<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 27, 1998 or
__ Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _________to _________
Commission file number 0-15858
-------
IMP, Inc.
---------
(Exact name of registrant as specified in its charter)
Delaware 94-2722142
-------- ----------
(State or other jurisdiction (IRS Employer
of incorporation or Identification No.)
organization)
2830 North First Street, San Jose, CA 95134
--------------------------------------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (408) 432-9100
----------------------------------------------
(Former name, former address and former fiscal
year if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
<PAGE> 2
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
September 27, 1998
------------------
Common Stock, $0.001 par value 28,284,098
<PAGE> 3
IMP, Inc.
FORM 10-Q
SECOND QUARTER
INDEX
Part I: Financial Information (unaudited)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Condensed Balance Sheet at 4
September 27, 1998 and March 29, 1998
Condensed Statement of 5
Operations for the three months ended
September 27, 1998 and September 28, 1997
Condensed Statement of 6
Operations for the six months ended
September 27, 1998 and September 28, 1997
Condensed Statement of Cash 7
Flows for the six months ended
September 27, 1998 and September 28, 1997
Notes to condensed financial 9
statements
Management's discussion and analysis of 12
financial condition and results of
operations
Part II: Other Information
Item 1, Legal Proceedings 22
Item 4, Submission of matters to a vote of
securities holders 22
Item 6, Reports on Form 8K 22
Signatures 23
</TABLE>
<PAGE> 4
IMP, Inc.
CONDENSED BALANCE SHEET
(In thousands)
(unaudited)
ASSETS
<TABLE>
<CAPTION>
Sept 27, 1998 March 29, 1998
------------- --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,609 $ 11,819
Accounts receivable - net 4,914 5,357
Inventories 4,122 3,064
Deposits and other current assets 1,114 950
-------- --------
Total current assets 12,759 21,190
Leasehold improvements and equipment 90,402 88,931
Accumulated depreciation (81,143) (78,547)
-------- --------
Net leasehold improvements and equipment 9,259 10,384
Other long term assets 387 375
-------- --------
$ 22,405 $ 31,949
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of notes payable $ 4,101 $ 3,348
Trade accounts payable 5,276 6,018
Accrued payroll and related expenses 1,829 1,954
Other accrued liabilities 472 276
Current portion of capital lease obligations 3,058 3,582
-------- --------
Total current liabilities 14,736 15,178
Long-term portion of notes payable
and capital lease obligations 3,645 6,173
Stockholders' equity:
Common stock 30 30
Additional paid-in capital 70,413 70,370
Accumulated deficit (62,522) (55,905)
Treasury stock at cost (3,897) (3,897)
-------- --------
Total stockholders' equity 4,024 10,598
-------- --------
$ 22,405 $ 31,949
======== ========
</TABLE>
See notes to unaudited condensed financial statements
<PAGE> 5
IMP, Inc.
CONDENSED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------
Sept 27, 1998 Sept 28, 1997
------------- -------------
<S> <C> <C>
Net revenues $ 6,738 $ 11,021
Cost of revenues 6,181 7,745
-------- --------
Gross profit 557 3,276
Operating expenses:
Research and development 2,189 1,897
Selling, general and administrative 1,380 1,678
-------- --------
Operating loss (3,012) (299)
Interest:
Expense (303) (370)
Income 33 173
-------- --------
Net interest (270) (197)
Loss before provision for
income taxes (3,282) (496)
Provision for income taxes -- --
-------- --------
Net loss $ (3,282) $ (496)
======== ========
Basic and diluted net loss per share $ (.12) $ (.02)
======== ========
Shares used in computing basic and
diluted net loss per share 28,284 28,216
======== ========
</TABLE>
See notes to unaudited condensed financial statements.
<PAGE> 6
IMP, Inc.
CONDENSED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
----------------------------------
Sept 27, 1998 Sept 28, 1997
------------- -------------
<S> <C> <C>
Net revenues $ 13,325 $ 22,027
Cost of revenues 12,177 15,586
-------- --------
Gross profit 1,148 6,441
Operating expenses:
Research and development 4,507 3,955
Selling, general and administrative 2,769 3,470
-------- --------
Operating loss (6,128) (984)
Interest:
Expense (627) (808)
Income 138 299
-------- --------
Net interest (489) (509)
Loss before provision for
income taxes (6,617) (1,493)
Provision for income taxes -- --
-------- --------
Net loss $ (6,617) $ (1,493)
======== ========
Basic and diluted net loss per share $ (.23) $ (.05)
======== ========
Shares used in computing basic and
diluted net loss per share 28,284 28,213
======== ========
</TABLE>
See notes to unaudited condensed financial statements.
<PAGE> 7
IMP, Inc.
CONDENSED STATEMENT OF CASH FLOWS
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
-------------------------------
Sept 27, 1998 Sept 28, 1997
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(6,617) $(1,493)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depreciation and amortization 2,596 3,074
Increase (decrease) from changes in:
Accounts receivable 443 1,709
Inventories (1058) 1,514
Deposits and other assets (176) (1,340)
Trade accounts payable (742) (664)
Accrued payroll and related expenses (125) 588
Other accrued liabilities 196 (228)
------- -------
Net cash (used for) provided by
operating activities (5,483) 3,160
------- -------
Cash flows from investing activities:
Net cash used for investing activities
for purchase of capital equipment (855) (82)
------- -------
Cash flows from financing activities:
Payments of principal under capital
lease obligations, net (2,001) (2,757)
Payments on notes payable (914) --
Proceeds from issuance of common stock 43 52
------- -------
Net cash used for financing activities (2,872) (2,705)
</TABLE>
<PAGE> 8
<TABLE>
<S> <C> <C>
Net increase (decrease) in cash and cash
equivalents (9,210) 373
Cash and cash equivalents at beginning of
the period 11,819 13,306
-------- -------
Cash and cash equivalents at end of the
period $ 2,609 $13,679
======== =======
Supplemental cash flow disclosures:
Interest paid $ 489 $ 509
Supplemental non cash disclosures:
Equipment acquired under capital lease $ 616 --
</TABLE>
See notes to unaudited condensed financial statements.
<PAGE> 9
IMP, Inc.
NOTES TO CONDENSED FINANCIAL
STATEMENTS
(unaudited)
1. Basis of presentation
The accompanying unaudited interim condensed financial statements have
been prepared in conformity with generally accepted accounting
principles, consistent with those applied in, and should be read in
conjunction with, the audited financial statements for the year ended
March 29, 1998 included in the Company's Annual Report on Form 10-K
filed with the Securities and Exchange Commission. The interim financial
information is unaudited, but reflects all adjustments consisting only
of normal recurring adjustments which are, in the opinion of management,
necessary to a fair statement of results for the interim periods
presented. For financial reporting purposes, the Company reports on a 13
or 14 week quarter and a 52 or 53 week year ending on the Sunday closest
to March 31.
2. Cash
At September 27, 1998, the Company had cash and cash equivalents of
approximately $2,609,000. An agreement signed by the Company for debt
financing of up to $10,000,000 in September 1998 is not expected to be
funded by the lender. As of the date of preparation of this report the
Company had cash and cash equivalents of approximately $1.7 million
which was assisted by faster than anticipated collection of Accounts
Receivable. The Company has taken steps to conserve cash and is working
with its financial institutions to restructure debt and otherwise
improve cash flow. In addition, the Company is evaluating all possible
strategic options for the company's future.
3. Inventories
Inventories consist of:
<TABLE>
<CAPTION>
Sept 27, 1998 March 29, 1998
------------- --------------
<S> <C> <C>
Raw materials $ 988 $ 1,111
Work-in-process 2,752 1,650
Finished goods 382 303
------- -------
$ 4,122 $ 3,064
======= =======
</TABLE>
4. Notes Payable
Bank equipment term loan - The Company had a financing agreement in
place with a bank under which the Company may borrow up to $3,000,000 to
finance 100% of the cost of collateralized equipment. Under the
agreement the Company is restricted from paying dividends and is
required to maintain certain financial ratios among other covenants. At
September 27, 1998 the
<PAGE> 10
Company was not in compliance with certain financial covenants. The bank
notified the Company that it will not renew the line. The Company is in
negotiations with the bank to restructure the note. The balance
outstanding under this line on September, 1998 was approximately
$1,775,000.
Equipment notes payable - The Company had a $5,000,000 facility with
assets based lender, which is fully utilized. This note does not contain
any restrictive financial covenants. The balance outstanding under this
line at September 27, 1998 was approximately $2,326,000.
5. Earnings per share
FAS 128 requires presentation of both basic and diluted EPS on the
statement of operations. Basic EPS is computed by dividing net income
available to common stockholders by the weighted average number or
common shares outstanding during the period. Diluted EPS is computed
using the weighted average number of common and potential common stock
equivalent shares outstanding during the period, except when
antidilutive. In computing diluted EPS, the average stock price for the
period is used in determining the number of shares assumed to be
purchased from the exercise of stock options. All prior period EPS data
has been restated to comply with the requirements of FAS 128. A
reconciliation of the numerators and the denominators of the basic and
diluted per share computation as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------- -------------------
Sept 27 Sept 28 Sept 27 Sept 28
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Basic EPS:
Net loss $(3,282) $ (496) $(6,617) $(1,493)
Weighted average shares outstanding 28,284 28,216 28,284 28,213
Basic and diluted loss per share $ (0.12) $ (0.02) $ (0.23) $ (0.05)
======= ======= ======= =======
</TABLE>
Options to purchase 2,651,055 and 2,217,521 shares of common stock were
outstanding at September 27, 1998 and September 28, 1997, respectively,
but were not included in the computation of diluted EPS as the Company
was in a loss situation and to do so would have been antidilutive.
6. Recently Issued Accounting Standard
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). FAS 133 establishes a
new model for accounting for derivatives and hedging activities and
supersedes and amends a number of existing accounting standards. SFAS
<PAGE> 11
133 requires that all derivatives be recognized in the balance sheet at
their fair market value, and the corresponding derivative gains or
losses be either reported in the statement of operations or as a
deferred item depending on the type of hedge relationship that exists
with respect to such derivative. Adopting the provisions of SFAS 133 are
not expected to have a material effect on the Company's consolidated
financial statements, which will be effective for the Company's fiscal
2001.
<PAGE> 12
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operation
Except for the historical information contained herein, the matters discussed in
this document are forward-looking statements that involve certain risks and
uncertainties, including the risks and uncertainties set forth below under
"Factors Affecting Future Results."
Results of Operations - Second Quarter of Fiscal 1999 Compared to Second Quarter
of Fiscal 1998
Net revenues for the second quarter of fiscal 1999 were $6.7 million compared to
$11.0 million for the same period of the prior year. The decrease in net
revenues was due to lower demand for the company's products by customers
reflecting the general slow down in the semiconductor industry. Revenues in the
immediate prior quarter were $6.6 million.
Cost of revenues in the second fiscal quarter of 1999 were 92% of revenues
compared to 70% for the same quarter in the prior year. Cost of revenues in the
second quarter of fiscal 1999 are higher as a result of less than optimum
utilization of the Company's manufacturing facility due to the decreased demand
noted above.
Research and development expenses were $2,189,000 (32% of revenue) in the second
quarter of fiscal 1999 compared to $1,897,000 (17% of revenue) in the
corresponding quarter of the prior year. Due to the Company's focus on the rapid
development of a portfolio of standard analog products, the Company believes
that research and development expenses in absolute dollars will remain higher
than fiscal 1998 levels.
Selling, general and administrative expenses were $1,380,000 (20% of revenue) in
the second quarter of fiscal 1999 down from $1,678,000 (15% of revenue) in the
same quarter of the prior year. The decrease in absolute dollars was primarily
due to lower commission expenses associated with lower sales.
Net interest expense was $270,000 for the second quarter of fiscal 1999,
compared to $197,000 for fiscal 1998. The increase is due to a decrease in
interest income as a result of lower cash balances.
Net loss for the second quarter of fiscal 1999 was $3,282,000 compared to net
loss of $496,000 for the same period of the prior year. This resulted in a loss
per share of $.12 for the second quarter of fiscal 1999 compared to $.02 loss
per share in the same period of the prior year.
<PAGE> 13
The Company believes that its sources of liquidity are at risk, and that without
additional significant cash inflows there is substantial risk that the Company
will not continue to exist as a going concern beyond December 1998.
Results of Operations - First Six Months of Fiscal 1999 Compared to First Six
Months of Fiscal 1998.
Net revenues for the six-month period ended September 27, 1998 were down by 39%
compared to the same period of the prior year. The decrease in net revenues was
due to lower demand for the company's products by customers reflecting the
general slow down in the semiconductor industry.
Cost of revenues in the six-month period ended September 27, 1998 was 91% of
revenues compared to 71% in the corresponding period of the prior year. The
increase is due to less than optimum utilization of the Company's foundry.
Research and development expenses were $4,507,000 (34% of revenue) for the six
month period ended September 27, 1998 compared to $3,955,000 (18% of revenue) in
the comparable period of fiscal 1997. Due to the Company's focus on the rapid
development of a portfolio of standard analog products, the Company believes
that research and development expenses in absolute dollars will remain higher
than fiscal 1998 levels.
Selling, general and administrative expenses were $2,769,000 (21% of revenue)
for the six months ended September 27, 1998 compared to $3,470,000 (16% of
revenue) in the corresponding period of the prior year. The decrease in absolute
dollars was primarily due to lower commission expenses associated with lower
sales.
Net interest expense was $489,000 for the six-month period ended September 27,
1998 compared to $509,000 for the corresponding period of the prior year. The
increase is due to a decrease in interest income as a result of lower cash
balances.
Net loss was $6,617,000 for the six-month period ended September 27, 1998
compared to a loss of $1,493,000 for the same period of the prior year. Loss per
share was $.23 for the six month period ended September 27, 1998 compared to
$.05 loss per share for the same period of the prior year.
<PAGE> 14
Liquidity and Capital Resources
At September 27, 1998, the Company had cash and cash equivalents of
approximately $2,609,000. An agreement signed by the Company for debt financing
of up to $10,000,000 in September 1998 is not expected to be funded by the
lender. As of the date of preparation of this report the Company had cash and
cash equivalents of approximately $1.7 million which was assisted by faster than
anticipated collection of Accounts Receivable. The Company has taken steps to
conserve cash and is working with its financial institutions to restructure debt
and otherwise improve cash flow. In addition, the Company is evaluating all
possible strategic options for the company's future.
Although orders received for shipment in the third quarter are significantly
above those shipped in the second quarter, business conditions continue to
remain uncertain. There can be no assurance that this trend of increased orders
will continue or that the Company will be able to fulfill all such orders
received or that customers will pay their accounts due in a timely manner. If
the Company is unable to significantly improve its cash position, there is
substantial risk that the Company will not be financially viable beyond December
1998.
Factors Affecting Future Results
The Company's business, financial condition and future results of operations
have been, and may in the future, be affected by a variety of factors, including
those described below:
Cash. As discussed above in "Liquidity and Capital Resources" the Company has
very low cash balances.
Dependence on Foundry Business. In the near term the company's success depends
on its ability to attract additional business from new and existing customers
for its analog and high-voltage wafer fabrication services. Due to the reduction
in demand for such services as a result of the current worldwide decline in the
semiconductor business, the market for such services is limited. As long as this
situation continues the slowdown in foundry business has and will continue to
result in less than optimum utilization of the Company's manufacturing
facilities. During periods of low demand, high fixed wafer fabrication costs
have historically had a material adverse effect on the Company's results of
operations. For example, during the last three-quarters of fiscal 1997 and all
of fiscal 1998 the Company's operating results were adversely affected by the
low utilization of the Company's manufacturing facility.
Dependence on New Analog Products. In the long term the Company's success
depends on its ability to develop new analog integrated circuit products for
existing and new applications, to introduce such products in a timely manner,
and to gain customer acceptance for its products. The development of new analog
integrated circuits is highly complex and from time to time the Company has
experienced
<PAGE> 15
delays in developing and introducing new products. Successful product
development and introduction depends on a number of factors including proper new
product definition, timely completion of design and testing of new products,
achievement of acceptable manufacturing yields and market acceptance of the
Company's and its customers' products. Moreover, successful product design and
development is dependent on the Company's ability to attract, retain and
motivate qualified analog design engineers, of which there is a limited number.
There can be no assurance that the Company will be able to meet these challenges
or adjust to changing market conditions as quickly and cost-effectively as
necessary to compete successfully. Due to the complexity and variety of analog
circuits, the limited number of analog circuit designers and the limited
effectiveness of computer-aided design systems in the design of analog circuits,
there can be no assurance that the Company will be able to continue to
successfully develop and introduce new products on a timely basis. The Company
seeks to design alternate source products that have already achieved market
acceptance from other vendors, as well as new proprietary IMP products. However,
there can be no assurance that any products introduced by the Company will be
accepted by customers or that any product initially accepted by the Company's
customers will result in production orders. The Company's failure to continue to
develop, introduce and sell new products successfully could materially and
adversely affect its long-term business and operating results.
Competition. Currently, the Company's principal competitors in the silicon
foundry market include American Microsystems Inc., a division of Japan Energy
Corporation, Austrian Micro Systems, GMT Microelectronics Corporation, Orbit
Semiconductor, a division of the DII Group, Tower Semiconductor, as well as
internal manufacturing facilities within its customers. To a lesser degree the
Company also competes with large Asian foundries, such as Chartered
Semiconductor of Singapore and TSMC of Taiwan. The Company's principal
competitors for existing and new Analog Products include Dallas Semiconductor,
Linear Technology Corporation, Linfinity Microelectronics, Maxim Integrated
Products, Inc., Micrel, Semtech, Sipex, Supertex, Texas Instruments, Unitrode
Corporation and certain European and Asian manufacturers. Many of the Company's
competitors have substantially greater technical, manufacturing, financial and
marketing resources than the Company. The Company's international sales are
primarily denominated in U.S. currency. Consequently, changes in exchange rates
that strengthen the U.S. dollar could increase the price in local currencies of
the Company's products in foreign markets and make the Company's products
relatively more expensive than competitor's products that are denominated in
local currency.
Due to the current excess of supply over demand for semiconductors of all types,
including both foundry services and analog integrated circuits, the Company
expects continued strong competition from existing suppliers and the entry of
new competitors. Such competitive pressures could reduce the market acceptance
of the Company's products and result in market price reductions and increases in
expenses
<PAGE> 16
that could adversely affect the Company's business, financial condition or
results of operations.
Patents and Licenses. Although the Company is not currently a party to any
material litigation relating to patents and other intellectual property rights,
because of technological developments in the semiconductor industry, it is
possible that certain of the Company's designs or processes may involve
infringement of existing patents. There can also be no assurance that any patent
owned by the Company will not be invalidated, circumvented or challenged, that
the rights granted thereunder will provide competitive advantages to the Company
or that any of the Company's pending or future patent applications will be
issued with the scope of the claims protection may be unavailable or limited in
certain foreign countries. The Company has from time to time received, and may
in the future receive, communications from third parties asserting patents, mask
work rights, or copyrights on certain of the Company's products and
technologies. Although the Company is not currently a party to any material
litigation, in the event a third party were to make a valid intellectual
property claim and a license was not available on commercially reasonable terms,
the Company's operating results could be materially and adversely affected.
Litigation, which could result in substantial cost to the Company and diversion
of its resources, may also be necessary to enforce patents or other intellectual
property rights of the Company or to defend the Company against claimed
infringement of the rights of others.
Manufacturing. The fabrication of integrated circuits is a highly complex and
precise process. Minute impurities, contaminants in the manufacturing
environment, difficulties in the fabrication process, defects in the masks used
to print circuits on a wafer, manufacturing equipment failure, wafer breakage or
other factors can cause a substantial percentage of wafers to be rejected or
numerous die on each wafer to be nonfunctional. The majority of the Company's
costs of manufacturing are relatively fixed, and, consequently, the number of
shippable die per wafer for a given product is critical to the Company's results
of operations. To the extent the Company does not achieve acceptable
manufacturing yields or experiences product shipment delays, its financial
condition or results of operations would be materially and adversely affected.
The Company has from time to time in the past experienced lower than expected
production yields, which have delayed product shipments and adversely affected
gross margins. Moreover, there can be no assurance that the Company in general
will be able to maintain acceptable manufacturing yields in the future.
The Company manufactures all of its wafers at the one fabrication facility in
San Jose. Given the unique nature of the Company's processes, it would be
difficult to arrange for independent manufacturing facilities to supply such
wafers in a short period of time. Any prolonged inability to utilize the
Company's manufacturing facility as a result of fire, natural disaster or
otherwise, would have a material adverse effect on the Company's financial
condition or results of operations. Although it believes that it has adequate
capacity to support its near term plans, the Company has in the past
subcontracted the fabrication of a portion of its wafer production to outside
foundries, and may need to do so again. At the present time,
<PAGE> 17
there are several wafer foundries that are capable of supplying certain of the
Company's needs. However, there can be no assurance that the Company will always
be able to find the necessary foundry capacity.
Due to the relatively long manufacturing cycle for integrated circuits, the
company builds some of its inventory in advance of receiving orders from its
customers. As a consequence of inaccuracies inherent in forecasting demand for
such products, inventory imbalances periodically occur that result in surplus
amounts of some Company products and shortages of others. Such shortages can
adversely affect customer relationships; surpluses can result in larger than
desired inventory levels.
The Company's backlog consists of distributor and OEM customer orders required
to be shipped within six months following the order date. Customers may
generally cancel or reschedule orders to purchase products without significant
penalty to the customer. As a result, to reflect changes in their needs,
customers frequently revise the quantities of the Company's products to be
delivered and their delivery schedules. Since backlog can be canceled or
rescheduled without significant penalty, the Company does not believe its
backlog is a meaningful indicator of future revenue. In addition, the Company's
backlog includes its orders from domestic distributors as to which revenues are
not recognized until the products are sold by the distributors. Such products
when sold may result in revenue lower than the stated backlog amounts as a
result of discounts that are authorized by the Company at the time of sale by
the distributors.
Furthermore, the Company is dependent on a number of subcontractors for certain
of its manufacturing processes, such as epitaxial deposition services. The
failure of any of these subcontractors to perform these processes on a timely
basis could result in manufacturing delays, which could materially adversely
affect the Company's results of operations. Currently, the Company purchases
certain materials, including silicon wafers, on a purchase order basis from a
limited number of vendors. Any disruption or termination of supply from any of
these suppliers could have a material adverse effect on the Company's financial
condition and results of operations.
The packaging of the Company's products is performed by a limited group of third
party subcontractors in the United States, as well as Indonesia and other Asian
countries. Certain of the raw materials included in such products are obtained
from sole source suppliers. Although the Company seeks to reduce its dependence
on its sole and limited source suppliers, disruption or termination of any of
these sources could occur and such disruptions could have a material adverse
effect on the Company's financial condition or results of operations. As is
common in the industry, independent third party subcontractors in Asia currently
assemble all of the Company's products. In the event that any of the Company's
subcontractors were to experience financial, operational, production or quality
assurance difficulties resulting in a reduction or interruption in supply to the
Company, the Company's operating results would be adversely affected until
alternate subcontractors, if any, became available.
Environmental and Safety Regulation. Federal, state, and local regulations
impose a variety of safety and environmental controls on the storage, handling,
discharge and
<PAGE> 18
disposal of certain chemicals and gases used in semiconductor manufacturing. The
Company's facilities have been designed to comply with these regulations, and it
believes that its activities are conducted in material compliance with such
regulations. There can be no assurance, however, that interpretation and
enforcement of current or future environmental regulations will not impose
costly requirements upon the Company. Any failure of the Company to control
adequately the storage, use and disposal of regulated substances could result in
future liabilities.
Increasing public attention has been focused on the safety and environmental
impacts of electronic manufacturing operations. While the Company to date has
not experienced any materially adverse effects on its business from such
regulations, there can be no assurance that changes or new interpretations of
such regulations will not impose costly equipment, facility or other
requirements.
Year 2000 Issues.
General.
Many currently installed computer, telecommunications and data
communications systems and equipment use embedded software or hardware that is
coded to accept only two digit entries in the date code field. These date code
fields will need to accept four digits to distinguish 21st century dates from
20th century dates. Therefore, any of such systems and equipment, including
computer systems and equipment sold or used by the Company, its customers and
its suppliers, that recognize a date code field of "00" as the year 1900 rather
than the year 2000 could cause such systems or equipment to malfunction prior to
or in the year 2000 and lead to significant business delays, additional expenses
and disruptions in service or operations. As a result, many companies' systems
and equipment with embedded software or hardware may need to be upgraded or
replaced in order to resolve the potential impact of this misinterpretation and
the resulting errors or system failures and to make such systems, equipment and
software Year 2000 compliant. The Company is assessing the impact of Year 2000
compliance requirements on its current business as well as on the systems and
applications that are critical to the Company's operations.
Impact on the Company's Business.
The Company designs its products both internally and through third party
design providers. Both sources of product design rely on licenses of third party
technology for certain aspects of these designs. In addition, while the Company
manufactures and tests substantially all of the wafers and finished packaged
devices used for its products, it relies on third party suppliers for the
management and control of the assembly of its products. The Company has done an
internal assessment of the Year 2000 compliance of certain of its stand-alone
products, and the Company believes that these products are designed so that they
are not dependent on embedded software or hardware that relies on a date code
field and, therefore, such products are Year 2000 compliant. To the extent that
date information is necessary for the proper functioning of these products, the
products rely on date information from other devices resident in the networks or
systems in
<PAGE> 19
which they operate. Thus, any Year 2000 problems within these third party
products or systems could cause the Company's products not to work accurately
and/or without disruption, if at all, with other companies' devices and systems.
Any failure of these products to be Year 2000 compliant would result in the
malfunctioning of such products or of the systems in which such products
operate. Any failure of the Company's products, any third party products on
which the Company's products rely or any third party products which incorporate
certain of the Company's licensed designs or technologies to be Year 2000
compliant could result in a substantial decline in the Company's revenues or
could result in the Company's incurring substantial unexpected expenses
associated with product returns, warranty claims and claims for consequential
damages and would materially adversely affect the Company's business, results of
operations and financial condition.
Many of the Company's customers and prospective customers are expected
to devote a substantial portion of their information systems budgets to the Year
2000 problem over the next several years, and, as a result, spending may be
diverted from new investment in semiconductor solutions. In addition, the
Company relies on a large variety of business enterprises such as customers,
suppliers, creditors, financial organizations, and domestic and international
governmental entities for the accurate exchange of data. Any disruption in the
computer systems of any of these third parties could materially and adversely
affect the Company. Due to the Company's focus on the power management and data
communications markets, which are vulnerable to technological issues involving
the Year 2000, substantially all of the Company's revenues may be at risk.
Despite the Company's efforts to address the Year 2000 impact on its products,
internal systems and business operations, the Year 2000 issue may result in a
material disruption of its business or have a material adverse effect on the
Company's business, financial condition or results of operations.
Impact on Systems and Applications Critical to the Company's Operations.
The Company relies on a number of computer systems and applications to
operate and monitor all major aspects of its business. The Company is making a
Year 2000 compliance assessment and taking actions to correct its internal
systems and equipment including its management information systems, its
automated design software and its fabrication, test and physical plant equipment
with embedded hardware and/or software. The Company believes it will complete
its assessment by mid-1999 and that it will complete all corrective actions,
including testing, by the end of 1999. Additionally, the Company is in the mid
stage of conducting an audit of its significant third party suppliers and
customers as to the Year 2000 compliance of their systems. The Company has not
yet established contingency plans for the Year 2000 issues, but, based on the
results of the assessment of its internal systems and the audit of its third
party suppliers and customers, the Company will evaluate the need for and begin
to implement contingency plans. Through September 27, 1998, the company has
incurred less than $100,000 in expenses associated with
<PAGE> 20
making its systems and equipment Year 2000 compliant and based on the
preliminary results of the assessment, the Company believes the total cost for
Year 2000 compliance will not exceed $1,000,000. However, there can be no
assurance that any such assessments and updates will be completed on a timely
basis, if at all, or within estimated budgets, or that any required updates or
corrections will work as anticipated in the year 2000.
<PAGE> 21
IMP, Inc.
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
The previously disclosed securities class action and derivative lawsuits filed
against the Company and certain of its present and former officers and directors
have been settled and all claims dismissed with prejudice.
Item 4. Submission of Matters to a Vote of Security Holders
The following proposals were voted upon by the Company's stockholders at
the Annual Meeting of Stockholders held on August 19, 1998.
1. The following persons were elected as directors of the Company to
serve until their successors are elected and qualified:
Name Votes For Votes Withheld
James Phillip Ferguson 25,292,690 1,381,851
Zvi Grinfas 25,302,835 1,371,706
David A. Laws 25,321,180 1,353,361
Peter D. Olson 25,324,895 1,349,646
Bernard V. Vonderschmitt 25,300,215 1,374,326
2. A proposal to approve the amendment to the Company's Stock Option
Plan (the "Plan") to increase the maximum number of shares of Common Stock
authorized for issuance over the term of the Plan by an additional 500,000
shares was approved by a vote of 24,330,708 shares, 2,222,703 shares voted
against the proposal and N/A votes were withheld, with 121,130 shares
abstaining and N/A broker non-votes.
3. A proposal to ratify the appointment of Price Waterhouse LLP as
independent accountants of the Company for the fiscal year ending March 29, 1999
was approved by a vote of 26,369,451 shares, 168,305 shares voted against the
proposal and N/A votes were withheld, with 136,785 shares abstaining and N/A
broker non-votes.
Item 6. Reports on Form 8-K.
No reports on Form 8-K were filed during the three months ended September 27,
1998.
<PAGE> 22
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.
IMP, Inc.
Registrant
/s/ GEORGE RASSAM
- ----------------- ---------------------------------
November 10, 1998 George Rassam
Chief Financial Officer
<PAGE> 23
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-28-1999
<PERIOD-START> MAR-30-1998
<PERIOD-END> SEP-27-1998
<CASH> 2,609
<SECURITIES> 0
<RECEIVABLES> 4,914
<ALLOWANCES> 0
<INVENTORY> 4,122
<CURRENT-ASSETS> 12,759
<PP&E> 90,402
<DEPRECIATION> (81,143)
<TOTAL-ASSETS> 22,405
<CURRENT-LIABILITIES> 14,736
<BONDS> 0
0
0
<COMMON> 30
<OTHER-SE> 70,413
<TOTAL-LIABILITY-AND-EQUITY> 22,405
<SALES> 6,738
<TOTAL-REVENUES> 6,738
<CGS> 6,181
<TOTAL-COSTS> 6,181
<OTHER-EXPENSES> 3,569
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 270
<INCOME-PRETAX> (3,282)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,282)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,282)
<EPS-PRIMARY> $(.12)
<EPS-DILUTED> $(.12)
</TABLE>
