<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 1, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-11879
VLSI TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 94-2597282
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
1109 MCKAY DRIVE, SAN JOSE, CALIFORNIA 95131
(Address of principal executive offices) (Zip Code)
(408) 434-3000
(Registrant's telephone number, including area code)
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 ( )
Shares outstanding of the Registrant's Common Stock as of April 1, 1994:
35,423,857
1
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
VLSI TECHNOLOGY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS - unaudited
(thousands except share per share amounts)
<TABLE>
<CAPTION>
Quarter Ended
--------------------------------
April 1, March 27,
1994 1993
---- ----
<S> <C> <C>
Net revenues $ 138,123 $ 117,303
Cost of sales 83,021 78,691
----------- ----------
Gross profit 55,102 38,612
----------- ----------
Operating expenses
Research and development 23,640 18,790
Marketing, general and
administrative 23,114 20,185
------------ ------------
Operating income (loss) 8,348 (363)
Interest income and other expenses, net 802 366
Interest expense (2,004) (2,153)
------------ ------------
Income (loss) before provision for taxes on income 7,146 (2,150)
Provision for taxes on income 1,785 -
----------- ----------
Net income (loss) $ 5,361 $ (2,150)
=========== ==========
Net income (loss) per share $ .15 $ (.06)
=========== ==========
Weighted average common and
common equivalent shares
outstanding 36,802,421 33,150,574
========== ==========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
2
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PART I (CONTINUED)
Item 1. Financial Statements (continued)
VLSI TECHNOLOGY, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS - unaudited
(thousands)
<TABLE>
<CAPTION>
April 1, December 25,
1994 1993
------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 34,583 $ 41,536
Liquid investments 40,944 31,100
Accounts receivable, net of allowance for doubtful
accounts and customer returns of $1,900
($2,250 at December 25, 1993) 72,566 70,666
Inventories:
Raw materials 6,775 8,831
Work-in-process 39,218 39,178
Finished goods 6,113 14,103
----------- -----------
Total inventories 52,106 62,112
Deferred and refundable income taxes 11,966 11,966
Prepaid expenses and other current assets 4,401 5,066
----------- -----------
Total current assets 216,566 222,446
Property, plant and equipment, at cost 432,725 412,693
Accumulated depreciation and amortization (241,158) (228,767)
----------- -----------
Net property, plant and equipment 191,567 183,926
Other assets 6,777 5,851
----------- -----------
TOTAL ASSETS $ 414,910 $ 412,223
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
3
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PART I (CONTINUED)
Item 1. Financial Statements (continued)
VLSI TECHNOLOGY, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS - unaudited (continued)
(thousands except per share amounts)
<TABLE>
<CAPTION>
April 1, December 25,
1994 1993
----- ----
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 37,574 $ 39,446
Accrued compensation and benefits 17,361 15,762
Deferred income 8,338 9,121
Reserve for special charge 7,342 7,866
Other accrued liabilities 22,505 21,222
Current capital lease obligations 8,507 8,314
Current portion of long-term debt 5,976 6,292
----------- ----------
Total current liabilities 107,603 108,023
Non-current capital lease obligations 8,617 10,944
Long-term debt 74,127 74,911
Deferred income taxes 5,837 5,837
Stockholders' equity:
Preferred Shares, $.01 par value - -
Common Stock, $.01 par value 354 351
Junior Common Stock, $.01 par value - 2
Additional paid-in capital 221,547 221,013
Accumulated deficit (3,175) (8,536)
Stockholders' notes receivable - (322)
----------- ---------
Total stockholders' equity 218,726 212,508
------------ ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 414,910 $ 412,223
=========== ==========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
4
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PART I (CONTINUED)
Item 1. Financial Statements (continued)
VLSI TECHNOLOGY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - unaudited
(thousands)
<TABLE>
<CAPTION>
Quarter Ended
-------------------------------------
April 1, March 27,
1994 1993
---- ----
Increase (decrease) in cash
and cash equivalents
<S> <C> <C>
Operating activities:
Net income (loss) $ 5,361 $ (2,150)
Adjustments to reconcile net income (loss)
to cash generated by operations:
Depreciation and amortization 14,649 11,409
Changes in operating assets and liabilities:
Accounts receivable (1,900) (2,572)
Inventories 10,006 5,858
Accounts payable, accrued liabilities
and deferred income (297) 2,401
Other (676) (246)
----------- -----------
Cash generated by operations 27,143 14,700
----------- -----------
Investing activities:
Purchases of liquid investments (37,061) -
Proceeds from sales and maturities of liquid investments 27,205 -
Purchases of property, plant and equipment (20,853) (14,967)
Other (200) (217)
----------- -----------
Net cash flow used for investing activities (30,909) (15,184)
----------- -----------
Financing activities:
Payments on debt and capital lease obligations (4,056) (3,820)
Issuance of Common Shares, net 869 (56)
----------- -----------
Net cash flow used for financing activities (3,187) (3,876)
----------- -----------
Net decrease in cash and cash equivalents (6,953) (4,360)
Cash and cash equivalents, beginning of period 41,536 69,674
----------- -----------
Cash and cash equivalents, end of period $ 34,583 $ 65,314
=========== ===========
Supplemental disclosure:
Cash outflows for property, plant and equipment $ 20,853 $ 14,967
Add: Secured equipment loans 822 -
Add: Capital lease obligations incurred - 4,273
----------- -----------
Property, plant and equipment additions $ 21,675 $ 19,240
=========== ===========
Interest paid $ 1,038 $ 1,253
=========== ===========
Income taxes paid (refund), net $ 77 $ (277)
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
5
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PART I (CONTINUED)
Item 1. Financial Statements (continued)
VLSI TECHNOLOGY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. The accompanying interim consolidated condensed financial
statements have been prepared in conformance with generally
accepted accounting principles, consistent with those applied in
the VLSI Technology, Inc. Annual Report to Stockholders on Form
10-K for the year ended December 25, 1993 (the 1993 Annual
Report). This Quarterly Report on Form 10-Q (Form 10-Q) should be
read in conjunction with the 1993 Annual Report. The interim
financial statements are unaudited, but reflect all normal
recurring adjustments which are, in the opinion of management,
necessary to a fair statement of results for the interim periods
presented. The results for the quarter ended April 1, 1994 are
not necessarily indicative of the results that may be expected for
the year ending December 30, 1994.
2. Effective with the beginning of fiscal 1994, the Company changed
its fiscal year end from the last Saturday in December to the last
Friday in December. While most fiscal years consist of 52 weeks,
fiscal 1994 will consist of 53 weeks. The extra week is reflected
in the first quarter of 1994, resulting in 14 weeks for the
quarter ended April 1, 1994 compared to 13 weeks for the quarter
ended March 27, 1993.
3. The 1994 year-to-date tax provision reflects the benefit of tax
credit carryforwards.
4. The Company is a named defendant in a lawsuit filed by Texas
Instruments Incorporated (TI) in 1990 claiming patent
infringement. For more information, see Note 4 of Notes to
Consolidated Financial Statements on pages 25 and 26 of the
Company's 1993 Annual Report and Item 1 in Part II of this Form
10-Q.
In December 1993, four civil class action complaints relating to
the drop in price of VLSI stock were filed in U.S. District Court,
Northern District of California, against the Company and certain
of its officers and directors, alleging violations of federal
securities laws for alleged material misrepresentations and
omissions of facts concerning the Company's business. The
consolidated amended complaint, known as Waldron et al. vs.
Fiebiger et al., Civ. No. C-93-20930-RMW (PVT) (N.D. Cal. filed
March 9, 1994), was filed on behalf of the named plaintiffs and
all others who purchased the Company's stock between June 28, 1993
and December 3, 1993. On April 25, 1994, the case was dismissed
with prejudice as a result of a stipulation entered into by all
parties. No consideration was paid.
5. Effective December 26, 1993, the Company adopted Statement of
Financial Accounting Standards No. 115 - "Accounting for Certain
Investments in Debt and Equity Securities" (FAS 115), which
creates certain classification categories for such investments,
based on the nature of the securities and the intent and
investment goals of the Company. FAS 115 has been adopted on a
prospective basis, and the financial statements of prior years
have not been restated. The cumulative effect of the change was
not material.
6
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PART I (CONTINUED)
Item 1. Financial Statements (continued)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
Under FAS 115, management classifies investments as available-for-sale or
held-to-maturity at the time of purchase and reevaluates such designation as of
each balance sheet date. Debt securities are classified as held-to-maturity
when the Company has the positive intent and ability to hold the securities to
maturity. Held-to-maturity securities are stated at amortized cost with
corresponding premiums or discounts amortized over the life of the investment
to interest income. Marketable equity and debt securities not classified as
held-to-maturity are classified as available-for-sale and reported at fair
value. Unrecognized gains or losses on available-for-sale securities are
included, net of tax, in equity until their disposition. Realized gains and
losses and declines in value judged to be other-than-temporary on
available-for-sale securities are included in interest income. The cost of
securities sold is based on the specific identification method.
All investments at April 1, 1994 are classified as available-for-sale
securities. Such investments mature through December 1994 and consist of
(in thousands):
<TABLE>
<CAPTION>
Gross Unrealized
Amortized ------------------ Estimated
Cost Gains Losses Fair Value
---- ----- ------ ----------
<S> <C> <C> <C> <C>
Liquid investments:
Commercial paper $38,419 $ 45 $ 18 $38,446
Corporate short-term notes 2,537 0 39 2,498
------- ---- ---- -------
TOTAL $40,956 $ 45 $ 57 $40,944
======= ==== ==== =======
Cash equivalents:
Commercial paper $13,866 $ 0 $ 0 $13,866
EuroDollar time deposits 12,000 0 0 12,000
Money market funds 8,576 0 0 8,576
------- ---- ---- -------
TOTAL $34,442 $ 0 $ 0 $34,442
======= ==== ==== =======
</TABLE>
VLSI realized no gains or losses on sales of available-for-sale securities
for the 14-week quarter ended April 1, 1994. Unrealized holding losses on
available-for-sale securities included in stockholders' equity for the first
quarter of 1994 were immaterial.
7
<PAGE> 8
PART I (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS - FIRST QUARTER OF 1994 COMPARED TO THE FIRST QUARTER OF
1993
This Management's Discussion and Analysis of Financial Condition and Results of
Operations (MDA) should be read in conjunction with the MDA in the 1993 Annual
Report.
The following table summarizes the Company's operating results for the 14-week
period ended April 1, 1994 as compared to the 13-week period ended March 27,
1993 (dollars in thousands):
<TABLE>
<CAPTION>
FIRST QUARTER
---------------------------------------------------------------------------
1994 1993
-------------------------------------------- -------------------------
PERCENT PERCENT PERCENT
OF NET CHANGE OF NET
AMOUNTS REVENUES FROM 1993 AMOUNTS REVENUES
------- -------- --------- ------- --------
<S> <C> <C> <C> <C> <C>
Net revenues $138,123 100.0% 17.7% $117,303 100.0%
Cost of sales 83,021 60.1 5.5 78,691 67.1
-------- ----- ---- -------- -----
Gross profit 55,102 39.9 42.7 38,612 32.9
Research & development 23,640 17.1 25.8 18,790 16.0
Marketing, general & administrative 23,114 16.8 14.5 20,185 17.2
-------- ---- ---- -------- ----
Operating income (loss) 8,348 6.0 * (363) (0.3)
Interest expense & other, net 1,202 0.8 (32.7) 1,787 1.5
Income taxes 1,785 1.3 * - -
-------- ---- ---- -------- ----
Net income (loss) $ 5,361 3.9 * $ (2,150) (1.8)
======== ==== ==== ======== ====
</TABLE>
* Not meaningful
The Company reported income of $5.4 million for the first quarter of 1994,
compared to a net loss of $2.2 million for the comparable quarter of last year.
This change reflects higher revenues and improved gross margins as a percentage
of net revenues, partially offset by increases in research and development
expenditures for new products and higher marketing, general and administrative
expenses to support the increased revenue levels.
Net revenues for the first quarter of 1994 increased 17.7% over the
corresponding quarter of 1993 and 3.6% over the fourth quarter of 1993,
although a portion of both increases may be attributable to the Company's
14-week first quarter in 1994. The increase in net revenues over the first
quarter of 1993 was primarily due to higher average sales prices of the
Company's core application-specific integrated circuit products and
increased net revenues from recently introduced devices for the portable
personal computer (PC) marketplace. Net revenues from the VLSI Product
Divisions increased over the comparable period of the prior year as the
Company experienced increased volume shipments in the communications and
high-end computing markets. Net revenues for the Personal Computer Division
increased over the first quarter of 1993, and included a shift in product mix
from desktop to portable PC products. Decreased unit volumes for desktop
products during the first quarter of 1994 reflect the loss of an International
Business Machines Corporation program in 1993. However, during the first
quarter of 1994, a substantial increase was experienced in net revenues from
the portable PC market as the Company commenced volume shipments of its SCAMPTM
IV and QuadNoteTM devices. Net revenues from shipments to Apple Computer, Inc.
(Apple) and its subcontractors decreased over the same quarter a year ago as a
result of Apple's fourth quarter
8
<PAGE> 9
PART I (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations - (continued)
RESULTS OF OPERATIONS - FIRST QUARTER OF 1994 COMPARED TO THE
FIRST QUARTER OF 1993 (continued)
1993 order cancellations reflecting changes to Apple's product line. Software
net revenues for the first quarter of 1994 from the Company's subsidiary,
COMPASS Design Automation, Inc. (COMPASS), increased from the first quarter of
1993 due to COMPASS' enhanced market presence in all geographies and increased
support revenues from its larger installed base.
International revenues, which include export sales, declined slightly as a
percentage of net revenues from the fourth quarter of 1993, accounting for
49.3% of consolidated net revenues in the first quarter of 1994 compared to
51.2% in the fourth quarter of 1993 and 49.7% in the first quarter of 1993.
Gross margin as a percentage of net revenues increased from 32.9% in the first
quarter of 1993 to 39.9% in the first quarter of 1994. The increase reflects a
change in sales mix to integrated circuit products with generally higher gross
margins and improved manufacturing efficiency. In addition, the percentage of
software revenues, which carry higher gross margins, increased. Gross margins
in the first quarter of 1993 were negatively affected by a manufacturing
process difficulty isolated in a single manufacturing facility and affecting a
limited number of customers.
The Company experienced a decrease in gross margins from the fourth quarter
1993 level of 44.2% to 39.9% in the first quarter of 1994 reflecting a change
in product mix, which included a higher proportion of recently introduced
products for the portable computer market that currently have lower margins, as
well as additional reserves taken on older X86 chip sets. In the first quarter
of 1994, the Company initiated volume shipments of two devices for the portable
PC market that currently have low gross margins. These shipments adversely
affected gross margins in the first quarter of 1994. The Company is
implementing die size reductions on these products but does not expect improved
gross margins on these products until the second half of 1994. No assurance can
be given that such die size reductions will be successful or that, if
successful, gross margins on these products will actually improve.
The Company's gross margins are also affected by variations in semiconductor
manufacturing operations, including defect densities, scheduled and unscheduled
plant shutdowns and wafer yields. Depending upon the nature and reasons for
such variations, differences in cost can either be inventoried as capitalized
manufacturing variances and expensed to cost of sales as the related product is
sold (often in a subsequent quarter) or charged to cost of sales in the period
incurred. In general, material unusual, unfavorable variances are expensed to
the period in which incurred while other variances are capitalized. For
example, cost of sales for the first quarter of 1993 included charges for an
isolated manufacturing process difficulty encountered during that quarter.
Total research and development expenditures in the first quarter of 1994
increased by $4.9 million compared to the same 1993 period. This increase
reflects higher expenses for the development of new products and technologies
for the electronic design automation software market, for design and
development of devices for portable and handheld PCs, and for network and
wireless devices. VLSI is also continuing to invest in new manufacturing
technologies. Marketing, general and administrative expenses decreased as a
percentage of net revenues between the first quarter of 1993 and the first
quarter of 1994, although the total expense increased by $2.9 million. The
growth in marketing, general and administrative expenses from
9
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PART I (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations - (continued)
RESULTS OF OPERATIONS - FIRST QUARTER OF 1994 COMPARED TO THE FIRST QUARTER OF
1993 (continued)
the first quarter of 1993 to the first quarter of 1994 supported the Company's
higher revenue and employee census levels.
Interest expense and other, net, decreased to $1.2 million in the current
quarter from $1.8 million in the comparable period a year ago. The decline
reflects a one-time increase in interest income from a shareholder note
collected in the first quarter of 1994, along with lower interest expense and a
positive impact from foreign currency hedging activities.
The Company's 1994 first quarter tax rate of 25% reflects the utilization of
tax credit carryforwards. No tax provision was reported in the first quarter
of 1993 due to the net loss.
On the first day of the 1994 fiscal year, the Company adopted Financial
Accounting Standards (FAS) No. 115, "Accounting for Certain Investments in Debt
and Equity Securities". The effect of the change on the Company's financial
statements was not material.
FACTORS AFFECTING FUTURE RESULTS
As discussed in the 1993 Annual Report, the semiconductor industry has
historically been cyclical and is characterized by shortening product life
cycles, continuous evolution of process technology, high fixed costs, additions
of manufacturing capacity in large increments, intense competition and wide
fluctuations in product supply and demand. The Company's products are
susceptible to pricing pressures and the Company continually pursues cost
reductions in the form of process enhancements and die size reductions in order
to maintain favorable gross margins. Future gross margins will also vary with
the general condition of the economy, customer acceptance of new technologies
and products, shifts in product mix and the success of ongoing manufacturing
cost reduction activities. The Company, from time to time, may begin risk
production of new products based on market conditions. This could result in
potentially adverse impacts to the Company's financial performance. As an
example of risk production, the Company may begin to ramp production of its
SuperCoreTM chip set device for PentiumTM-based computer systems prior to the
full qualification of the device and prior to the receipt of significant
customer orders. Accordingly, if the current product design is not
production-worthy, the Company would be required to write off the
work-in-process inventory value of the devices and face the loss of potentially
significant revenues from the device in the second half of the year.
The Company is making significant investments in research and development of
new products for all of its market segments in 1994. New product development
often requires long-term forecasting of market trends, development and
implementation of new processes and technologies and a substantial capital
commitment. No assurance can be given that the Company's product and process
development efforts will be successful or that new product introductions will
achieve market acceptance. For example, the Company has expended considerable
financial and technical resources in the development of its PolarTM product, a
device for the handheld computer market integrating Intel Corporation's 386SLTM
microprocessor. Some major computer manufacturers no longer view 386
technology as a viable solution for the handheld market and are now focusing on
the utilization of 486-based devices for handheld computer applications.
Specifically, in the first quarter of 1994, Compaq Computer Corporation
(Compaq) reduced its development efforts with the Company for 386-based
handheld computer products. This, along with the limited success of certain
other
10
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PART I (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations - (continued)
FACTORS AFFECTING FUTURE RESULTS (continued)
handheld computer devices, leads the Company to believe that significant
uncertainty exists as to the timing and revenue potential of handheld products
in general.
Other factors that may adversely affect VLSI's future results include customer
concentration, pending litigation and contingencies, environmental regulations
and earthquakes. (See the 1993 Annual Report for a more detailed discussion of
Factors Affecting Future Results.)
Approximately 62% of the Company's net revenues for the first quarter
of 1994 were derived from sales to its top 20 customers, a large percentage of
which are in the personal computer business. The personal computer market is
volatile and subject to significant shifts in demand and severe pricing
pressures. As a result of this concentration of its customer base, the
Company's operating results would be materially adversely affected by the loss
of business from, or the cancellation of orders by, any such customers. During
the first quarter of 1994, the Company experienced such a decrease in orders
from Apple, which resulted in a decrease in Apple net revenues from 19% in the
1993 fiscal year to 12% during the first quarter of 1994. The Company expects
further declines in net revenues from Apple through the remainder of 1994.
Additionally, Compaq, also in the personal computer business, accounted for 21%
of net revenues during the first quarter of 1994. The Company anticipates that
Compaq will represent a higher percentage of net revenues in the second quarter
of 1994.
The status of the Company's material legal proceedings are set forth in
Item 1, Part II of this Form 10-Q. Four class action litigation claims were
filed during the fourth quarter of 1993 and were subsequently consolidated
during the first quarter of 1994 to a single action, Waldron et al. vs.
Fiebiger, et al. The claim related to a decrease in the market price of the
Company's Common Stock in December 1993. On April 25, 1994, the case was
dismissed with prejudice as a result of a stipulation entered into by all
parties. No consideration was paid.
The Company cannot accurately predict the eventual outcome of the remaining
matter with TI. Management believes the ultimate outcome of this matter will
not result in a material adverse effect on VLSI's consolidated financial
position or results of operations. An unfavorable outcome could, however, have
an adverse effect on VLSI's future business operations and could be material to
any particular quarter's results of operations. In addition, the ongoing costs
of defending lawsuits utilizes cash and management resources.
LIQUIDITY AND CAPITAL RESOURCES
VLSI generates cash from operations, equipment financings and sales of its
securities. Principal uses of cash include purchases of capital equipment
needed for semiconductor manufacturing and engineering and payments of debt and
lease obligations.
At April 1, 1994, total cash and cash equivalents decreased $7.0 million from
1993 fiscal year end, primarily due to purchases of liquid investments and
capital expenditures. Working capital decreased to $109.0 million at April 1,
1994, as compared to $114.4 million at December 25, 1993.
During the first quarter of 1994, VLSI generated $27.1 million of cash from
operations, an increase of $12.4 million over the first quarter of 1993. At
April 1, 1994, receivables increased by $1.9 million over fiscal year end
balances, reflecting greater demand for the Company's products. Inventory
levels declined $10.0 million from December 25, 1993 levels, primarily
11
<PAGE> 12
PART I (CONTINUED)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations - (continued)
LIQUIDITY AND CAPITAL RESOURCES (continued)
resulting from higher sales volumes and lower per-unit costs. In the
first quarter of both 1994 and 1993, increased revenues over the preceding
respective prior year fourth quarter resulted in reduced inventories and
increased receivables over the respective fiscal year end balances. Current
liabilities decreased by $0.4 million during the first quarter of 1994,
primarily due to lower balances of accounts payable and deferred revenues.
Accrued compensation and benefits and other accrued liabilities increased
during the first quarter of 1994, reflecting the timing of cash payments for
various items.
Cash used for investing activities was $30.9 million for the 14-week quarter
ended April 1, 1994, compared to $15.2 million for the 13-week quarter ended
March 27, 1993. In the first quarter of 1994, VLSI had net purchases of $9.9
million in liquid investments compared to none in 1993. VLSI invested $21.7
million in property, plant and equipment during the first quarter of 1994
compared to $19.2 million in the same 1993 period. The investments in
property, plant and equipment in the first quarters of 1994 and 1993 include
the acquisition of equipment for expanding internal sub-micron wafer
fabrication capacity, upgrades to manufacturing and office facilities and
computers and software to support research and development activities. The 1994
first quarter investment in property, plant and equipment was financed with
$20.9 million of cash and $0.8 million in equipment loans. The Company expects
to continue to utilize debt and/or lease financing agreements for portions
of its 1994 capital expenditures.
Cash used for financing activities was $3.2 million in the first quarter of
1994 compared to $3.9 million in the same 1993 period. This change reflects a
modest increase in debt and capital lease payments, offset by increased
proceeds from the exercise of employee stock options and the repayment of a
shareholder note receivable.
VLSI currently anticipates that capital expenditures for 1994 will approximate
$100 million. Unused equipment loan facilities approximated $7.5 million at
April 1, 1994.
VLSI believes that its existing cash balances, together with cash flow
from operations and available equipment financing, will be sufficient to meet
its liquidity and capital expenditure needs through 1994. While the Company
believes that its current capital resources are sufficient to meet its
near-term needs, in order to meet its longer-term needs, VLSI continues to
investigate the possibility of generating financial resources through
technology or manufacturing partnerships, as well as from equity or debt
financing based on market conditions.
During the fourth quarter of 1993, the Company filed a registration statement
with the Securities and Exchange Commission for an anticipated public offering
of Common Stock. The offering, which was postponed during the fourth quarter of
1993 due to unfavorable fluctuations in the stock price, may be pursued if the
Company's stock price improves.
12
<PAGE> 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to Item 3 of the Company's Annual Report on Form 10-K for the
fiscal year ended December 25, 1993 (the 1993 Form 10-K) for a discussion of
certain pending legal proceedings. Except as discussed below, there have been
no material developments in any of such matters since the filing of the
Company's 1993 Form 10-K.
Texas Instruments
The Company is a named defendant in a lawsuit filed by TI in 1990 claiming
patent infringement. For more information, see Note 4 of Notes to Consolidated
Financial Statements on pages 34 and 35 of the Company's 1993 Form 10-K.
With respect to the TI actions against the Company and four other defendants,
in February 1992, the United States International Trade Commission (ITC)
affirmed the decision of the Administrative Law Judge that the Company's
old plastic encapsulation gating process infringed TI's patent, but found the
Company's newly developed process to be non-infringing. The U.S. Executive
Branch affirmed the order in the second quarter of 1992. The United States
Court of Appeal, for the Federal Circuit, affirmed the ITC decision in the
first quarter of 1993. A trial date for TI's pending patent infringement
action in the United States District Court for the Northern District of Texas,
Dallas Division, has not been set. In the first quarter of 1994, the parties
filed cross motions for summary judgment. No decision on the summary judgment
motions has been rendered.
Waldron Action
In December 1993, four civil class action complaints relating to the
drop in price of VLSI stock were filed in U.S. District Court, Northern
District of California, against the Company and certain of its officers and
directors, alleging violations of federal securities laws for alleged material
misrepresentations and omissions of facts concerning the Company's business.
The consolidated amended complaint, known as Waldron et al. vs. Fiebiger et
al., Civ. No. C-93-20930-RMW (PVT) (N.D. Cal. filed March 9, 1994), was filed on
behalf of the named plaintiffs and all others who purchased the Company's stock
between June 28, 1993 and December 3, 1993. On April 25, 1994, the case was
dismissed with prejudice as a result of a stipulation entered into by all
parties. No consideration was paid.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - See Index to Exhibits on Page 15.
(b) Reports on Form 8-K - None.
13
<PAGE> 14
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.
VLSI TECHNOLOGY, INC.
(Registrant)
<TABLE>
<S> <C> <C>
Date May 9, 1994 By: Gregory K. Hinckley
--------------------------------------------------- -------------------
Gregory K. Hinckley
Vice President, Finance and
Chief Financial Officer
(Principal Financial Officer)
Date May 9, 1994 By: Balakrishnan S. Iyer
---------------------------------------------------- --------------------
Balakrishnan S. Iyer
Vice President, Controller and Chief
Accounting Officer
(Principal Accounting Officer)
</TABLE>
14
<PAGE> 15
VLSI TECHNOLOGY, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO DESCRIPTION PAGE NO.
---------- ----------- ---------
<S> <C> <C>
11.1 Calculation of Earnings Per Share 16
</TABLE>
15
<PAGE> 1
Exhibit 11.1
VLSI TECHNOLOGY, INC.
CALCULATION OF EARNINGS (LOSS) PER SHARE - unaudited
(thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended
--------------------
April 1, March 27,
Primary earnings per share 1994 1993
- -------------------------- ---- ----
<S> <C> <C>
Net income (loss) $ 5,361 $ (2,150)
========== =========
Average number of common and common
equivalent shares:
Average common shares outstanding 35,272 33,151
Dilutive options 1,530 -
---------- ---------
Average number of common and
common equivalent shares 36,802 33,151
========== =========
Earnings (loss) per common and common
equivalent share $ .15 $ (.06)
========== =========
Fully diluted earnings per share
- --------------------------------
Net income (loss) $ 5,361 $ (2,150)
Add interest expense on convertible
subordinated debentures, net of tax
effect 755 1,006
---------- ---------
Adjusted net income (loss) $ 6,116 $ (1,144)
========== =========
Average number of common and common
equivalent shares on a fully diluted
basis:
Average common shares outstanding 35,272 33,151
Dilutive options 1,895 967
Conversion of convertible debenture 2,614 2,614
---------- ---------
Average number of common and
common equivalent shares on a fully
diluted basis 39,781 36,732
========== =========
Fully diluted earnings (loss) per common
and common equivalent share $ .15 $ (.03)
========== =========
</TABLE>
16
