<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A AMENDMENT NO. 1
[XX] Amendment to Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (Fee Required)
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995 or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the transition period from _____ to _____
COMMISSION FILE NUMBER: 000-19053
BROOKTREE CORPORATION
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-3646367
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
9868 Scranton Road, San Diego, CA 92121-3707
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (619) 452-7580
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
--------------
Common Stock, no par value
This document consists of 30 pages.
The Exhibit Index is on page 28.
Page 1 of 30
<PAGE>
BROOKTREE CORPORATION
FORM 10-K/A AMENDMENT NO. 1
ANNUAL REPORT
FISCAL YEAR ENDED SEPTEMBER 30, 1995
TABLE OF CONTENTS
Item of Form 10-K/A Amendment No. 1 Page
- ----------------------------------- ----
PART II
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 3
Item 8 - Financial Statements and Supplementary Data 10
PART IV
Item 14 - Exhibits, Financial Statement Schedules and
Reports on Form 8-K 28
Signatures 29
2
<PAGE>
PART II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table set forth for the periods indicated certain
financial data as a percentage of revenues:
Year Ended September 30,
--------------------------------------------------------------
1995 1994 1993
--------------------------------------------------------------
Revenues 100.0 % 100.0 % 100.0 %
Cost of Sales 51.8 54.0 43.0
--------------------------------------------------------------
Gross Margin 48.2 46.0 57.0
--------------------------------------------------------------
Operating Expenses:
Research and development 20.6 24.0 20.6
Sales and marketing 15.2 15.5 15.6
General and administrative 6.5 5.5 5.4
Patent litigation - - 0.2
Restructuring charge - 2.6 -
--------------------------------------------------------------
Total 42.3 47.6 41.8
--------------------------------------------------------------
Operating Income (Loss) 5.9 (1.6) 15.2
Litigation Settlements (2.2) - 22.9
Gain on Sale of Investment 9.4 2.9 1.4
Interest Income - Net 1.4 1.2 1.2
--------------------------------------------------------------
Income before Income Taxes 14.5 2.5 40.7
Provision for Income Taxes 5.4 0.6 15.2
--------------------------------------------------------------
Net Income 9.1 % 1.9 % 25.5 %
--------------------------------------------------------------
FISCAL 1995 COMPARED TO FISCAL 1994
REVENUES
Revenues increased 26.3% to $137.7 million in fiscal 1995 compared to
revenues of $109.0 million in fiscal 1994. This increase was primarily due to
increased unit volumes of the Company's imaging, communications and automated
test equipment (ATE) products, partially offset by decreased unit volumes of
graphics products. During the fourth quarter of fiscal 1995, revenues
increased, as compared to the third quarter of fiscal 1995, primarily due to
$4.5 million in sales of the Company's recently introduced multimedia products,
of which there were essentially no sales in the third quarter. In addition,
increased unit volumes of imaging products contributed $2.9 million to the
increase in revenue in the fourth quarter of fiscal 1995. Overall average
selling prices in fiscal 1995 increased slightly due to increases of average
selling prices for communication products, offset in part by decreased average
selling prices for graphics, imaging and ATE products.
3
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Graphics and imaging product revenues in fiscal 1995 included last-time
sales of approximately $2.0 million for discontinued products that are not
expected to generate future revenues of any significant amount.
Revenues from the Company's non-graphics product lines amounted to $88.1
million, or 64% of revenues in fiscal 1995, up from approximately $43.8 million,
or 40% of revenues in fiscal 1994. A significant portion of the increase in the
Company's communications and imaging product lines in fiscal 1995 was
attributable to increased shipments of products which were introduced during the
past three years. The increase in ATE product revenues was due to increased
shipment volumes for parts that the Company has placed under a last-time-buy
status. ATE revenues for fiscal 1996 are not expected to exceed ATE revenues
achieved in fiscal 1995. The Company expects the trend in the mix of product
revenues toward a greater percentage of non-graphics revenues to continue in
fiscal 1996. The Company anticipates that future revenue growth could be
substantially dependent on its new multimedia products. There can be no
assurance, however, that these products will achieve significant market
acceptance. In the event that the market does not develop at an acceptable rate
or demand for the Company's products does not materialize, the Company may not
achieve growth in future revenues. Multimedia product revenues during the first
quarter of fiscal 1996 are not expected to contribute substantially to total
first quarter revenues.
During fiscal 1995, the decrease in graphics product revenues was primarily
attributable to a decrease in both the unit volumes and average selling prices
of several personal computer graphics products. The ongoing integration of the
functionality of RAMDACs into graphical user interface (GUI) products by
competitors and a general decline in average selling prices due to continued
pricing pressures from the Company's OEM customers as well as competition from
other suppliers are the primary causes for the decline in personal computer
graphics revenues. During fiscal 1995, a greater percentage of the Company's
personal computer graphics revenues was concentrated among a few key customers.
The loss of one or more of these customers or a decrease in their demand for
these products could adversely affect future revenues.
The Company's operating results are subject to quarterly fluctuations as a
result of a number of factors, including competitive pressures on selling
prices, adequate availability of wafers, integrated circuit packages and finish-
tested packaged parts, fluctuation in test yields, changes in the mix of
products sold, the timing and success of new product introductions, foreign
currency fluctuations that impact wafer costs and the scheduling of orders by
its customers. Furthermore, the semiconductor industry has historically been
characterized by business cycles, with economic downturns resulting in
diminished product demand and erosion of average selling prices. The Company
believes that the cyclical nature of the semiconductor business could have an
impact on its business and operating results in the future. Additionally, the
semiconductor industry is intensely competitive and is generally characterized
by rapid technological change and rapid rates of product obsolescence. The
Company believes that its ability to compete depends upon elements both within
and beyond its control, including, but not limited to, the success and timing of
new product development and introduction by the Company and its competitors,
customer order patterns, customer support, product performance and selling
prices. There can be no assurance that the Company will compete successfully as
to these or other elements.
The Company does not directly manufacture the finished silicon wafers used
for its products. Finished wafers for the Company's products are currently
manufactured by several qualified wafer suppliers, two of which currently supply
the substantial majority of the Company's wafers. The Company is dependent on
these suppliers to obtain adequate supply of raw materials and to provide it
with an adequate supply of wafers to meet customer demand for products. Wafer
capacity in the semiconductor industry is currently limited and has caused
concern, within the industry, that such capacity may continue to be limited over
the next several years. Universal wafer capacity limitations may increase the
difficulty for the Company to obtain adequate capacity and may result in
increased wafer prices and increased lead times. Any increase in general demand
for wafers over currently expected levels or any failure of the wafer supply to
grow at anticipated rates could magnify these problems. Although the Company
has put in place long-term supply arrangements with three vendors in an effort
to secure capacity, and may continue to pursue similar supply arrangements in
the future, there can be no assurance that these arrangements will be adequate.
4
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Since a significant percentage of the Company's products are manufactured
utilizing sub-micron wafers, the Company routinely seeks the qualification of
new processes at its current wafer suppliers in addition to other wafer
suppliers that can provide sub-micron wafers. Additional qualified sources of
supply could reduce the Company's dependence on a few manufacturers to fulfill
its needs for wafer capacity. However, there can be no assurance that the
Company will be successful in identifying and qualifying new processes and/or
suppliers, or that such suppliers will have available capacity to maintain
adequate sources of supply for finished silicon wafers or reduce the Company's
dependence on a few suppliers. If the Company were unable to obtain a
sufficient supply of wafers to meet sales demand, its financial position and
results of operations could be adversely affected.
During fiscal 1994, the Company was informed by two suppliers which provide
substantially all of its bipolar wafer requirements that these suppliers would
be discontinuing the manufacture of wafers of this kind. Both suppliers have
given the Company last-time-buy notices, which range to the middle of 1996.
Bipolar wafers are predominantly used in the manufacture of ATE and certain
graphics products. The Company has worked closely with its customers to
determine their future demand for products which incorporate the bipolar process
in order that the Company can order sufficient quantities of bipolar wafers to
meet anticipated future demand. An inadequate estimate of future bipolar wafer
needs or an unforeseen interruption in the supply of its bipolar wafers could
adversely affect the Company's ability to meet its customer needs and impact
revenues.
The assembly and packaging of all the Company's products is performed by
several vendors. The Company is dependent upon these vendors to provide the
Company adequate capacity and related raw materials to meet its customer
requirements. In some cases, the Company's vendors, in turn, are dependent upon
a few suppliers for certain of their packaging and material supplies. A
restriction on the capacity or materials provided by one or more of its assembly
and packaging vendors could adversely affect the Company's ability to meet
customer demand for certain products and adversely impact revenues. In
addition, some of the Company's vendors could be affected by political
instability in their countries or countries neighboring those in which they
operate. To the extent that any of the Company's vendors are affected by
unforeseen political turmoil, the Company may experience constraints on the
capacity and materials provided by those vendors. The Company also purchases
the majority of its communications products from three manufacturers. If delays
or interruptions are encountered, shipments of communications products and
revenues could be adversely affected.
COST OF SALES AND GROSS MARGIN
The Company's cost of sales includes the cost of wafer fabrication and
packaging and assembly performed by third party vendors, and direct and indirect
costs associated with the procurement, scheduling, testing and quality assurance
functions performed by the Company. Gross margin as a percentage of revenues in
fiscal 1995 increased to 48.2% from 46.0% in fiscal 1994.
During fiscal 1995, gross margin increased primarily due to a shift in the
mix of products sold to a greater percentage of non-graphics products which
realize higher gross margins, an increase in overall average selling prices, as
discussed above, and lower average product costs for imaging and ATE products.
Average product costs for imaging products decreased primarily as a result of
lower reserves expense for excess products and improved manufacturing yields.
ATE average product costs decreased as a result of greater number of units sold
over which certain fixed costs were allocated.
Average selling prices for certain of the Company's products, especially
for mature products, generally decline over a period of time. The Company
expects average selling prices for its mature products to continue to decline in
future periods. The Company attempts to offset this reduction in average
selling prices, and the related negative impact on gross margin, by a
combination of the following factors: increasing unit sales volumes, reducing
material costs, improving manufacturing yields and introducing new products of
superior performance and capabilities with higher prices and margins. There can
be no assurances that the Company will be successful in these efforts or that
these efforts, if successful, will fully offset price declines in future
periods. The Company anticipates that future overall gross margin percentage
will be lower than fiscal 1995 gross margin percentage as a result of a possible
shift in product mix from which the Company expects to derive a
greater proportion of its revenues from multimedia products which realize
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
somewhat lower gross margins than its other products. There can be no assurance
that the Company can compensate for this potential impact to gross margins by
sufficiently increasing unit volume.
With the addition of the Company's test facility in Singapore at the
beginning of fiscal 1995, the Company's total production capacity has increased.
If this capacity and its associated overhead costs cannot be fully absorbed,
future gross margin may be negatively impacted. In addition, if forecasted
sales of certain products are not realized, increased inventory reserves for
excess product or product obsolescence may be necessary which would adversely
affect future gross margins. For instance, the Company has increased its levels
of multimedia inventory in anticipation of future sales. In the event these
sales do not materialize as expected, reserves for excess multimedia product
inventory may be necessary.
The Company's future gross margin could be negatively impacted by price
increases for wafer purchases if the Company's wafer suppliers exercise certain
contractual rights to compensate them for the devaluation of the U.S. dollar
relative to their local currency. There can be no assurance that the Company
will be able to increase prices of its products to offset potential increases in
wafer costs.
OPERATING EXPENSES
Research and development expense in fiscal 1995 increased by $2.2 million
but decreased as a percentage of revenue to 20.6% from 24.0% in fiscal 1994.
The increase in expenses in fiscal 1995 was primarily to support the ongoing
development of the Company's products and new technologies in the form of
additional engineering personnel and related costs, and increased prototype
expenses.
Sales and marketing expenses in fiscal 1995 increased $4.0 million but
decreased as a percentage of revenue to 15.2% from 15.5% in fiscal 1994. This
expense increase was primarily to support marketing of the Company's products in
the form of additional marketing personnel and related employment costs, travel
and costs related to increased attendance at trade shows and expositions.
Additionally, sales and marketing expense increased as a result of an increase
in commission expense due to higher revenues.
General and administrative expenses in fiscal 1995 increased $2.9 million
and as a percent of revenue to 6.5% from 5.5% in fiscal 1994. The increase in
expenses during fiscal 1995 was primarily due to increased salaries and
employment costs in support of the Company's Singapore operations, legal defense
costs in association with the class-action complaints and increased asset
reserves.
Subsequent to the end of fiscal 1995, the Company filed a lawsuit against a
competitor for infringement of a patent related to its new multimedia
technology. The Company is seeking a preliminary injunction to prevent this
competitor from continuing to sell the products which the Company alleges use
its patented technology. Consequently, the Company is expecting it will incur
patent litigation costs in fiscal 1996. As additional future events warrant,
the Company intends to vigorously defend its intellectual property rights.
However, there can be no assurance that the Company will be successful in
defending these rights.
INTEREST INCOME
Net interest income in fiscal 1995 increased $0.6 million compared to
fiscal 1994 . This was primarily due to higher interest rates and more cash
available for investment compared to the same periods in fiscal 1994.
GAIN ON SALE OF INVESTMENT
On several occasions during fiscal 1995 and fiscal 1994, the Company sold
portions of its minority interest investment in a telecommunications company for
approximately $14.0 million and $3.8 million, respectively. These sales
resulted in an after-tax gain of approximately $8.1 million ($0.45 per share,
fully diluted) in fiscal 1995 and $2.3 million ($0.14 per share, fully diluted)
in fiscal 1994.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
LITIGATION SETTLEMENT
In June 1994, two civil class action complaints were filed against the
Company, certain of its current and former directors and officers, and its
largest shareholder. The complaints alleged that the defendants misrepresented
or failed to disclose material facts about the Company's operations and
financial results, which plaintiffs asserted artificially inflated the market
price of the Company's common stock. In March 1995, the Company entered into an
agreement to settle both complaints for approximately $5.5 million, subject to
the finalization of formal settlement documents. The settlement was recorded in
fiscal 1995, net of approximately $2.5 million paid by the insurance company
that provides the Company's directors' and officers' liability insurance.
During fiscal 1995, the settlement amount was paid into an escrow account. The
court approved the settlement in October 1995. See Note 13 of Notes to
Consolidated Financial Statements.
PROVISION FOR INCOME TAXES
The provision for income taxes is computed based on the Company's pretax
income, adjusted for tax credits and other permanent differences. The effective
tax rate for fiscal 1995 was approximately 37.0%. This tax rate is higher than
the fiscal 1994 tax rate of 26.5% primarily due to higher start-up expenses that
resulted in a loss in fiscal 1995 for the Company's test facility in Singapore.
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109.
FISCAL 1994 COMPARED TO FISCAL 1993
Fiscal 1994 revenues decreased 2% to $109.0 million from $111.3 million in
fiscal 1993. The decrease in fiscal 1994 revenue was primarily attributable to
a decrease in sales of graphics products which offset an increase in sales of
the Company's imaging, communications and ATE product lines.
Graphics product revenues decreased $14.6 million or 18% from fiscal 1993.
This decline was primarily due to a significant reduction in average selling
prices, which is more fully explained below, for both the Company's personal
computer and workstation graphics products. To a lesser extent, graphics
product revenues decreased due to a change in the product mix between personal
computer and workstation graphics during fiscal 1994, whereas lower-priced
personal computer graphics products accounted for 54% of total graphics product
revenues, compared to 46% in fiscal 1993. The growth in imaging product
revenues was attributable to increased unit volumes of two products. The
increase during fiscal 1994 in communications product sales was attributable to
increased sales of the communications product line acquired from Base(2)
Systems, Inc. ("Base(2)"), in January 1993 and sales of communications products
developed and introduced by the Company in mid fiscal 1993.
With the exception of the ATE product line, average selling prices for all
product lines decreased during fiscal 1994 as compared to fiscal 1993. Overall
average selling prices decreased approximately 14%. This decline in average
selling prices was partially offset by an increase in unit sales of the
Company's personal computer graphics, imaging, communications and ATE product
lines. Average selling prices for personal computer and workstation graphics
products declined 11% and 17%, respectively, during fiscal 1994. The decrease
in personal computer graphics average selling prices was primarily attributable
to increased sales of lower-priced products and increased pricing pressures from
competitors. The decrease in workstation graphics average selling prices was
primarily the result of continued pricing pressures from the Company's OEM
customers as well as competition from other suppliers.
Revenues from the Company's non-graphics product lines amounted to $43.8
million or 40% of revenues in fiscal 1994, up from $31.5 million or 28% of
revenues in fiscal 1993.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
COST OF SALES AND GROSS MARGIN
Gross margin as a percentage of revenues in fiscal 1994 decreased to 46.0%
from 57.0% in fiscal 1993. The decrease in gross margin was due to the
significant decline in average selling prices for graphics products, as
discussed above, and to a lesser extent, an increase in average product costs
for the Company's graphics, imaging and communications products. Graphics
product costs increased primarily due to higher material costs, the result of
increased production of advanced, sub-micron integrated circuits using more
expensive packaging and increased amortization expense. Imaging product costs
increased primarily due to an increase in inventory reserves and low
manufacturing yields. Communications product costs increased as a result of
increased inventory reserves and amortization of acquired technologies.
OPERATING EXPENSES
Research and development expense in fiscal 1994 increased by $3.2 million
and as a percentage of revenue to 24.0% from 20.6% in fiscal 1993. The increase
in expense was primarily to support the ongoing development of the Company's
products and new technologies in the form of additional design personnel and
related employment costs, consulting and other outside services, prototype, mask
and depreciation expenses.
Sales and marketing expenses in fiscal 1994 decreased $0.4 million and as a
percentage of revenue to 15.5% from 15.6% in fiscal 1993. This slight decrease
reflected a decrease in amortization expenses and lower sales commissions,
offset by increased salaries and benefits, sales literature and marketing
expenses in support of the Company's product lines and customer base.
General and administrative expenses in fiscal 1994 decreased $0.1 million
but increased as a percentage of revenue to 5.5% from 5.4% in fiscal 1993. The
decrease was primarily attributable to a reduction in salaries and benefits
which offset incremental administrative costs of the Company's Singapore
operations.
GAIN ON SALE OF INVESTMENT
In fiscal 1994, the Company sold approximately 28% of its minority interest
investment in a telecommunications company for approximately $3.8 million in
cash. During fiscal 1993, the Company sold approximately 10% of its interest in
this telecommunications company for $1.9 million. The sales resulted in an
after-tax gain of approximately $2.3 million ($0.14 per share) and $1.1 million
($0.06 per share) in fiscal 1994 and 1993, respectively.
RESTRUCTURING CHARGE
During fiscal 1994, the Company recognized a restructuring charge of $2.8
million in connection with restructuring of its ATE business and a 7% reduction
in its workforce. The Company took this action as a result of its decision to
discontinue the development of future ATE products and, instead, focus resources
on its communications and multimedia businesses. The one-time charge included
$0.6 million for employee severance and related expenses and $2.2 million for a
reserve against a portion of its ATE inventory, equipment and related costs.
All severance payments were disbursed during fiscal 1994. A portion of the
inventory reserve was used to write off obsolete inventory. The Company
estimates that the remaining reserve continues to be appropriate for potential
obsolescence of its existing ATE products.
INTEREST INCOME
Net interest income in fiscal 1994 increased 3% to $1.3 million compared to
fiscal 1993, primarily due to an increase in interest rates.
INCOME TAXES
The tax rate for fiscal 1994 was 26.5%, compared to the fiscal 1993 tax
rate of 37.4%. The decrease in the fiscal 1994 tax rate reflected a reduction
in taxes due to reduced taxable income, an increase in tax-exempt interest
income and the utilization of tax credits.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES.
At September 30, 1995, the Company had $13.5 million in cash and cash
equivalents, and $29.9 million in short-term investments. The Company's
operating activities generated net cash of $11.8 million and $22.4 million
in fiscal 1995 and 1994, respectively; its financing activities generated $11.0
million and $0.4 million for the same years, primarily from borrowing against a
bank line of credit during fiscal 1995 and common stock issued due to options
exercised. Investing activities used $20.6 million during fiscal 1995 and $16.0
million in fiscal 1994. The Company's working capital increased from $60.7
million at September 24, 1994 to $67.0 million at September 30, 1995 for the
reasons discussed below.
The principal source of cash from operating activities, aside from net
income and non-cash adjustments thereto, was from an increase in accounts
payable and other accrued expenses ($10.9 million) during fiscal 1995. Accounts
payable and accrued expenses increased primarily due to an increase in payables
resulting from the purchase of inventory and equipment and an increase in
advanced payments from customers for future delivery of ATE last-time-buy
products. The primary uses of cash for operating activities during fiscal 1995
were $8.9 million increase in trade receivables and an increase in inventory of
$4.9 million. Accounts receivable increased due to higher shipments in the
latter part of the fourth quarter of fiscal 1995 than in the latter part of the
fourth quarter of fiscal 1994.
The Company's principal investment activity during fiscal 1995 was the sale
of a portion ($14.0 million) of the Company's minority investment in a
telecommunications company. The funds provided by the sale of this investment
were partially used to finance an advance payment to Seiko Epson Corporation of
$9.0 million for future wafers, an additional payment of $1.4 million in
connection with the acquisition of Base(2), an investment of $3.3 million in
Chartered Semiconductor Manufacturing, Ltd and expenditures of $17.3 million
for capital equipment.
The Company has budgeted approximately $22 million for equipment
expenditures in fiscal 1996 primarily in support of expansion of the Company's
Singapore facility. The fiscal 1996 advance payments to Seiko Epson Corporation
will be approximately $27.8 million. In addition, the Company is obligated to
make its remaining investment of approximately $3.4 million in Chartered
Semiconductor Manufacturing, Ltd. in March 1996. Subsequent to the end of
fiscal 1995, the Company entered into two agreements with Taiwan Semiconductor
Manufacturing Co., Ltd. which grant the Company options to obtain an additional
supply of wafers. Pursuant to these agreements, the Company may make several
installment payments in 1996 and 1997 which could total approximately $59.0
million. If the Company elects to exercise these options, the first installment
of $19.6 million is due January 31, 1996. The Company expects to finance these
expenditures from existing capital resources, cash generated from operations,
debt and/or equity financing.
At the end of fiscal 1995, the Company finalized an agreement with its bank
to provide a $5.0 million revolving line of credit facility to finance short-
term working capital requirements and a $6.0 million non-revolving-to-term loan
for equipment purchases to support expansion of its operations in Singapore. At
September 30, 1995, no borrowings have been made against these facilities.
During fiscal 1994, the Company entered into bank financing arrangements
for a working capital line of credit and a term loan in connection with the
development and expansion of its operations in Singapore. At September 30,
1995, borrowings under these facilities totaled $7.9 million, secured by
production equipment in Singapore. Total potential borrowings under these
facilities could amount to approximately $11.2 million.
The Company believes its existing capital resources, combined with cash
expected to be generated from operations and potential resources from debt
and/or equity financing, will be adequate to fund the Company's cash needs for
the next fiscal year. However, the Company may seek additional sources of funds
in the future for product acquisition, product development, securing future
wafer capacity and other corporate needs. There can be no assurance that such
potential sources of financing will be available on reasonable terms.
9
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
BROOKTREE CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) September 30,
- --------------------------------------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 13,509 $ 11,288
Short-term investments 29,949 27,545
Receivables 23,757 15,742
Inventories 20,805 15,571
Deferred income taxes 4,752 4,083
Prepaid and other current assets 9,464 2,940
- --------------------------------------------------------------------------------------------------------------
Total current assets 102,236 77,169
- --------------------------------------------------------------------------------------------------------------
Property and Equipment 49,137 42,517
Other Assets 36,669 22,727
- --------------------------------------------------------------------------------------------------------------
$ 188,042 $ 142,413
- --------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------------------------------------
Current Liabilities:
Current portion of long-term obligations $ 3,602 $ 1,333
Accounts payable 16,245 5,725
Accrued payroll and benefits 5,029 3,241
Accrued expenses 3,917 1,392
Income taxes payable 1,306 1,592
Deferred revenue 5,099 3,182
- --------------------------------------------------------------------------------------------------------------
Total current liabilities 35,198 16,465
- --------------------------------------------------------------------------------------------------------------
Long-Term Obligations and Other 8,870 3,013
- --------------------------------------------------------------------------------------------------------------
Commitments and Contingencies (Notes 4, 5, 6 and 13)
- --------------------------------------------------------------------------------------------------------------
Shareholders' Equity:
Preferred stock authorized 15,000,000
shares, none outstanding.
Common stock, authorized 45,000,000
shares, no par value, issued
and outstanding - 16,654,722 in 1995
and 16,222,593 in 1994 74,249 69,928
Unrealized gain on available-for-sale securities, net of tax 4,174 -
Retained earnings 65,551 53,007
- --------------------------------------------------------------------------------------------------------------
Total shareholders' equity 143,974 122,935
- --------------------------------------------------------------------------------------------------------------
$ 188,042 $ 142,413
- --------------------------------------------------------------------------------------------------------------
See accompanying notes.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
BROOKTREE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA) Year Ended September 30,
- --------------------------------------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 137,662 $ 108,964 $ 111,342
- --------------------------------------------------------------------------------------------------------------
Cost of Sales 71,322 58,804 47,896
- --------------------------------------------------------------------------------------------------------------
Gross Margin 66,340 50,160 63,446
- --------------------------------------------------------------------------------------------------------------
Operating Expenses:
Research and development 28,332 26,131 22,948
Sales and marketing 20,964 16,955 17,383
General and administrative 8,870 5,951 6,020
Patent litigation - - 150
Restructuring charge - 2,815 -
- --------------------------------------------------------------------------------------------------------------
Total 58,166 51,852 46,501
- --------------------------------------------------------------------------------------------------------------
Operating Income (Loss) 8,174 (1,692) 16,945
Litigation Settlements (3,050) - 25,515
Gain on Sale of Investment 12,911 3,125 1,605
Interest Income - Net 1,877 1,324 1,284
- --------------------------------------------------------------------------------------------------------------
Income Before Income Taxes 19,912 2,757 45,349
Provision for Income Taxes 7,368 730 16,978
- --------------------------------------------------------------------------------------------------------------
Net Income $ 12,544 $ 2,027 $ 28,371
- --------------------------------------------------------------------------------------------------------------
Earnings Per Share:
Primary $ 0.72 $ 0.12 $ 1.73
Fully Diluted $ 0.69 $ 0.12 $ 1.72
- --------------------------------------------------------------------------------------------------------------
Weighted Average Common and
Common Equivalent shares:
Primary 17,418 16,432 16,439
Fully Diluted 18,181 16,539 16,528
- --------------------------------------------------------------------------------------------------------------
See accompanying notes.
</TABLE>
11
<PAGE>
BROOKTREE CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Unrealized
Gain on
Common Stock Available-
-------------------- Retained for-Sale
(IN THOUSANDS) Shares Amount Earnings Securities Total
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances at September 30, 1992 15,597 $ 62,955 $ 22,609 $ - $ 85,564
Stock repurchased (5) (60) (60)
Options exercised 448 3,737 3,737
Warrants exercised 31 246 246
Collection on notes receivable 146 146
Tax benefit from option transactions 1,293 1,293
1984 and 1988 Stock Purchase Plans 263 263
1992 Employee Stock Purchase Plan 101 890 890
Net income 28,371 28,371
- --------------------------------------------------------------------------------------------------------------------------
Balances at September 30, 1993 16,172 69,470 50,980 - 120,450
Stock repurchased (195) (1,372) (1,372)
Options exercised 90 692 692
1984 and 1988 Stock Purchase Plans 16 16
1992 Employee Stock Purchase Plan 156 1,122 1,122
Net income 2,027 2,027
- --------------------------------------------------------------------------------------------------------------------------
Balances at September 30, 1994 16,223 69,928 53,007 - 122,935
Options exercised 238 1,716 1,716
Tax benefit from option transactions 1,057 1,057
1984 and 1988 Stock Purchase Plans 289 289
1992 Employee Stock Purchase Plan 194 1,259 1,259
Unrealized gain on available-for-sale securities, net of taxes 4,174 4,174
Net income 12,544 12,544
- --------------------------------------------------------------------------------------------------------------------------
Balances at September 30, 1995 16,655 $ 74,249 $ 65,551 $ 4,174 $ 143,974
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
12
<PAGE>
BROOKTREE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(IN THOUSANDS) Year Ended September 30,
- -------------------------------------------------------------------------------------------------
1995 1994 1993
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities:
Net income $ 12,544 $ 2,027 $ 28,371
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 13,921 13,171 10,297
Gain on sale of investment (12,911) (3,125) (1,605)
Restructuring charge - 2,815 -
Changes in operating assets and liabilities:
(Increase) decrease in receivables (8,914) 3,994 (3,027)
(Increase) decrease in inventories (4,851) 6,690 (8,355)
Increase (decrease) in accounts
payable and other accrued expenses 10,980 (2,028) 596
Other - net 1,080 (1,161) 1,604
- -------------------------------------------------------------------------------------------------
Net cash provided by operating activities 11,849 22,383 27,881
- -------------------------------------------------------------------------------------------------
Investing Activities:
Capital and property expenditures (17,334) (17,510) (22,408)
Purchase of short-term investments (49,285) (9,712) (34,308)
Sales of short-term investments 46,736 17,827 33,561
Purchase of net assets of Base2 (1,447) (4,049) (9,127)
Advanced wafer purchase payments (9,000) (2,000) -
Proceeds from sale of investments 14,037 3,764 1,905
Other investments (4,319) (4,310) (522)
- -------------------------------------------------------------------------------------------------
Net cash used for investing activities (20,612) (15,990) (30,899)
- -------------------------------------------------------------------------------------------------
Financing Activities:
Issuance of common stock 3,255 1,830 5,136
Repurchase of common stock - (1,372) (60)
Employee notes receivable issued, net of repayments 274 (248) 212
Issuance of long-term obligations, net of repayments 7,455 150 (1,062)
- -------------------------------------------------------------------------------------------------
Net cash provided by financing activities 10,984 360 4,226
- -------------------------------------------------------------------------------------------------
Net Increase In Cash and Cash Equivalents 2,221 6,753 1,208
Cash and Cash Equivalents at Beginning of Year 11,288 4,535 3,327
- -------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 13,509 $ 11,288 $ 4,535
- -------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 218 $ 11 $ 93
Income taxes paid, net of refund 11,058 291 17,379
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Capital equipment acquired through
the exchange of non-cash asset $ - $ - $ 408
</TABLE>
See accompanying notes.
13
<PAGE>
BROOKTREE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES
Brooktree Corporation and its subsidiaries (the "Company" or "Brooktree")
design, develop and market proprietary high-performance digital and
mixed-signal integrated circuits for computer graphics, imaging, multimedia,
communications and automated test equipment applications.
The Company's principal operations are conducted in the United States. In
September 1994, the Company commenced operations of its subsidiary in
Singapore. Independent subcontractors, both domestic and foreign, are used
for the fabrication and assembly of semiconductor components.
The Company performs ongoing credit evaluations of its customers, but does
not require collateral. The Company maintains reserves for potential credit
losses; to date, such losses have been insignificant and within management's
expectations.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries, after elimination of all
significant intercompany accounts and transactions.
Certain amounts in the consolidated financial statements and accompanying
notes for fiscal 1994 and 1993 have been reclassified to conform with the
fiscal 1995 presentation.
FISCAL YEAR
For ease of presentation, the Company has indicated its fiscal year as
ending on September 30; whereas, in fact the Company operates and reports on
a 52-53 week fiscal year ending on the last Saturday in September. Fiscal
year 1995 included 53 weeks and fiscal years 1994 and 1993 included 52 weeks.
REVENUE RECOGNITION
Product sales to OEM customers are recognized as revenues upon shipment.
Sales to domestic distributors are subject to agreements allowing certain
rights of return and price protection on products not resold by the
distributors. Consequently, the recognition of revenue from these sales is
deferred and classified as deferred revenue in the Company's consolidated
balance sheets until the products are resold to the consumer.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash equivalents consist of highly liquid investments with original
maturities of three months or less. Short-term investments have original
maturities of greater than three months and are highly liquid. Cash
equivalents and short-term investments are carried at market in accordance
with Statement of Financial Accounting Standards No. 115 (see Note 10).
Although the Company is exposed to potential credit risk in the event of
default by financial institutions or issuers of the investment, the Company's
cash investment policies limit the exposure to any one institution or issuer
and restrict placement of these investments to only institutions or issuers
evaluated as highly credit worthy.
INVENTORIES
Inventories are stated at the lower of cost (determined by the first-in,
first-out method) or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over estimated useful lives of generally three to
five years for equipment and up to forty years for buildings. Amortization
of leasehold improvements is based on the lesser of the estimated useful life
or the remaining term of the related lease.
14
<PAGE>
BROOKTREE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
INCOME TAXES
Effective fiscal 1994, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". As permitted by
Statement No. 109, the Company elected not to restate the financial
statements of prior years for which the provision for income taxes was
computed in accordance with Accounting Principles Board Opinion No. 11. The
effect of the change on income taxes for fiscal 1994 and the cumulative
effect of the change were not material. Research and development credits are
recognized as a reduction of the provision for income taxes when utilized.
EARNINGS PER SHARE
Primary earnings per share are computed based on the weighted average
number of common and common equivalent shares outstanding during each period.
Fully diluted earnings per share reflect additional dilution from stock
options due to the use of the market price at the end of the period when
higher than the average price for the period. Stock options and warrants
(computed using the treasury stock or modified treasury stock method, as
appropriate) are considered to be common stock equivalents.
FOREIGN CURRENCY REMEASUREMENT
All accounts of foreign subsidiaries have been remeasured using the U.S.
dollar as the functional currency. Accordingly, all gains and losses
resulting from the remeasurement of these accounts are reflected in the
results of operations. Assets and liabilities of the foreign subsidiaries
have been remeasured at the rate in effect at the balance sheet date, except
inventory and fixed assets which have been remeasured at historical rates.
The statements of income have been remeasured at average rates of exchange,
except cost of sales and depreciation which have been remeasured at
historical rates. Occasionally, the Company enters into forward exchange
contracts which hedge foreign currency exposures arising from normal, ongoing
business transactions. Gains and losses resulting from such transactions are
included in results of operations. For fiscal years 1995, 1994 and 1993, the
gains and losses arising from the remeasurement of foreign subsidiaries'
accounts and forward exchange contracts have not been significant.
15
<PAGE>
BROOKTREE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 2. FINANCIAL STATEMENT DETAILS
<TABLE>
<CAPTION>
September 30,
- --------------------------------------------------------------------------------------------------------
(IN THOUSANDS) 1995 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Receivables:
Trade receivables $ 24,778 $ 16,035
Less allowance for bad debts (1,021) (293)
- --------------------------------------------------------------------------------------------------------
$ 23,757 $ 15,742
- --------------------------------------------------------------------------------------------------------
Inventories:
Raw materials $ 48 $ 245
Work-in-process 11,381 6,700
Finished goods 9,376 8,626
- --------------------------------------------------------------------------------------------------------
$ 20,805 $ 15,571
- --------------------------------------------------------------------------------------------------------
Property and equipment:
Land $ 3,000 $ 3,000
Buildings 12,387 12,353
Machinery and equipment 67,125 57,729
Furniture and fixtures 1,230 1,220
Leasehold improvements 888 890
- --------------------------------------------------------------------------------------------------------
84,630 75,192
Less accumulated depreciation and amortization (35,493) (32,675)
- --------------------------------------------------------------------------------------------------------
$ 49,137 $ 42,517
- --------------------------------------------------------------------------------------------------------
Other assets:
Purchased intangible assets $ 12,218 $ 13,797
Other 24,451 8,930
- --------------------------------------------------------------------------------------------------------
$ 36,669 $ 22,727
- --------------------------------------------------------------------------------------------------------
Current portion of long-term obligations:
Note payable $ 2,269 $ -
Accrued Base2 purchase payments 1,333 1,333
- --------------------------------------------------------------------------------------------------------
$ 3,602 $ 1,333
- --------------------------------------------------------------------------------------------------------
Long-term obligations and other:
Note payable $ 5,605 $ 419
Accrued Base2 purchase payments
- 1,333
Deferred income taxes payable 3,265 1,261
- --------------------------------------------------------------------------------------------------------
$ 8,870 $ 3,013
- --------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
- --------------------------------------------------------------------------------------------------------
(IN THOUSANDS) 1995 1994 1993
- --------------------------------------------------------------------------------------------------------
Interest income-net:
Interest income $ 2,095 $ 1,335 $ 1,377
Interest expense (218) (11) (93)
- --------------------------------------------------------------------------------------------------------
$ 1,877 $ 1,324 $ 1,284
- --------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
BROOKTREE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 3. RESTRUCTURING CHARGE
In March 1994, the Company recognized a charge of $2,815,000 in connection
with restructuring its Automated Test Equipment ("ATE") business line and a
seven percent reduction in workforce.
The Company decided that development of new ATE products was not consistent
with its long-term strategic direction and, therefore, took this action in an
effort to focus resources on its multimedia and communications businesses. The
Company discontinued the development of future ATE products but will continue
sales, marketing and production support of existing ATE products. The
restructuring charge included $615,000 for employee severance and related costs
and $2,200,000 for a reserve against a portion of its ATE inventory, equipment
and related costs. All severance payments were disbursed during fiscal 1994. A
portion of the inventory reserve was used to write-off obsolete inventory. The
Company estimates that the remaining inventory reserve continues to be
appropriate for potential obsolescence of its existing ATE products.
NOTE 4. TRANSACTIONS
On several occasions throughout fiscal 1995, 1994 and 1993, the Company
sold a total of approximately 86% of its minority interest investment in a
telecommunications company for $14,037,000, $3,764,000 and $1,905,000,
respectively. After these sales, the Company's remaining investment represented
less than 10% of the outstanding common stock of the company. These sales
resulted in an after-tax gain of $8,143,000 ($0.45 per share on a fully diluted
basis) in fiscal 1995, $2,297,000 ($0.14 per share on a fully diluted basis) in
fiscal 1994 and $1,059,000 ($0.06 per share on a fully diluted basis) in fiscal
1993.
In January 1993, the Company acquired all the assets and assumed certain
liabilities of Base(2) Systems, Inc. ("Base(2)"), a Colorado-based designer and
marketer of integrated circuits for the telecommunications market, for a
purchase price of $9,000,000 in cash. Additional consideration of approximately
$5,496,000 was paid through fiscal 1995. Remaining consideration of $1,333,000
has been accrued and will be paid in fiscal 1996 contingent upon certain
conditions. The Company accounted for the acquisition as a purchase and,
accordingly, allocated the purchase price to acquired assets, assumed
liabilities, technology, non-compete agreements, goodwill and other intangibles.
Amortization of these assets is on a straight line basis over five to ten years.
The Company's consolidated financial statements include the results of Base2
from January 15, 1993.
NOTE 5. COMMITMENTS
LEASES
Prior to fiscal 1994, the Company had leased equipment under various
capital leases, however, it fully satisfied all existing capital lease
obligations during fiscal 1994. The Company exercised the option to purchase
equipment at fair value in accordance with the provisions contained in certain
leases. All equipment acquired under capital leases was fully depreciated in
fiscal 1994. Amortization expense for fiscal 1994 and 1993 was $9,000 and
$132,000, respectively.
In March 1993, the Company purchased two office buildings totaling 170,000
square feet and adjacent land to replace its major facilities leased in San
Diego for $7,800,000 in cash. The Company expended an additional $3,600,000 in
the second half of fiscal 1993 and $4,000,000 during fiscal 1994 for
modifications and improvements to the property. Prior to this purchase, the
Company leased all of its facilities under various operating leases. The leases
for the former San Diego facilities terminated during the first half of fiscal
1994. The Company leases sales offices in various locations in the United
States and Europe. Additionally, the Company leases a production facility in
connection with its operations in Singapore. This lease expires in June 1997.
Rental expense for facilities under operating leases amounted to approximately
$722,000 for fiscal 1995, $1,002,000 for fiscal 1994 and $1,673,000 for fiscal
1993.
17
<PAGE>
BROOKTREE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Minimum future operating lease payments under non-cancelable leases at
September 30, 1995 are $708,000 in fiscal 1996, $534,000 in fiscal 1997,
$141,000 in fiscal 1998, $117,000 in fiscal 1999, $17,000 in fiscal 2000 and
$59,000 thereafter.
WAFER CAPACITY
Subsequent to the end of fiscal 1995, the Company entered into two
agreements with Taiwan Semiconductor Manufacturing Co., Ltd. which grant the
Company options to obtain an additional supply of wafers. Pursuant to these
agreements, the Company may make several installment payments in 1996 and 1997
which could total approximately $59,000,000. If the Company elects to exercise
these options, the first installment of $19,600,000 is due on January 31, 1996.
In August 1994, the Company entered into an Advance Production Payment
Agreement with Seiko Epson Corporation ("Seiko"). The Company agreed to pay
Seiko $45,000,000 in installments over approximately three years, of which
$9,000,000 was paid in fiscal 1995 and $27,750,000 is to be paid in fiscal 1996
and $8,250,000 to be paid in fiscal 1997. These installments are to assist
Seiko in the expansion of an advanced sub-micron wafer CMOS process line to
fabricate semiconductor wafers. The Company recorded a portion of the
$9,000,000 installment as a current asset based on the projected wafers to be
received in the next fiscal year; the remaining portion was recorded as a non-
current asset. As wafers are received by the Company, other assets will be
reduced and the value will be transferred to inventory. The Company will
receive these wafers as its production needs require. Seiko agreed to provide
the Company with a guaranteed minimum supply of wafers at favorable prices and
25 free wafers after each 2,000 wafers ordered by the Company.
This agreement will be effective until either Seiko supplies the Company
with the minimum supply of wafers or all amounts paid have been credited against
wafer receipts. In the event of default by either party, this agreement
contains provisions for termination, whereby the obligation for payment of
subsequent installments would cease and the portion of payments previously made
but not credited with wafer receipts would be refunded, net of reasonable costs
incurred by Seiko.
In connection with this agreement, the Company paid Seiko $2,000,000 in
fiscal 1994 to cover additional expenses required for the acquisition of
equipment, construction of a new facility and fabrication of wafers. In
consideration of this payment, Seiko will fabricate and deliver, free of charge,
engineering wafers to be provided over the next three years. Such wafers will
be charged to expense upon receipt.
In February 1994, the Company entered into an agreement with Chartered
Semiconductor Manufacturing, Ltd. ("CSM") which provides for an investment of
approximately $10,700,000 to be applied towards the construction of a new CSM
wafer fabrication facility in Singapore. In consideration for the investment,
the Company receives a minority equity position in CSM and will receive
guaranteed foundry capacity for sub-micron wafers. The Company invested
$3,255,000 in fiscal 1995 and $4,057,000 in fiscal 1994 and is expected to
invest approximately $3,400,000 in fiscal 1996. The Company accounts for this
investment by the cost method.
NOTE 6. NOTES PAYABLE
In September 1995, the Company finalized an agreement with a bank to
provide a $5,000,000 revolving line of credit facility to finance short-term
working capital requirements and a $6,000,000 non-revolving-to-term loan for
equipment purchases to support expansion of its operations in Singapore. Both
of these facilities are unsecured and bear interest at the Company's choice of
the bank's prime rate or LIBOR. The revolving line of credit expires on
September 30, 1997. The non-revolving-to-term loan expires on September 30,
1996, at which time all unpaid principal under this loan shall be converted to a
five year, fully amortizing term loan. There were no borrowings under these
facilities at September 30, 1995.
18
<PAGE>
BROOKTREE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
During fiscal 1994, in connection with its operations in Singapore, the
Company entered into agreements with a bank for a short-term working capital
line of credit for approximately $4,800,000 and a term loan for the purchase of
equipment for approximately $6,400,000. The working capital line of credit is
secured by accounts receivable and bears interest at market rates. The term
loan is secured by the equipment purchased and bears interest at the bank's cost
of funds plus 1.25%. The effective interest rate for borrowings made against
both facilities in fiscal 1995 was 8.40%. The term loan will be available until
December 31, 1995 and is to be repaid in four years with payments commencing in
March 1996. The balance outstanding under the working capital line of credit
and term loan at September 30, 1995 was $7,874,000.
Each of the financial agreements noted above contain certain restrictive
covenants.
NOTE 7. INCOME TAXES
Effective fiscal 1994, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes", the liability
method. As permitted by Statement No. 109, the Company elected not to restate
the financial statements of any prior years which reflect the application of
Accounting Principles Board Opinion No. 11, the deferred method. The effect of
the change on income taxes for the year ended September 30, 1994 and the
cumulative effect of the change were not material.
Income before income taxes consists of:
<TABLE>
<CAPTION>
Year Ended September 30,
- ------------------------------------------------------------------------------------------------
(IN THOUSANDS) 1995 1994 1993
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $ 26,609 $ 3,676 $ 44,827
Foreign (6,697) (919) 522
- ------------------------------------------------------------------------------------------------
Total $ 19,912 $ 2,757 $ 45,349
- ------------------------------------------------------------------------------------------------
The components of the provision for income taxes are as follows:
Year Ended September 30,
- ------------------------------------------------------------------------------------------------
(IN THOUSANDS) 1995 1994 1993
- ------------------------------------------------------------------------------------------------
Current tax provision:
Federal $ 9,976 $ (10) $ 14,624
State 1,101 261 3,590
Foreign 20 35 134
Deferred (prepaid) tax provision:
Federal (3,166) 788 (1,284)
State (563) (344) (86)
- ------------------------------------------------------------------------------------------------
Provision for income taxes $ 7,368 $ 730 $ 16,978
- ------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
BROOKTREE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The reconciliation of the income tax provision computed at the Federal
statutory rate in effect for each of the years presented below to the recorded
provision for income taxes is as follows:
<TABLE>
<CAPTION>
Year Ended September 30,
- ------------------------------------------------------------------------------------------------
(IN THOUSANDS) 1995 1994 1993
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Provision at statutory rate $ 6,969 $ 937 $ 15,759
State income taxes, net of
Federal benefit 358 (55) 2,286
Benefit of foreign sales corporation (327) - (351)
Tax credits (458) (202) (344)
Tax exempt interest (206) (310) (231)
Losses of foreign subsidiaries
(no benefit available) 791 348 -
Other 241 12 (141)
- ------------------------------------------------------------------------------------------------
Provision for income taxes $ 7,368 $ 730 $ 16,978
- ------------------------------------------------------------------------------------------------
</TABLE>
The Company has derived tax deductions measured by the excess of the market
value over the option price at the date certain employee stock options were
exercised. The related tax benefit of these deductions, $886,000, $171,000 and
$1,293,000 for fiscal years 1995, 1994 and 1993, respectively, is credited to
common stock when realized.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
September 30,
-------------------------------------------------------------------------------------------
(IN THOUSANDS) 1995 1994
-------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Amortization $ 1,807 $ 1,270
Inventory reserves 1,805 1,988
Undistributed earnings of foreign subsidiaries 1,781 -
Non-deductible accrued expenses 1,398 614
Deferred income on sales to distributors 1,356 778
Tax credits 396 371
Other 266 318
-------------------------------------------------------------------------------------------
Total deferred tax assets 8,809 5,339
-------------------------------------------------------------------------------------------
Deferred tax liabilities:
Depreciation (814) (1,239)
Unrealized gain on available-for-sale-gain securities (2,451) -
Other - (22)
-------------------------------------------------------------------------------------------
Total deferred tax liabilities (3,265) (1,261)
-------------------------------------------------------------------------------------------
Net deferred tax assets $ 5,544 $ 4,078
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
BROOKTREE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 8. SHAREHOLDERS' EQUITY
COMMON STOCK
During the year ended September 30, 1992, the Company's Board of Directors
authorized the repurchase of up to 300,000 shares of the Company's common stock
from time to time in the open market or in negotiated transactions at prevailing
prices. During fiscal 1994, an additional 100,000 shares were authorized to be
repurchased. As of September 30, 1995, the Company had repurchased a total of
400,000 shares of its common stock at an aggregate cost of $3,619,000.
The Company is authorized to issue common shares to directors and certain
employees under various stock option plans. Incentive stock options are granted
at prices not less than the fair market value at the date of grant, as
determined by the market price for the Company's common stock, and become
exercisable in various increments over five years. Options are terminated, if
not exercised, ten years from the date of grant under the various plans. Non-
qualified stock options are also granted from time to time to certain employees
and directors at prices less than fair market value with various vesting
provisions.
Stock option transactions during fiscal years 1993,1994 and 1995 are
summarized as follows:
<TABLE>
<CAPTION>
Options Outstanding
-----------------------------------------------
Options Available Number Price
(IN THOUSANDS EXCEPT PER SHARE DATA) For Grant of Shares Per Share
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at September 30, 1992 443 2,201 $ 6.00 - $ 20.50
Additional shares reserved 700
Granted (698) 698 $ 8.63 - $ 17.50
Exercised (448) $ 6.00 - $ 15.13
Cancelled 189 (189) $ 8.63 - $ 20.50
- -------------------------------------------------------------------------------------------------------------
Balance at September 30, 1993 634 2,262 $ 6.00 - $ 19.75
Additional shares reserved 700
Granted (2,043) 2,043 $ 6.00 - $ 18.25
Exercised (90) $ 6.00 - $ 12.13
Cancelled 1,536 (1,536) $ 6.00 - $ 19.25
- -------------------------------------------------------------------------------------------------------------
Balance at September 30, 1994 827 2,679 $ 6.00 - $ 19.75
Additional shares reserved 500
Granted (934) 934 $ 6.75 - $ 20.75
Exercised (238) $ 6.00 - $ 15.50
Cancelled 209 (213) $ 6.00 - $ 16.75
- -------------------------------------------------------------------------------------------------------------
Balance at September 30, 1995 602 3,162 $ 6.00 - $ 20.75
- -------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
BROOKTREE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
In April 1994, the Board of Directors authorized a plan for certain option
holders, excluding officers and directors of the Company, whereby each holder
could have exchanged all of his or her current vested and unvested options on a
one-for-one basis for new options priced at the market value as of April 11,
1994. An aggregate of 1,071,446 options at an average exercise price of $11.41
were exchanged for options with an exercise price of $6.88. The vesting of
these replacement options started on the new grant date. All of the replacement
options are included in grants and cancellations in the above summary of stock
option activity.
At September 30, 1995, options for 1,306,665 shares were exercisable at
prices ranging from $6.00 to $19.75 at an aggregate exercise price of
$11,271,000.
EMPLOYEE STOCK PURCHASE PLAN
The Company implemented the Brooktree Corporation 1992 Employee Stock
Purchase Plan (the "Plan") for eligible employees to purchase shares of common
stock at 85% of the lower of the fair market value on the first or the last day
of each six-month offering period. The Plan provides for up to 450,000 shares
of common stock to be purchased by participating employees through payroll
deductions. An employee's purchase is limited to the lesser of 20% of their
compensation or $12,500 during any six-month offering period. At September 30,
1995, approximately 450,000 shares have been issued under the Plan at an
aggregate purchase price of $3,271,000.
PREFERRED STOCK
The Company is authorized to issue up to 15,000,000 shares of no par value
preferred stock; rights as to dividends, redemptions, liquidation and
conversion, if any, are determined upon issuance. At September 30, 1995, 1994
and 1993, there were no shares of preferred stock outstanding.
NOTE 9. BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION
The Company operates in one principal industry segment - the design,
development and marketing of proprietary high-performance digital and mixed-
signal integrated circuits for computer graphics, imaging, multimedia,
communications and automated test equipment applications. No customer accounted
for 10% or more of fiscal 1995 and 1993 revenues. One customer accounted for
10% of fiscal 1994 revenues. Consolidated revenues generated by sales to
customers outside the United States, primarily in Europe and Asia, accounted for
52%, 48% and 37% of revenues for fiscal years 1995, 1994 and 1993, respectively.
The Company's operations include a test facility in Singapore and sales
offices in Europe and Asia. Transfers between geographic areas are recorded at
amounts generally above cost and in accordance with the rules and regulations of
the respective governing tax authorities. Operating results exclude the effects
of transfers resulting from intercompany cost sharing arrangements.
22
<PAGE>
BROOKTREE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The table below summarizes the operations by entities located in each noted
geographic area for the past three years:
<TABLE>
<CAPTION>
United
(IN THOUSANDS) States Europe Asia Eliminations Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended September 30, 1995
Sales to unaffiliated customers $ 118,870 $ 2,574 $ 16,218 $ - $ 137,662
Transfers between geographic areas 2,798 - 5,569 (8,367) -
- -----------------------------------------------------------------------------------------------------------------------------
Revenues, net 121,668 2,574 21,787 (8,367) 137,662
- -----------------------------------------------------------------------------------------------------------------------------
Operating income (loss) 4,473 (77) 3,836 (58) 8,174
- -----------------------------------------------------------------------------------------------------------------------------
Identifiable assets $ 176,628 $ 896 $ 31,380 $ (20,862) $ 188,042
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Year ended September 30, 1994
Sales to unaffiliated customers $ 106,072 $ 2,892 $ - $ - $ 108,964
Transfers between geographic areas 2,205 - - (2,205) -
- -----------------------------------------------------------------------------------------------------------------------------
Revenues, net 108,277 2,892 - (2,205) 108,964
- -----------------------------------------------------------------------------------------------------------------------------
Operating income (loss) (626) 1,307 (1,148) (1,225) (1,692)
- -----------------------------------------------------------------------------------------------------------------------------
Identifiable assets $ 141,450 $ 768 $ 6,827 $ (6,632) $ 142,413
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Year ended September 30, 1993
Sales to unaffiliated customers $ 108,671 $ 2,671 $ - $ - $ 111,342
Transfers between geographic areas 1,921 - - (1,921) -
- -----------------------------------------------------------------------------------------------------------------------------
Revenues, net 110,592 2,671 - (1,921) 111,342
- -----------------------------------------------------------------------------------------------------------------------------
Operating income (loss) 16,784 1,524 (319) (1,044) 16,945
- -----------------------------------------------------------------------------------------------------------------------------
Identifiable assets $ 142,998 $ 759 $ 144 $ (60) $ 143,841
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
During fiscal 1995, the Company's operations in Europe sustained minor
operating losses due primarily to higher sales related expenses incurred in
connection with relocating the Company's United Kingdom (U.K.) subsidiary to a
larger office and establishing a greater presence in the U.K.
During fiscal 1994, the Company's United States (U.S.) and Asia operations
sustained losses primarily due to a restructuring charge in the U.S. and costs
associated with the start-up of its Singapore test facility which had not yet
generated revenues.
During fiscal 1993, the Company's Asia operations sustained losses due to
the wind down of the Company's subsidiary in Japan.
NOTE 10. DEBT AND EQUITY SECURITIES
Effective fiscal 1995, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities". Statement No. 115 requires companies to record certain debt
and equity security investments at market value. The Company has classified its
minority equity investment in the telecommunications company discussed in Note
4, its short-term investment portfolio and certain cash equivalent investments
as available-for-sale securities. Available-for-sale securities are stated at
fair value, with unrealized gains and losses, net of deferred taxes, reported as
a separate component of shareholders' equity.
23
<PAGE>
BROOKTREE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The following is a summary of available-for-sale securities at September
30, 1995:
<TABLE>
<CAPTION>
Gross Gross Estimated
Unrealized Unrealized Fair
(IN THOUSANDS) Cost Gains Losses Value
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 13,511 $ - $ (2) $ 13,509
Short-term investments by
contractual maturities:
Due in one year or less 27,747 - (76) 27,671
Due after one year through three years 1,498 3 - 1,501
Due after three years 847 - (70) 777
- --------------------------------------------------------------------------------------------------------------
Total short-term investments 30,092 3 (146) 29,949
Equity investment 325 6,770 - 7,095
- --------------------------------------------------------------------------------------------------------------
$ 43,928 $ 6,773 $ ( 148) $ 50,553
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Eventual maturities for the Company's debt investments may differ from
contractual maturities because of the possibility that the Company may dispose
of these investments in the open market at its discretion.
NOTE 11. RELATED PARTY TRANSACTIONS
The Company paid $553,000, $467,000 and $506,000 in fiscal years 1995, 1994
and 1993, respectively, for legal services, including expenses and fees to
professional associates, to a law firm of which a founder and director of the
Company is a shareholder and the president. These amounts were for services in
support of patent litigation and for filing and maintaining patents.
The Company sells products to a telecommunications company in which the
Company holds a minority interest investment (see Note 4). Revenues from
product sales amounted to $2,847,000, $2,793,000 and $3,644,000 in fiscal years
1995, 1994 and 1993, respectively.
NOTE 12. EMPLOYEE BENEFIT PLANS
The Company has implemented cash incentive plans for all employees based
upon attaining targets for operating profits for the year, subject to annual
revisions by the Board of Directors. Provisions charged to expense under these
plans totaled $1,435,000 and $2,247,000 in fiscal years 1995 and 1993,
respectively. There were no amounts earned and provided under these plans in
fiscal 1994.
The Company also has a 401(k) plan that allows participating employees to
contribute from 1% to 15% of their salary, subject to annual limits. The Board
may, at it sole discretion, approve Company contributions; the Company's
contributions to the plan were $672,000, $529,000 and $839,000 in fiscal years
1995, 1994 and 1993, respectively.
NOTE 13. LEGAL PROCEEDINGS
Subsequent to the end of fiscal 1995, the Company filed a lawsuit against a
competitor for infringement of a patent related to its new multimedia
technology. The suit was filed in the United States District Court for the
Southern District of California. The Company is seeking a preliminary
injunction to prevent this competitor from continuing to sell the products which
the Company alleges use its patented technology.
24
<PAGE>
BROOKTREE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
In June 1994, two civil class action complaints were filed against the
Company, certain of its current and former directors and officers, and its
largest shareholder in the United States District Court for the Southern
District of California. The shareholder defendant was subsequently dismissed
without prejudice.
The complaints alleged that the defendants misrepresented or failed to
disclose material facts about the Company's operations and financial results,
which plaintiffs asserted artificially inflated the market price of the
Company's common stock. In March 1995, the Company entered into an agreement to
settle both complaints for approximately $5,500,000, subject to the finalization
of formal settlement documents. The settlement was recorded in fiscal 1995, net
of approximately $2,500,000 paid by the insurance company that provides the
Company's directors' and officers' liability insurance. During fiscal 1995, the
settlement amount was paid into an escrow account. The court approved the
settlement in October 1995.
In April 1993, the Company entered into an agreement with Advanced Micro
Devices, Inc. ("AMD") under which the two companies settled all outstanding
litigation previously filed against each company by the other company. The
settlement agreement provided for the payment of $26,759,000 in cash to the
Company from the original damage award for patent and mask work infringement and
the dismissal of all other pending litigation between the Company and AMD. The
agreement also provided for the transfer of certain technology rights from AMD
to the Company and for AMD to supply the Company with color palette devices for
a specified period of time.
In April 1993, the Company entered into a settlement agreement with TRW LSI
Products, Inc. ("TRW") for the resolution of its lawsuit against TRW for
infringement of two of the Company's patents previously held to be valid and to
be infringed by AMD. The Company and TRW agreed to dismiss the lawsuit on terms
which Brooktree considered favorable.
The Company recorded both settlements, including associated expenses, in
fiscal 1993 and recognized an after-tax gain of $15,258,000 ($0.93 per share).
25
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND SHAREHOLDERS
BROOKTREE CORPORATION
We have audited the accompanying consolidated balance sheets of Brooktree
Corporation as of September 30, 1995 and 1994, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the three
years in the period ended September 30, 1995. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Brooktree
Corporation at September 30, 1995 and 1994, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
September 30, 1995, in conformity with generally accepted accounting principles.
SAN DIEGO, CALIFORNIA /s/ ERNST & YOUNG LLP
OCTOBER 20, 1995, EXCEPT FOR THE FOURTH PARAGRAPH OF NOTE 5,
AS TO WHICH THE DATE IS OCTOBER 31, 1995
26
<PAGE>
BROOKTREE CORPORATION
QUARTERLY DATA
(Unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
(IN THOUSANDS, EXCEPT PER SHARE DATA) Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 31,624 $ 31,372 $ 32,213 $ 42,453
Gross margin 14,567 16,093 16,107 19,573
Operating income 1,203 2,254 1,318 3,399
Gain on sale of investment (1) 1,768 5,385 2,860 2,898
Net income $ 2,069 $ 3,250 (2) $ 2,970 $ 4,255
- --------------------------------------------------------------------------------------------------------------
Earnings per share:
Primary $ 0.13 $ 0.19 $ 0.16 $ 0.23
Fully Diluted $ 0.13 $ 0.18 $ 0.16 $ 0.23
- --------------------------------------------------------------------------------------------------------------
Weighted average common and
common equivalent shares:
Primary 16,245 17,064 18,038 18,326
Fully Diluted 16,248 17,695 18,118 18,381
- --------------------------------------------------------------------------------------------------------------
Year Ended September 30, 1994
- --------------------------------------------------------------------------------------------------------------
Revenues $ 27,699 $ 24,924 $ 27,574 $ 28,767
Gross margin 14,160 11,377 12,258 12,365
Operating income (loss) 2,292 (3,695) (3) 280 (569)
Gain on sale of investment (1) - 970 1,094 1,061
Net income (loss) $ 1,636 $ (1,506) $ 1,179 $ 718
- --------------------------------------------------------------------------------------------------------------
Earnings (loss) per share:
Primary $ 0.10 $ (0.09) $ 0.07 $ 0.04
Fully Diluted $ 0.10 $ (0.09) $ 0.07 $ 0.04
- --------------------------------------------------------------------------------------------------------------
Weighted average common and
common equivalent shares:
Primary 16,768 16,319 16,198 16,263
Fully Diluted 16,768 16,319 16,267 16,263
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) REPRESENTS A GAIN FROM THE SALE OF A PORTION OF A MINORITY INVESTMENT IN A
TELECOMMUNICATIONS COMPANY.
(2) INCLUDES A CHARGE FOR LITIGATION SETTLEMENT OF $1,952 ($0.11 PER FULLY
DILUTED SHARE).
(3) INCLUDES A CHARGE FOR RESTRUCTURING OF $2,815.
27
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
(3) EXHIBITS - Index of Exhibits
Exhibit
Number Description and Location
- ------- ----------------------------------------------------------
23.1 Consent of Ernst & Young LLP (Included herein on page 30).
27 Financial Data Schedule.
28
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant, Brooktree Corporation, has duly caused
this report to be signed on its behalf by the undersigned, thereto duly
authorized, on the 15th of August 1996.
BROOKTREE CORPORATION
By: JAMES A. BIXBY
-----------------
James A. Bixby
Chairman of the Board,
President and Chief Executive
Officer
29
<PAGE>
Exhibit 23.1
Consent of Ernst & Young LLP, Independent Auditor
We consent to the use of our report dated October 20, 1995, except for the
fourth paragraph of Note 5, as to which the date is October 31, 1995, included
in the Annual Report on Form 10-K of Brooktree Corporation for the year ended
September 30, 1995, with respect to the consolidated financial statements, as
amended, included in this Form 10-K/A Amendment No.1.
We also consent to the incorporation by reference in the Registration Statements
(Form S-8 and Form S-3 No. 33-42744) pertaining to the 1985 Stock Option Plan
and the 1988 Stock Option Plan, (Form S-8 No. 33-82686) pertaining to the 1991
Non-Employee Director Stock Option Plan, (Form S-8 Nos. 33-78306 and 33-32528)
pertaining to the 1992 Employee Stock Purchase Plan and (Form S-8 Nos. 33-90332
and 33-32528) pertaining to the 1992 Stock Plan and in the related Prospectuses
of our report dated October 20, 1995, except for the fourth paragraph of Note 5
as to which the date is October 31, 1995, with respect to the consolidated
financial statements, as amended, of Brooktree Corporation, included in this
Form 10-K/A Amendment No.1 for the year ended September 30,1995.
/s/ Ernst & Young LLP
San Diego, California
August 15,1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BROOKTREE
CORPORATION'S AMENDED ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR ENDED SEPTEMBER
30, 1995.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<CASH> 13,509
<SECURITIES> 29,949
<RECEIVABLES> 23,757
<ALLOWANCES> 0
<INVENTORY> 20,805
<CURRENT-ASSETS> 102,236
<PP&E> 49,137
<DEPRECIATION> 0
<TOTAL-ASSETS> 188,042
<CURRENT-LIABILITIES> 35,198
<BONDS> 0
0
0
<COMMON> 74,249
<OTHER-SE> 69,725
<TOTAL-LIABILITY-AND-EQUITY> 188,042
<SALES> 137,662
<TOTAL-REVENUES> 137,622
<CGS> 71,322
<TOTAL-COSTS> 71,322
<OTHER-EXPENSES> 58,166
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,877)
<INCOME-PRETAX> 19,912
<INCOME-TAX> 7,368
<INCOME-CONTINUING> 12,544
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,544
<EPS-PRIMARY> 0.72
<EPS-DILUTED> 0.69
</TABLE>
