<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
- -- EXCHANGE ACT OF 1934
For quarterly period ended March 31, 1996
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OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-15012
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CHIPS AND TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 7-0047943
- -------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2950 Zanker Road, San Jose, California 95134
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(Address of principal executive offices)(Zip code)
Registrant's telephone number, including area code: (408)434-0600
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Former name, former address and former fiscal year.
If changed since last report.
Indicate by check 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
--- ---
At March 31, 1996, the registrant had 20,471,752 shares of common
stock outstanding.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
PART I. FINANCIAL INFORMATION PAGE
Item 1. Unaudited Condensed Consolidated Financial Statements 3
Notes to Unaudited Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of 8
Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings Not applicable
Item 2. Changes in Securities Not applicable
Item 3. Defaults upon Senior Securities Not applicable
Item 4. Submission of Matters to a Vote of Security Holders Not applicable
Item 5. Other Information Not applicable
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHIPS AND TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Dollars in thousands except share amounts) MARCH 31, 1996 JUNE 30, 1995
-------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $23,853 $22,385
Short-term investments 27,719 23,644
Accounts receivable, net of allowance for
doubtful accounts of $1,197 and $1,032, respectively 9,469 14,696
Inventory 10,774 11,667
Prepaid and other assets 902 2,549
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Total current assets 72,717 74,941
Property and equipment, net 11,041 10,550
Other assets 14,220 276
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Total assets $97,978 $85,767
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,212 $ 8,072
Current portion of capitalized lease obligations 1,480 689
Other accrued liabilities 8,220 9,585
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Total current liabilities 18,912 18,346
Long-term capitalized lease obligations, less current portion 1,307 849
Notes payable -- 876
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Total liabilities 20,219 20,071
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Stockholders' equity:
Common stock, 20,472,000 and 19,744,000 shares issued
and outstanding 205 197
Capital in excess of par value 77,023 73,016
Notes receivable from officer (79) (107)
Unrealized gain on investments 4,466 16,267
Retained deficit (3,856) 23,677)
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Total stockholders' equity 77,759 65,696
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Total liabilities and stockholders' equity $97,978 $85,767
======= =======
</TABLE>
See notes to Unaudited Condensed Consolidated Financial Statements.
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CHIPS AND TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
(In thousands except per share amounts) 1996 1995 1996 1995
--------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Net sales $36,514 $27,231 $111,992 $70,881
Cost of sales 22,057 16,866 68,216 44,019
------- ------- -------- -------
Gross margin 14,457 10,365 43,776 26,862
Operating expenses
Research and development 4,822 3,216 14,538 9,510
Selling, general and administrative 5,589 4,866 15,707 12,798
Restructuring recovery -- -- -- (1,429)
------- ------- -------- -------
Total operating expenses 10,411 8,082 30,245 20,879
Income from operations 4,046 2,283 13,531 5,983
Interest income and other, net 6,827 60 8,492 304
------- ------- -------- -------
Income before taxes 10,873 2,343 22,023 6,287
Provision for income taxes 1,087 234 2,202 551
------- ------- -------- -------
Net Income $ 9,786 $ 2,109 $ 19,821 $ 5,736
======= ======= ======== =======
Net income per share $ 0.45 $ 0.11 $ 0.91 $ 0.31
======= ======= ======== =======
Shares used in per share calculation 21,671 20,290 21,905 18,719
======= ======= ======== =======
</TABLE>
See notes to Unaudited Condensed Consolidated Financial Statements
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CHIPS AND TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
(In thousands) 1995 1994
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $19,821 $ 5,736
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization 1,955 2,002
Gain on sale of land (949) --
Gain on sale of stock investments (6,204) --
Changes in operating assets and liabilities:
Accounts receivable 5,227 (2,609)
Inventory 893 (4,499)
Accounts payable 1,140 1,389
Other assets and liabilities (1,596) 1,427
Accrued restructuring costs -- (498)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 20,287 2,948
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,446) (1,991)
Sale (purchase) of short-term investments (9,672) 155
Deposit for capacity agreement 13,880) --
Proceeds from sale of land and other 2,759 --
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NET CASH USED IN INVESTING ACTIVITIES 23,239) (1,836)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to capital lease obligations, net of principle payment 1,249 1,043
Repayment of note payable principle (876) (37)
Proceeds from issuance of stock 4,015 2,627
Repayments (issuance) of officer's loan 32 (100)
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NET CASH PROVIDED BY FINANCING ACTIVITIES 4,420 3,533
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Net increase in cash and cash equivalents 1,468 4,645
Cash and cash equivalents at beginning of period 22,385 17,372
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $23,853 $22,017
======= =======
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 178 $ 528
Income taxes 431 181
Additions under capital lease obligations 2,099 1,806
</TABLE>
See notes to Unaudited Condensed Consolidated Financial Statements
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The unaudited Condensed Consolidated Financial Statements have been prepared by
the Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, the financial statements reflect all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair statement of the financial position, operating results and cash flows for
those periods presented. These condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto for the year ended June 30, 1995, included in the Company's 1995
Annual Report on Form 10-K.
The results of operations for interim periods are not necessarily indicative of
the results that may be expected for the entire year.
NOTE 2. SHORT-TERM INVESTMENTS
The Company classified all investments on March 31, 1996 as available-for-sale.
The fair market value and the amortized cost of the securities at March 31, 1996
are presented in the table below. The investments are adjusted to fair market
value as of the balance sheet date and any unrealized gains are recorded as a
separate component of stockholders' equity. In February 1996, the Company's
Nexgen stock holding was converted into 553,333 shares of Advanced Micro
Devices, Inc. (`AMD') common stock resulting from the merger of the two
companies. Subsequently, the Company sold 299,000 shares of such stock and
realized a gain of $6.2 million. The unrealized gain from investments on March
31, 1996 decreased by $11.8 million compared to $16.3 million on June 30, 1995
mainly due to a decline in the fair market value of the AMD stock and the sale
of the Company's AMD shares.
<TABLE>
<CAPTION>
Unrealized Fair
(In thousands) Amortized Holding Market
Cost Gain Value
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AMD Common Stock $ -- $4,419 $ 4,419
U.S. Government and Corporation Obligations 23,253 47 23,300
- --------------------------------------------------------------------------------------------------------------
Total $23,253 $4,466 $27,719
==============================================================================================================
</TABLE>
NOTE 3. INVENTORY
Inventory consists of the following:
(In thousands)
<TABLE>
<CAPTION>
March 31, 1996 June 30, 1995
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<S> <C> <C>
Work-in-process $ 4,556 $ 5,471
Finished goods 6,218 6,196
--------------- --------------
$10,774 $11,667
=============== ==============
</TABLE>
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NOTE 4. INCOME TAXES
The Company provides for income taxes during interim reporting periods based
upon an estimate of the annual effective tax rate at approximately 10%. This
rate is substantially lower than the statutory income tax rate, reflecting the
utilization of the Company's net operating loss carryforwards. The estimated tax
rate reflects alternative minimum taxes and other state tax obligations.
NOTE 5. NET INCOME PER SHARE
Net income per share is based on the weighted average common shares outstanding
and dilutive common equivalent shares (using the treasury stock method). Common
equivalent shares include stock options and warrants.
NOTE 6. LONG-TERM CAPACITY AGREEMENTS
During the second quarter of fiscal 1996, the Company entered into wafer
capacity agreements with Taiwan Semiconductor Manufacturing Company (`TSMC') and
Chartered Semiconductor Manufacturing PTE LTD (`CSM'). Both agreements were
entered into for the purpose of securing additional guaranteed wafer supplies
through the year 2000 and both require the payment of cash deposits and the
purchase by the Company of certain quantities of wafers. Under the agreement
with TSMC, the Company will deposit $23.5 million with TSMC during calendar year
1996. The deposit will be applied against the price of wafers purchased under
the agreement, and is not refundable except under certain circumstances. The
agreement with CSM requires the Company to make deposits totaling $20 million
over the next two years. The deposits will be refunded to the Company at the end
of the agreement term subject to certain conditions, including purchase by the
Company of the required quantity of wafers. During the second and third quarters
of fiscal 1996, the Company made $13.9 million of deposits under these
agreements which were recorded as part of other assets on March 31, 1996.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
Net sales for the third quarter and the first three quarters of fiscal 1996
increased substantially over the same periods in the prior year. The increase is
mainly due to higher unit sales of portable graphics products which continue to
represent the substantial majority of the Company's sales. Gross margins for the
third quarter and the first three quarters of fiscal 1996 improved over the same
periods in the previous year as the Company's mix of products shifted towards
higher value and higher margin portable graphics accelerators. Operating
expenses during fiscal 1996 have grown compared to the corresponding period of
fiscal 1995, reflecting the higher level of sales and additional investments in
new product development. Operating income in absolute dollars and as a
percentage of sales has increased in fiscal 1996 as compared to the prior year.
NET SALES
Net sales for the third quarter of fiscal 1996 were $36.5 million, an increase
of $9.3 million from $27.2 million reported for the same quarter in fiscal 1995.
Net sales for the first three quarters of fiscal 1996 were $112.0 million, an
increase of $41.1 million from $70.9 million for the same period of fiscal 1995.
The increase in net sales was mainly due to significant increases in unit
shipments of portable graphics accelerators. Revenue from portable graphics
accelerator products comprised 82% of the Company's net sales in the third
quarter of fiscal 1996, compared to 68% of net sales in the same quarter of
fiscal 1995.
GROSS MARGIN
The gross margin percentage was 39.6% in the third quarter of fiscal 1996,
compared to 38.1% for the same quarter of fiscal 1995. The gross margin
percentage was 39.1% for the first three quarters of fiscal 1996, compared to
37.9% for the same period of fiscal 1995. The improvement in gross margin
percentage was primarily due to an improved mix of products including higher
margin portable graphics accelerators.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses increased $1.6 million from the third quarter
of fiscal 1995 to $4.8 million in the third quarter of fiscal 1996. Research and
development expenses were 13% of net sales in the third quarter of fiscal 1996,
compared to 12% in the third quarter of fiscal 1995. Research and development
expenses were 13% of net sales in the first three quarters of both fiscal 1996
and fiscal 1995. Research and development expenses increased mainly due to
higher engineering staffing levels and product prototyping costs. The Company
expects research and development expenditures to increase in absolute dollars as
it invests in new hardware and software product development.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased $0.7 million from the
third quarter of fiscal 1995 to $5.6 million in the third quarter of fiscal
1996. Selling, general and administrative expenses were 15% of net sales in the
third quarter of fiscal 1996, compared to 18% in the third quarter of fiscal
1995. For the first three quarters of fiscal 1996, selling, general and
administrative expenses as a percentage of net sales were 14% as compared to 18%
in the same period of fiscal 1995. Although expenses increased in absolute
dollars, selling, general and administrative expenses as a percentage of sales
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declined as sales grew at a faster rate than spending. The Company expects
selling, general and administrative expenses will remain flat as a percentage
of net sales for the remainder of this fiscal year.
INTEREST INCOME AND OTHER, NET
Interest and other income was $6.8 million in the third quarter of fiscal 1996,
as compared to $60,000 during the same period of fiscal 1995. Interest and other
income for the first three quarters of fiscal 1996 was $8.5 million, as compared
to $0.3 million in the same period of fiscal 1995. Other income in the first
three quarters of fiscal 1996 included a $0.9 million gain related to the sale
of land in the second fiscal quarter and a $6.2 million gain from the sale of
AMD stock in the third fiscal quarter (see Note 2 - Cash Equivalents and
Short-term investments).
INCOME TAXES
The Company provides for income taxes during interim reporting periods based
upon an estimate of the annual effective tax rate at approximately 10%. This
rate is substantially lower than the statutory income tax rate, reflecting the
utilization of the Company's net operating loss carryforwards. The estimated tax
rate reflects alternative minimum taxes and other state tax obligations.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and short-term investments were $51.6 million on March
31, 1996, an increase of $5.6 million from $46.0 million on June 30, 1995. This
increase was primarily attributable to cash generated from operating activities
and proceeds from the sale of land in December, 1995. The increase was partially
offset by usage of cash for deposits to two foundries to obtain commitments for
the supply of additional wafers and by repayment of a note related to a 1993
building lease settlement. Short-term investments as of March 31, 1996 included
$4.4 million of AMD Common Stock which was converted from Nexgen common stock as
a result of the merger of the two companies. The Company sold 299,000 shares of
such stock for $6.2 million during the third quarter of fiscal 1996. The Company
plans to sell the remaining stock at appropriate valuations. The market value of
AMD stock has declined as compared to June 30, 1995, which contributed to the
decrease in short-term investments.
During the first three quarters of fiscal 1996, other assets increased $13.9
million from $0.3 million on June 30, 1995. The increase was primarily
attributable to the payment of cash deposits relating to the foundry capacity
agreements with TSMC and CSM which were entered into during the second quarter
of fiscal 1996. These agreements require deposits totaling $23.5 million and
$20.0 million, respectively, to be paid by the Company. During the past two
quarters, the Company has made deposits totaling $13.9 million under these
agreements. The Company is required to make another two deposits in an
aggregated amount of $17.6 million during the second half of calendar year 1996.
The deposit under the agreement with TSMC will be fully paid by the end of
calendar year 1996 and the remaining balance of $12.0 million under the
agreement with CSM will be made in the first quarters of calendar years 1997 and
1998, respectively. The Company expects to finance the remaining deposits from
existing cash balances and funds generated from operations.
The Company's capital requirements consist primarily of financing working
capital items and funding operational activities. The Company has agreements
with three banking institutions for a combined total of $21.0 million in
unsecured lines of credit. The lines of credit will expire at various times from
August 1996 through August 1997. There was no borrowing against these line of
credit agreements as of March 31, 1996. These agreements contain certain
covenants related to financial performance and condition, and the ability to
borrow under such lines is subject to compliance with such covenants. The
Company expects that its existing cash balances, bank lines of credit and funds
generated from operations will be sufficient to meet the Company's capital and
operating requirements for the remainder of this fiscal year.
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FACTORS AFFECTING FUTURE OPERATING RESULTS
This report includes a number of forward-looking statements which reflect the
Company's current views with respect to future events and financial performance.
These forward-looking statements are subject to certain risks and uncertainties,
including those discussed below or in the Company's report on Form 10-K for the
fiscal year ended June 30, 1995, that could cause actual results to differ
materially from historical results or those anticipated. In this report, the
words "expect," "anticipate" and similar expressions identify forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof.
The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
The Company expects its revenues will increase modestly and gross margin
percentages will remain substantially the same in the fourth quarter of fiscal
1996 as compared to revenue and gross margin percentages in the most recent
quarter. The Company's quarterly revenues, gross margin and other operating
results have been and will continue to be affected by a wide variety of factors
that could have a material adverse effect during any particular period,
including the level of orders that are received and can be shipped in a quarter,
the rescheduling or cancellation of orders by its customers, gain or loss of any
strategic relationships with customers, availability and cost of foundry
capacity and raw materials, the Company's ability to predict product demand and
manage its inventory levels, fluctuations in manufacturing yields, the timing of
qualification of new foundries or foundry production lines, new product
introductions by the Company's competitors, the Company's ability and timing in
introducing new products and technologies, market acceptance of products of both
the Company and its customers, supply constraints and price or other
fluctuations for other components incorporated into its customers' products,
such as portable display screens and memory devices, competitive pressures on
selling prices, changes in product or customer mix, and the level of
expenditures for research and development and for selling, general and
administrative functions.
The Company does not own or operate a wafer fabrication facility, and all of its
semiconductor device requirements are supplied by outside foundries. In
addition, all of the Company's semiconductor products are currently assembled
and tested by third party vendors, primarily in Asia. The Company's reliance on
subcontractors to manufacture, assemble and test its products involves
significant risks, including reduced control over delivery schedules, quality
assurance, manufacturing yields and cost, as well as potential misappropriation
of the Company's intellectual property. Delays in delivery of the Company's
products, problems with quality or yields, cost increases and other factors
beyond the Company's control could result in the loss of customers, reductions
in the Company's revenues or other material adverse effects on the Company's
business, financial condition and operating results.
In connection with the manufacture of its products, the Company expects to
obtain access to and qualify new foundries or new production lines at
established foundries that employ advance manufacturing and process
technologies. Such technologies are currently available from a limited number of
foundries. The Company expects that the majority of its products will utilize
increasingly advanced process geometries in order to achieve high performance
and lower production costs. The Company is currently qualifying a new foundry
supplier and is in the process of qualifying certain of its existing products at
additional foundry suppliers and on new semiconductor process technologies. The
qualification process can take six months or longer. The Company has in the past
experienced increased costs and delays in connection with the qualification of
new foundries or new production lines or processes at established foundries.
Failure to qualify and obtain adequate access to advanced process technologies
to supply products on a timely basis would delay product introduction and
delivery to the Company's customers. Delays, as well as cost increases or
quality and yield problems resulting from the qualification of new foundries or
new production lines or processes at established foundries, could have a
material adverse effect on the Company's business, financial condition and
results of operations.
A number of factors have recently resulted in reduced average order lead times
from customers. These factors include customers' perception that product is more
readily available to them because foundry capacity is more readily available to
semiconductor suppliers than it was in the recent past and customers' reluctance
to place long range orders due to the uncertain growth rate in the personal
computer market. Some customers have also built up larger than usual inventory
levels. As a result, the Company is currently receiving orders for delivery of
product primarily during the next thirty (30) to ninety (90) days, whereas
during the last several quarters, a higher proportion represented orders for
delivery as many as one hundred eighty (180) days into the future. This
shortened lead time makes forecasting by the Company of product requirements
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more difficult. The Company currently must place non-cancelable orders to
purchase its products from outside foundries on a three-month rolling basis.
Accordingly, the Company could experience an unexpected shortfall in product
availability or unexpected excess product inventory. In addition, the reduced
order lead time from customers makes it more difficult for the Company to
predict future revenues and operating results. If sales and shipments in any
quarter do not occur as expected, revenue could be reduced and expense and
inventory levels could be disproportionately high, and the Company's business,
financial condition and results of operations could be materially adversely
affected.
A limited number of customers account for a substantial portion of the Company's
net sales. The Company expects that sales to a limited number of customers will
continue to account for a substantial portion of its net sales for the
foreseeable future. Some companies in the desktop PC market have recently
announced or are expected to experience lower results of operations due to
various issues affecting the desktop PC market. As a result, many companies are
reevaluating product strategies as well as expected unit shipment volumes. The
Company's business is primarily in the portable computer segment of the market
which has not been affected to the same extent. However, in the event that one
or more of the Company's major customers were to cancel and/or substantially
reschedule orders for significant quantities of product, the Company's results
of operation could be materially adversely affected.
The Company relies on obtaining and maintaining design wins for its products
with leading personal computer manufacturers. In the event that the Company's
competitors have product features and/or performance which are perceived as
valuable by the market but are not in the Company's products, the Company could
lose current design wins or not acquire new design wins. In addition, other
factors such as internal product development delays, aggressive competition and
intangible factors affecting customer relationships could also adversely impact
design wins. To the extent that the Company is unable to retain existing design
wins or to acquire new design wins and the associated revenues for the Company's
existing and future products, there could be a material adverse on the Company's
business, financial condition and results of operations.
During calendar year 1995, the semiconductor industry experienced shortages of
available production. The Company, like many fabless semiconductor companies,
entered into long term deposit agreements with wafer foundry suppliers to ensure
guaranteed access to capacity. Although production capacity for advanced
processes such as 0.35u appears to be limited, availability of production
capacity for more mature processes now appears to be less constrained. To the
extent that the Company must utilize production capacity at certain foundries to
fulfill its long term commitments and to the extent that the Company might, as a
result, pay a higher price for product than the current market conditions
warrant, this could have an adverse impact on the Company's gross margins and
results of operation.
The PC semiconductor market is generally characterized by price declines over
time as new competitors enter and as new semiconductor process technologies
enable lower cost manufacturing. There can be no assurance that the Company will
not experience increased price competition, which could have a material adverse
effect on the Company's business, financial condition and results of operations.
The Company expects its competitors to aggressively price alternative solutions
to attempt to gain or maintain market share. To the extent that the Company must
reduce prices to meet competition, maintain market share or meet customer
requirements, the gross margin percentages achieved in recent periods may not be
sustainable.
The largest portion of the Company's sales is comprised of portable graphics
accelerators. The Company expects that the majority of it revenues for at least
the rest of the fiscal year will continue to be from sales of those products.
While the market for PCs in general and portable computers in particular has
recently experienced substantial growth, the overall industry has historically
been cyclical and seasonal, and there can be no assurance that growth rates
experienced in prior periods will continue in the future.
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PART II - OTHER INFORMATION
<TABLE>
<CAPTION>
<S> <C> <C>
Item 1. Legal Proceedings Not applicable
Item 2. Changes in Securities Not applicable
Item 3. Defaults upon Senior Securities Not applicable
Item 4. Submission of Matters to a Vote of Security Holders Not applicable
Item 5. Other Information Not applicable
Item 6 Exhibits 14
The exhibits listed in the Exhibit Index set forth on page 14 of
this report are incorporated herein by reference.
Reports on Form 8-K Not applicable
</TABLE>
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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.
CHIPS AND TECHNOLOGIES, INC.
(Registrant)
/s/ James F. Stafford
-----------------------------------
James F. Stafford
President & Chief Executive Officer
/s/ Timothy R. Christoffersen
-----------------------------------
Timothy R. Christoffersen
Vice President of Finance
Chief Financial Officer and
Principal Accounting Officer
Date: May 13, 1996
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
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<C> <C> <C> <C>
3.1 (1) Amended Certificate of Incorporation of Chips and Technologies, Inc.
3.2 (2) Restated By-laws of Chips and Technologies, Inc.
4.1 (3) Stockholders' Rights Agreement dated August 23, 1989.
10.1 (6) * First Amended 1988 Nonqualified Stock Option Plan for Outside Directors dated October 1,
1993 (as amended through November 9, 1995) .
10.2 (1) * Form of Indemnity Agreement between the Company and each of its directors and executive
officers.
10.3 (4) * Promissory note to the Company from Keith Angelo dated August 1, 1994.
10.4 (4) * Independent Contractor Services Agreement between the Company and Henri Jarrat dated
August 11, 1994.
10.5 (6) * Amended and Restated 1994 Stock Option Plan dated November 10, 1994 (as amended
through November 9, 1995).
10.6 (5) * Executive Bonus Plan dated September 21, 1995.
10.7 (6) Option Agreement between the Company and Taiwan Semiconductor Manufacturing
Company dated November 6, 1995. (**)
10.8 (6) Deposit Agreement between the Company and Chartered Semiconductor Manufacturing PTE
LTD dated November 16, 1995. (**)
11.1 Statement re: Calculation of Earnings per Share. 15
27.0 Financial Data Schedule for the quarter ended March 31, 1996 16
(1) Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended June 30, 1990.
(2) Incorporated by reference to Registration Statement No. 33-8005 effective October 8, 1986.
(3) Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended June 30, 1989.
(4) Incorporated by reference to the Company's Annual Report on Form 10-K for the period ended June 30, 1994.
(5) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 1995.
(6) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the period ended December 31, 1995.
* Denotes management contracts or compensatory plans or arrangements covering executive officers or directors of
Chips and Technologies, Inc.
** Confidential treatment has been requested for a portion of this document.
</TABLE>
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EXHIBIT 11.1 STATEMENT RE: CALCULATION OF EARNINGS PER SHARE - UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
(In thousands except per share amounts) 1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income $ 9,786 $ 2,109 $19,821 $ 5,736
Interest saving on convertible debenture -- 151 --
------- ------- ------- -------
Net income for calculation of earnings per share $ 9,786 $ 2,260 $19,821 $ 5,736
======= ======= ======= =======
Average number of common and common equivalent shares:
Weighted average common shares outstanding 20,441 17,479 20,267 17,157
Dilutive common stock equivalents:
Common stock options and warrant, using treasury 1,230 1,365 1,638 1,504
stock method
Convertible preferred stock -- 58 -- 58
Convertible debentures -- 1,388 -- *
------- ------- ------- -------
Common and common equivalent shares used in the
calculation of net income per share: 21,671 20,290 21,905 18,719
======= ======= ======= =======
Earnings per share: $ 0.45 $ 0.11 $ 0.91 $ 0.31
======= ======= ======= =======
</TABLE>
* Antidilutive
Page 15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the third
quarter of fiscal 1996 10Q financial statements and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0000767965
<NAME> CHIPS AND TECHNOLOGIES, INC.
<CURRENCY> US DOLLAR
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 23,853
<SECURITIES> 27,719
<RECEIVABLES> 10,666
<ALLOWANCES> 1,197
<INVENTORY> 10,774
<CURRENT-ASSETS> 72,717
<PP&E> 36,123
<DEPRECIATION> 25,082
<TOTAL-ASSETS> 97,978
<CURRENT-LIABILITIES> 18,912
<BONDS> 0
0
0
<COMMON> 77,228
<OTHER-SE> 531
<TOTAL-LIABILITY-AND-EQUITY> 97,978
<SALES> 38,259
<TOTAL-REVENUES> 36,514
<CGS> 22,057
<TOTAL-COSTS> 22,057
<OTHER-EXPENSES> 4,822
<LOSS-PROVISION> 75
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 10,873
<INCOME-TAX> 1,087
<INCOME-CONTINUING> 9,786
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,786
<EPS-PRIMARY> 0.45
<EPS-DILUTED> 0.45
</TABLE>
