenues, the Company recognizes substantial operating expenses
associated with the facility as cost of revenues, which have reduced gross
margins. As commercial production continues in fiscal 1998, the Company
anticipates incurring substantial additional operating costs and depreciation
expenses relating to this facility. Accordingly, if revenue levels do not
increase sufficiently to offset these additional expense levels, or if the
Company is unable to achieve gross margins from products produced at the Oregon
facility that are comparable to the Company's current products, the Company's
future results of operations could be adversely impacted.
Dependence on New Products
New products and new process technology associated with the Oregon wafer
fabrication facility will continue to require significant research and
development expenditures. However, there can be no assurance that the Company
will be able to develop and introduce new products in a timely manner, that new
products will gain market acceptance or that new process technologies can be
successfully implemented. If the Company is unable to develop new products in a
timely manner, and to sell them at gross margins comparable to the Company's
current products, the future results of operations could be adversely impacted.
Additionally, the Company is currently designing substantially all of its new
MIPS RISC based Microprocessor products in-house. Historically, the Company
supplemented its in-house design efforts with contract design resources.
Dependence on Limited Suppliers
The Company's manufacturing operations depend upon obtaining adequate raw
materials on a timely basis. The number of vendors of certain raw materials,
such as silicon wafers, ultra-pure metals and certain chemicals and gases, is
very limited. In addition, certain packages used by the Company require long
lead times and are available from only a few suppliers. From time to time,
vendors have extended lead times or limited supply to the Company due to
capacity constraints. The Company's results of operations would be adversely
affected if it were unable to obtain adequate supplies of raw materials in a
timely manner or if there were significant increases in the costs of raw
materials.
Capital Needs
The semiconductor industry is extremely capital-intensive. To remain
competitive, the Company must continue to invest in advanced manufacturing and
test equipment. In fiscal 1998, the Company expects to expend approximately $144
million in capital expenditures and anticipates significant continuing capital
expenditures in the next several years. There can be no assurance that the
Company will not be required to seek financing to satisfy its cash and capital
needs or that such financing will be available on terms satisfactory to the
Company. If such financing is required and if such financing is not available on
terms satisfactory to the Company, its operations could be materially adversely
affected.
Intellectual Property Risks
The semiconductor industry is characterized by vigorous protection and pursuit
of intellectual property rights, which have resulted in significant and often
protracted and expensive litigation. In recent years, there has been a growing
trend by companies to resort to litigation to protect their semiconductor
technology from unauthorized use by others. The Company in the past has been
involved in patent litigation, which adversely affected its operating results.
Although the Company has obtained patent licenses from certain semiconductor
manufacturers, the Company does not have licenses from a number of semiconductor
manufacturers who have a broad portfolio of patents. The Company has been
notified that it may be infringing patents issued to certain semiconductor
manufacturers and other parties and is currently involved in several license
negotiations. There can be no assurance that additional claims alleging
infringement of intellectual property rights will not be asserted in the future.
The intellectual property claims that have been made or that may be asserted
against the Company could require that the Company discontinue the use of
certain processes or cease the manufacture, use and sale of infringing products,
to incur significant litigation costs and damages and to develop non-infringing
technology. There can be no assurance that the Company
16
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Cont.)
Factors Affecting Future Results (Cont.)
would be able to obtain such licenses on acceptable terms or to develop
non-infringing technology. Further, the failure to renew or renegotiate existing
licenses, or significant increases in amounts payable, or the inability to
obtain a license, could have a materially adverse effect on the Company.
Risks of International Operations
A substantial percentage of the Company's revenues are derived from export
sales. Accordingly, pricing of and demand for the Company's products can
fluctuate with movements in foreign currency exchange rates. The Company's
offshore assembly and test operations and export sales are subject to risks
associated with foreign operations, including political instability, currency
controls and fluctuations, changes in local economic conditions and import and
export controls, as well as changes in tax laws, tariffs and freight rates.
Contract pricing for raw materials used in the fabrication and assembly
processes, as well as for subcontract assembly services, can also be impacted by
currency exchange rate fluctuations.
Environmental Risks
The Company is subject to a variety of regulations related to hazardous
materials used in its manufacturing process. Any failure by the Company to
control the use of, or to restrict adequately the discharge of, hazardous
materials under present or future regulations could subject it to substantial
liability or could cause its manufacturing operations to be suspended.
Volatility of Stock and Notes Prices
The Company's Common Stock and the Notes have experienced substantial price
volatility and such volatility may occur in the future, particularly as a result
of quarter-to-quarter variations in the actual or anticipated financial results
of the Company, the companies in the semiconductor industry or in the markets
served by the Company, or announcements by the Company or its competitors
regarding new product introductions. In addition, the stock market has
experienced extreme price and volume fluctuations that have affected the market
price of many technology companies' stock in particular. These factors may
adversely affect the price of the Common Stock and the Notes.
17
<PAGE>
PART II OTHER INFORMATION
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On Thursday, August 28, 1997 the Company held its 1997 Annual Meeting of
Stockholders. On the record date of July 1, 1997, 79,891,319 shares of the
Company's Common Stock were issued, outstanding and entitled to vote. Tabulated
proxies at the meeting represented 68,924,606, or 86.273%, of the total eligible
shares. Voting results of the proposals presented were as follows:
(1) Proposal I - To elect one Class I director for a term to expire at the
2000 Annual Meeting of Stockholders:
Name Votes For Authority Withheld
---------------------------------------------------------------------
Leonard Perham 66,691,477 2,233,129
(2) Proposal II - To approve an amendment to the Company's 1994 Stock
Option Plan to increase the number of shares reserved for issuance
thereunder from 10,750,000 to 13,500,000:
Votes For Votes Against Votes Abstained Non-Votes
---------------------------------------------------------------------
52,904,778 13,908,440 2,111,388 0
(3) Proposal III - To approve an amendment to the Company's 1984 Employee
Stock Purchase Plan to increase the number of shares reserved for
issuance thereunder from 4,050,000 to 5,050,000:
Votes For Votes Against Votes Abstained Non-Votes
---------------------------------------------------------------------
60,869,564 7,628,051 426,991 0
(4) Proposal IV - To ratify the appointment of Price Waterhouse LLP as
independent auditors of the Company for fiscal 1998:
Votes For Votes Against Votes Abstained Non-Votes
---------------------------------------------------------------------
68,450,401 242,213 231,992 0
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed herewith:
Exhibit No. Description Page
------------ ----------------------------------------------- ----
11 Statement re: Computation of Earnings Per Share 20
27 Financial Data Schedule 21
(b) Reports on Form 8-K:
No reports have been filed on Form 8-K during this quarter.
18
<PAGE>
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: November 11, 1997 /s/ Leonard C. Perham
------------------------------------
Leonard C. Perham
Chief Executive Officer
(duly authorized officer)
Date: November 11, 1997 /s/ Alan F. Krock
------------------------------------
Alan F. Krock
Vice President and Corporate Controller
(chief accounting officer)
19
<TABLE>
EXHIBIT 11
INTEGRATED DEVICE TECHNOLOGY, INC.
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
(Unaudited)
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
September 28, September 29, September 28, September 29,
1997 1996 1997 1996
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Primary:
Weighted average shares outstanding 80,010 77,898 79,889 77,797
Net effect of dilutive stock options 3,659 -- 3,523 --
-------------------------------------------------------
Total shares 83,669 77,898 83,412 77,797
=======================================================
-------------------------------------------------------
Net income (loss) 2,601 (10,334) 4,492 (1,465)
=======================================================
-------------------------------------------------------
Net income (loss) per share .03 (.13) .05 (.02)
=======================================================
Fully Diluted:
Weighted average shares outstanding 80,010 77,898 79,889 77,797
Net effect of dilutive stock options 4,100 -- 4,018 --
"If Converted" conversion of convertible -- -- -- --
subordinated notes (See Note 1)
-------------------------------------------------------
Total shares 84,110 77,898 83,907 77,797
=======================================================
Net income (loss) 2,601 (10,334) 4,492 (1,465)
Add:
Convertible subordinated notes interest, net of -- -- -- --
taxes
Expenses attributable to convertible notes issue -- -- -- --
-------------------------------------------------------
Adjusted net income (loss) 2,601 (10,334) 4,492 (1,465)
=======================================================
-------------------------------------------------------
Net income (loss) per share .03 (.13) .05 (.02)
=======================================================
<FN>
Note 1 The effects of the potential conversion of the 5.5% Convertible
Subordinated Notes have not been included in the fully diluted EPS
calculations for both the second quarters and the first six months of
fiscal 1998 and fiscal 1997 because they are anti-dilutive.
</FN>
</TABLE>
20
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-29-1998
<PERIOD-END> SEP-28-1997
<CASH> 177,738
<SECURITIES> 47,485
<RECEIVABLES> 74,793
<ALLOWANCES> 10,786
<INVENTORY> 52,135
<CURRENT-ASSETS> 406,309
<PP&E> 836,415
<DEPRECIATION> 392,968
<TOTAL-ASSETS> 925,484
<CURRENT-LIABILITIES> 149,852
<BONDS> 183,455
0
0
<COMMON> 80
<OTHER-SE> 532,255
<TOTAL-LIABILITY-AND-EQUITY> 925,484
<SALES> 292,680
<TOTAL-REVENUES> 292,680
<CGS> 181,180
<TOTAL-COSTS> 181,180
<OTHER-EXPENSES> 102,866
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,255
<INCOME-PRETAX> 6,239
<INCOME-TAX> 1,747
<INCOME-CONTINUING> 4,492
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,492
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.05
</TABLE>
