UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 30, 2000
[ ] 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 0-17739
RAMTRON INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 84-0962308
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1850 Ramtron Drive, Colorado Springs, CO 80921
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (719) 481-7000
Indicate by check mark whether 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 registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.01 Par Value - 17,475,988 as of November 1, 2000.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
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RAMTRON INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value and share amounts)
Sept. 30, Dec. 31,
2000 1999
--------- ---------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 9,054 $ 10,601
Accounts receivable, less allowances
of $388 and $347, respectively 2,907 1,703
Inventories 6,335 4,174
Other current assets 400 184
--------- ---------
Total current assets 18,696 16,662
Property, plant and equipment, net 5,602 6,064
Intangible assets, net 16,947 6,654
--------- ---------
$ 41,245 $ 29,380
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,204 $ 3,066
Accrued liabilities 984 985
Deferred revenue 1,920 1,761
Promissory note and accrued interest, DFA -- 3,335
Accrued interest, the Fund -- 230
--------- ---------
Total current liabilities 6,108 9,377
Long-term promissory note, the Fund, net of unamortized
discount of $823 and $1,234, respectively 6,177 5,766
--------- ---------
Total liabilities 12,285 15,143
Minority interest in subsidiary 517 --
Redeemable preferred stock, $.01 par value,
10,000,000 shares authorized: 907 and 984 shares
issued and outstanding, respectively, entitled to
$1,000 per share plus accrued and unpaid
dividends in liquidation 889 914
--------- ---------
Stockholders' Equity:
Common stock, $.01 par value, 50,000,000 and
50,000,000 shares authorized, respectively:
17,473,638 and 14,609,459 shares issued and
outstanding, respectively 175 146
Deferred compensation (408) (2,423)
Additional paid-in capital 201,046 180,613
Accumulated deficit (173,259) (165,013)
--------- ---------
Total stockholders' equity 27,554 13,323
--------- ---------
$ 41,245 $ 29,380
========= =========
See accompanying notes to consolidated financial statements.
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RAMTRON INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
(Amounts in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
-------- -------- -------- --------
Revenue:
Product sales $6,442 $ 2,641 $13,158 $10,685
License and development fees -- 2,000 2,000 2,500
Royalties 14 1,500 27 1,500
Customer-sponsored research
and development 1,676 1,046 4,727 3,368
-------- -------- -------- --------
8,132 7,187 19,912 18,053
-------- -------- -------- --------
Costs and expenses:
Cost of product sales 4,682 1,824 8,626 6,353
Research and development 1,651 1,793 5,141 5,048
Customer-sponsored research
and development 1,637 1,036 4,505 3,332
Sales, general and administrative
(exclusive of non-cash
compensation expense shown below) 2,936 2,246 7,779 7,155
Stock-based compensation 206 -- 1,976 --
-------- -------- -------- --------
11,112 6,899 28,027 21,888
-------- -------- -------- --------
Operating income (loss) (2,980) 288 (8,115) (3,835)
Interest expense, related party (278) (217) (878) (549)
Other income, net 120 236 383 384
Minority interest in net loss
of subsidiary 153 -- 456 --
-------- -------- -------- --------
Net income (loss) $(2,985) $ 307 $(8,154) $(4,000)
======== ======== ======== ========
Income (loss) per common share:
Net income (loss) $(2,985) $ 307 $(8,154) $(4,000)
Dividends on redeemable
preferred stock (25) (91) (74) (371)
Accretion of redeemable
preferred stock (6) (5) (18) (493)
Gain on preferred stock settlement -- 3,183 -- 3,762
-------- -------- -------- --------
Net income (loss) applicable to common
shares $(3,016) $ 3,394 $(8,246) $(1,102)
======== ======== ======== ========
Net income(loss)per share - basic $(0.17) $ 0.27 $(0.51) $(0.09)
======== ======== ======== ========
Net income(loss)per share - diluted $(0.17) $ 0.26 $(0.51) $(0.09)
======== ======== ======== ========
Weighted average shares outstanding:
Basic 17,329 12,738 16,229 12,464
======== ======== ======== ========
Diluted 17,329 13,003 16,229 12,464
======== ======== ======== ========
See accompanying notes to consolidated financial statements.
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RAMTRON INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
(Amounts in thousands)
2000 1999
-------- --------
Cash flows from operating activities:
Net loss $(8,154) $(4,000)
Adjustments used to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 2,306 1,763
Amortization of debt discount, related party 411 --
Stock-based compensation 1,976 --
Minority interest in subsidiary (456) --
Changes in assets and liabilities:
Accounts receivable (732) (1,739)
Inventories (1,786) (628)
Accounts payable and accrued liabilities (285) 722
Accrued interest, related party (230) (39)
Deferred revenue (246) (81)
Other 11 114
--------- ---------
Net cash used in operating activities (7,185) (3,888)
--------- ---------
Cash flows from investing activities:
Cash obtained in acquisition 665 --
Purchase of property, plant and equipment (369) (217)
Intellectual property (472) (1,846)
--------- ---------
Net cash used in investing activities (176) (2,063)
--------- ---------
Cash flows from financing activities:
Payments on license rights payable -- (550)
Issuance of capital stock, net of expenses 5,814 --
Preferred stock settlement -- (3,300)
Other -- (46)
--------- ---------
Net cash provided by (used in) financing activities 5,814 (3,896)
--------- ---------
Net decrease in cash and cash equivalents (1,547) (9,847)
Cash and cash equivalents, beginning of period 10,601 15,237
--------- ---------
Cash and cash equivalents, end of period $ 9,054 $ 5,390
========= =========
See accompanying notes to consolidated financial statements.
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RAMTRON INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
-----------------------------------------------------------------------------
NOTE 1. BASIS OF PRESENTATION AND MANAGEMENT OPINION
The accompanying consolidated financial statements at September 30, 2000 and
1999 and for the periods then ended have been prepared from the books and
records of the Company without audit. The statements reflect all normal
recurring adjustments which, in the opinion of management, are necessary for
the fair presentation of financial position, results of operations and cash
flows for the periods presented.
Certain information and disclosures normally included in financial statements
have been omitted under Securities and Exchange Commission regulations. It is
suggested that the accompanying financial statements be read in conjunction
with the annual report on Form 10-K for the year ended December 31, 1999. The
results of operations for the period ended September 30, 2000 are not
necessarily indicative of the operating results for the full year.
NOTE 2. NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). SFAS No. 133, as amended, is
effective for fiscal years beginning after June 15, 2000. SFAS No. 133
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or liability
measured at its fair value. It also requires that changes in the derivative's
fair value be recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a
derivative's gains and losses to offset related results on the hedged item in
the income statement, and requires that a company must formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting. SFAS No. 133 may not be applied retroactively and must be applied
to (i) derivative instruments and (ii) certain derivative instruments embedded
in hybrid contracts. With respect to hybrid instruments, a company may elect
to apply SFAS No. 133, as amended, to (i) all hybrid contracts, (ii) only those
hybrid instruments that were issued, acquired, or substantively modified after
December 31, 1997, or (iii) only those hybrid instruments that were issued,
acquired or substantively modified after December 31, 1998. Management is
currently evaluating the effect SFAS No. 133 will have on the Company's
financial statements.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition" ("SAB No. 101"), which
provides guidance on the recognition, presentation and disclosure of revenue in
financial statements. SAB No. 101, as amended, is required to be adopted in
the fourth quarter of 2000. The Company is evaluating the impact SAB No. 101
will have on the Company's financial position and results of operations.
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NOTE 3. INVENTORIES
Inventories consist of:
Sept. 30, Dec. 31,
2000 1999
--------- --------
(in thousands)
(Unaudited)
Finished goods $4,112 $2,544
Work in process 2,223 1,630
------ ------
Total $6,335 $4,174
====== ======
NOTE 4. PROMISSORY NOTE, RELATED PARTY
In September 1995, the Company and the National Electrical Benefit Fund (the
"Fund") entered into a Loan Agreement (the "Fund Credit Facility"). On
August 6, 1999, the Company and the Fund amended the terms of the Fund Credit
Facility reclassifying $1.5 million of accrued interest to principal, leaving
an outstanding principal balance under the loan as of August 6, 1999 of
$7 million. The Amended Credit Facility bears interest at 8% per annum,
payable quarterly. The maturity date of the Amended Credit Facility is
March 15, 2002. No additional borrowings are available to the Company under
the Amended Credit Facility and the loan is secured by a first priority lien on
substantially all of the Company's assets. The Fund has the right to convert
all or any portion of the amounts outstanding under the Amended Credit Facility
into common stock at any time or times before maturity of the loan at a
conversion price equal to $5.00 for each share of common stock. The agreement
requires the Company to maintain a minimum level of net worth of $7 million,
current assets to current liabilities ratio of not less than 1.5, as defined,
and long-term debt to net worth ratio not to exceed 1.0, as defined. The
Company was in compliance with these covenants at September 30, 2000. The
outstanding face amount due under the Amended Credit Facility was $7.0 million
as of September 30, 2000.
NOTE 5. PROMISSORY NOTE, DIMENSIONAL FUND ADVISORS ("DFA")
In connection with the restructuring of the Company's Series A Preferred Stock
in August 1999, the Company entered into agreements with certain affiliates of
Dimensional Fund Advisors, Inc. (the "DFA Affiliates") to issue to each DFA
Affiliate an unsecured convertible promissory note (together, the "DFA
Promissory Notes") in consideration of the termination of certain Common Stock
purchase rights of the DFA Affiliates. The DFA Promissory Notes bore interest
at 8% per annum and were scheduled to mature on July 30, 2000. All or part of
the principal and accrued and unpaid interest of the DFA Promissory Notes were
convertible into common stock at the option of the holder of the note at a
conversion ratio of one share of common stock for each $5.00 of principal and
accrued interest converted. On February 29, 2000 the DFA Affiliates elected to
convert outstanding principal and accrued interest totaling approximately
$3,378,000 into 675,547 shares of the Company's common stock.
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NOTE 6. EARNINGS PER SHARE
The Company calculates its loss per share pursuant to Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128"). Under
SFAS No. 128, basic earnings per share is computed by dividing reported
earnings available to common stockholders by weighted average shares
outstanding. Diluted earnings per share reflects the potential dilution
assuming the issuance of common shares for all dilutive potential common shares
outstanding during the period. As a result of the Company's net losses, all
potentially dilutive securities including warrants and stock options, would be
anti-dilutive and thus, excluded from diluted earnings per share.
The computation of basic and diluted earnings per share for the quarter ended
September 30, 1999 was as follows:
(in thousands, except per share data)
Basic:
Net income $ 307
Dividends on convertible preferred stock (91)
Accretion of redeemable preferred stock
to redemption value (5)
Gain on preferred stock settlement 3,183
--------
Net income applicable to common shares $3,394
Weighted average common shares outstanding 12,738
--------
Basic earnings per share $0.27
========
Diluted:
Net income applicable to common shares $3,394
--------
Weighted average common shares outstanding 12,738
Assumed conversion of warrants, net of common
shares assumed repurchased with the proceeds 195
Assumed exercise of stock options, net of common
shares assumed repurchased with the proceeds 70
--------
Adjusted weighted average shares outstanding 13,003
--------
Diluted earnings per share $0.26
========
As of September 30, 2000, the Company had several financial instruments or
obligations that could create future dilution to the Company's common
shareholders and are not currently classified as outstanding common shares of
the Company. The following table details such instruments and obligations and
the common stock comparative for each. The common stock number is based on
specific conversion or issuance assumptions pursuant to the corresponding terms
of each individual instrument or obligation.
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Instrument or Obligation Common Stock
---------------------------------------------------- ------------
(in thousands)
Warrants, 25,000 exercisable at $17.00 per share,
868,810 exercisable at $16.22 per share, 814,212
exercisable at $10.81 per share, 667,000 exercisable
at $6.88 per share, 249,818 exercisable at $5.00 per
share and 905,697 exercisable at $2.25 per share. 3,531
Stock options outstanding as of September 30, 2000
with a weighted average exercise price per
share of $12.18 2,466
Series A Convertible Preferred Stock, 907 shares
outstanding and accrued dividends as of
September 30, 2000 with a conversion price of $5.00
per share. 186
Promissory note, related party, principal and
accrued interest as of September 30, 2000 totaling
$7,000,000 with a conversion price of $5.00 per
share. 1,400
------
Total 7,583
======
NOTE 7. DEFERRED COMPENSATION
In December 1999, the Company's shareholders approved an amendment to the
Company's 1995 Stock Option Plan. Under the amended stock option plan certain
officers of the Company were granted common stock options totaling 500,000
shares with an exercise price of $2.25 per share. The intrinsic value of stock
based compensation related to the options was approximately $2,539,000. This
amount is recorded as deferred compensation and is being amortized over the
vesting period of the options as a charge to compensation expense.
Amortization for the three and nine month periods ended September 30, 2000 was
$206,000 and $1,976,000, respectively. Unamortized compensation expense as of
September 30, 2000 is approximately $408,000.
NOTE 8. ACQUISITION OF LICENSE
On January 26, 2000, the Company's then wholly owned subsidiary, Enhanced
Memory Systems ("EMS"), Inc., entered into a non-exclusive, worldwide
technology licensing agreement with Infineon Technologies AG ("Infineon"). In
consideration for the grant of the license, Infineon received 20% of the
outstanding common stock of EMS. Additionally, the agreement calls for
Infineon to provide EMS with up to $200 million per year of committed wafer
manufacturing capacity using Infineon's advanced DRAM and embedded DRAM process
capabilities and access to Infineon's design technology. The agreement has a
term of six years with optional two-year renewal periods thereafter. The
technology license valued at approximately $1,983,000 is recorded as an
intangible asset and is being amortized over the life of the agreement. The
increase in the carrying value of the Company's investment in EMS of $1,010,000
as a result of the shares issued to Infineon has been recorded as an increase
to additional paid-in capital.
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NOTE 9. ACQUISITION OF MUSHKIN INC.
On June 14, 2000, the Company entered into a merger transaction among the
Company, a wholly owned subsidiary of Ramtron International Corporation,
Mushkin Inc. ("Mushkin"), and the Mushkin shareholders. In this transaction
Ramtron acquired all of the issued and outstanding shares of Mushkin for
952,380 shares of Ramtron common stock valued at $10,000,000. The acquisition
was accounted for as a purchase. Accordingly, Ramtron's consolidated financial
statements include the results of operations of Mushkin since the acquisition
date. The total purchase price was allocated based on fair value of assets
acquired and liabilities assumed as follows:
(In thousands)
Fair value of tangible net assets $ 666
Goodwill 9,334
------
$10,000
======
The amount allocated to goodwill is being amortized over an estimated useful
life of 7 years using the straight-line method.
Summarized below are the unaudited pro forma results of operations of the
Company as if Mushkin had been acquired at the beginning of the fiscal periods
presented.
Pro Forma Nine Months
Ended September 30
(In thousands, except
per share data)
---------------------
2000 1999
-------- --------
Revenue $26,019 $22,802
Net loss (8,202) (4,475)
Net loss applicable to common shares (8,294) (1,577)
Net loss per share- basic and diluted $ (0.49) $ (0.12)
NOTE 10. CONTINGENCIES
PATENT INTERFERENCE PROCEEDING. A patent interference proceeding, which was
declared in 1991 in the United States Patent and Trademark Office (the "Patent
Office") between the Company, National Semiconductor Corporation ("National")
and the Department of the Navy in regard to one of the Company's issued United
States patents, is continuing. The Patent involved covers a basic
ferroelectric memory cell design invention the Company believes is of
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fundamental importance to its FRAM business in the United States. An
interference is declared in the Patent Office when two or more parties each
claim to have made the same invention. The interference proceeding is
therefore conducted to determine which party is entitled to the patent rights
covering the invention. In the present interference contest, the Company is
the "senior" party, which means that it is in possession of the issued
United States Patent and retains all rights associated with such patent. The
other two parties involved in the interference are the "junior" parties, and
each has the burden of proof of convincing the Patent Office by a
preponderance of the evidence that it was the first to invent the subject
matter of the invention and thus is entitled to the corresponding patent
rights. Only the Company and National filed briefs in this matter. Oral
arguments were presented before the Patent Office on March 1, 1996.
The Patent Office decided the interference on May 6, 1997, holding that all of
the claims were patentable to National, one of the "junior" parties. The
other "junior" party, the Department of the Navy, was not granted any patent
claims pursuant to the interference proceedings. On June 20, 1997, the
Company filed a Request for Reconsideration with the Patent Office concerning
the interference decision. Pursuant to the Request for Reconsideration, the
Company requested that five separate issues be reconsidered because, from the
Company's perspective, they were either ignored or misconstrued in the
original decision. A decision on the Request for Reconsideration was issued on
November 19, 1998, again holding that all of the claims were patentable to
National. On January 9, 1999, the Company appealed the decision of the Patent
Office on one of the interference counts directly to the Court of Appeals for
the Federal Circuit. On February 2, 2000 the Court of Appeals vacated and
remanded the decision of the Patent Office for further proceedings. The
Company also filed complaints in Federal District Court in the District of
Columbia seeking a review of the decision of the Patent Office on the remaining
interference counts, which are still pending. The Company remains in
possession of the issued United States Patent and retains all rights associated
with such patent while it pursues its appeal options. The "junior" party has
received no rights associated with this patent decision and will not receive
any such rights as long as the appeal process continues.
If the Company's patent rights that are the subject of the interference
proceeding are ultimately lost or significantly compromised, the Company would
be precluded from producing FRAM products in the United States using the
Company's existing design architecture, absent being able to obtain a suitable
license to exploit such rights. If such patent rights are ultimately awarded
to National, and if a license to such rights is not subsequently entered into
by the Company with National, National could use the patent to prevent the
manufacture, use or sale by the Company, and/or its licensees, within the
United States of any products that come within the scope of such patent rights,
which would include all FRAM products as currently designed, and which would
materially adversely affect the Company. The Company has vigorously defended
its patent rights in this interference contest and will continue such efforts.
The Company is uncertain as to the ultimate outcome of the interference
proceeding, as well as to the resulting effects upon the Company's financial
position or results of operations.
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NOTE 11. SEGMENT INFORMATION
Ramtron is engaged primarily in the design, development, manufacture and sale
of specialty high-performance semiconductor memory devices. Ramtron has two
principal businesses, ferroelectric nonvolatile random access memory ("FRAM")
technology and products, and high-speed DRAM products called Enhanced-DRAM
products.
The accounting policies for determining segment net profit (loss) are the same
used in the consolidated financial statements. There are no internal sales
between segments.
The following table represents segment information for the three months ended
September 30, 2000 and 1999.
2000 1999
------------------ ------------------
FRAM EDRAM FRAM EDRAM
-------- -------- -------- --------
(in thousands)
Revenue:
Product sales $ 1,178 $ 5,264 $ 830 $ 1,811
License and development fees -- -- 2,000 --
Royalties 14 -- 1,500 --
Customer-sponsored research
and development 1,172 504 1,046 --
-------- -------- -------- --------
2,364 5,768 5,376 1,811
-------- -------- -------- --------
Costs and expenses 4,602 6,510 4,088 2,811
-------- -------- -------- --------
Operating income (loss) (2,238) (742) 1,288 (1,000)
Other 8 153 214 (1)
-------- -------- -------- --------
Net income (loss) $(2,230) $ (589) $ 1,502 $ (1,001)
======== ======== ======== ========
Net income (loss) excludes interest income, interest expense and miscellaneous
charges of ($166,000) and ($194,000) in 2000 and 1999, respectively, not
allocated to business segments.
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The following table represents segment information for the nine months ended
September 30, 2000 and 1999.
2000 1999
------------------ ------------------
FRAM EDRAM FRAM EDRAM
-------- -------- -------- --------
(in thousands)
Revenue:
Product sales $ 2,835 $10,323 $ 2,750 $ 7,935
License and development fees 2,000 -- 2,500 --
Royalties 27 -- 1,500 --
Customer-sponsored research
and development 3,923 804 3,368 --
-------- -------- -------- --------
8,785 11,127 10,118 7,935
-------- -------- -------- --------
Costs and expenses 14,764 13,263 12,730 9,158
-------- -------- -------- --------
Operating loss (5,979) (2,136) (2,612) (1,223)
Other 14 456 131 17
-------- -------- -------- --------
Net loss $(5,965) $(1,680) $(2,481) $(1,206)
======== ======== ======== ========
Total assets $30,512 $10,733 $17,679 $ 8,438
Net loss excludes interest income, interest expense and miscellaneous charges
of ($509,000) and ($313,000) in 2000 and 1999, respectively, not allocated to
business segments.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FACTORS AFFECTING FUTURE RESULTS
This quarterly report contains forward-looking statements. Except for
historical information, the matters discussed in this report are forward-
looking statements that are subject to certain risks and uncertainties that
could cause the actual results to differ materially from those projected.
Words such as "expects," "plans," "anticipates," "believes," "estimates" and
variations of such words are intended to represent forward-looking statements.
The Company undertakes no obligation to publicly release the results of any
revisions to these forward-looking statements, which may be made to reflect
events or circumstances after the date hereof. Factors that might cause such a
difference include but are not limited to: (i) the timely completion of the
development and qualification for manufacturing of the Company's new EDRAM,
ESDRAM, and FRAM products; (ii) broader customer acceptance of its
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EDRAM, ESDRAM and HSDRAM and FRAM products; (iii) acceptance of new EDRAM,
ESDRAM, ESRAM, HSDRAM and FRAM products which may be developed; (iv) the
Company's ability to manufacture its products on a cost-effective and timely
basis at its contract manufacturing foundry partners; (v) the Company's ability
to perform under existing alliance agreements and to develop new alliance and
foundry relationships; (vi) the alliance partners' willingness to continue
development activities as they relate to their license agreements with the
Company; (vii) future potential changes in the Company's capital structure;
(viii) the availability and related cost of future financing; (ix) the
retention of key personnel; (x) the outcome of the Company's patent
interference litigation proceedings, and (xi) factors not directly related to
the Company, such as competitive pressures on pricing, marketing conditions in
general, competition, technological progression, product obsolescence and the
changing needs of potential customers and the semiconductor industry in
general.
RESULTS OF OPERATIONS
QUARTER ENDED SEPTEMBER 30, 2000 COMPARED TO THE QUARTER ENDED SEPTEMBER 30,
1999.
REVENUES. Total revenues for the quarter ended September 30, 2000 increased
$945,000, or 13% from the quarter ended September 30, 1999.
Revenue from product sales increased $3.8 million, or 144% for the quarter
ended September 30, 2000, as compared to the same period in 1999. EDRAM
product revenues for the quarter ended September 30, 2000 increased $3.5
million to $5.3 million, an increase of 191% as compared to the same period in
1999. The increase in EDRAM product sales is primarily attributable to sales
revenue of the Company's Mushkin subsidiary, which was acquired in June 2000,
offset by a decline in the EDRAM 4-megabit product sales. A decreasing demand
for the Company's 4-megabit EDRAM products is expected to continue to occur in
future periods as the Company continues to focus its sales and development
efforts on higher density 16-megabit and 64-megabit memory products.
FRAM product revenues for the quarter ended September 30, 2000 increased
$348,000 to $1.2 million, an increase of 42% as compared to the same period in
1999. This increase is attributable in part to increased availability of FRAM
products from the Company's foundry partners, a wider product portfolio due to
bringing new products to market and the selective reduction of average selling
prices for high volume EEPROM replacement programs to take advantage of
shortages in the EEPROM market.
License and development fees for the quarter ended September 30, 2000 decreased
$2 million to zero, as compared to the same period in 1999. This decrease is
due to milestone achievements occurring during the quarter ended September 30,
1999. No such milestone achievements occurred during the quarter ended
September 30, 2000.
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<PAGE>
Royalty revenue decreased by $1.5 million to $14,000 in the third quarter ended
September 30, 2000 as compared to the same period in 1999. This decrease was
primarily due to $1.5 million of royalty income recorded in the quarter ended
September 30, 1999 under a FRAM licensing agreement with an existing licensee.
Customer-sponsored research and development revenue for the quarter ended
September 30, 2000 increased by $630,000 to $1.7 million, an increase of 60% as
compared to the same period in 1999. This increase resulted primarily from
process development activities with one of the Company's existing FRAM
licensees and new product development programs in our Enhanced Memory Systems
subsidiary.
COST OF SALES. Overall cost of product sales as a percentage of product
revenues during the third quarter increased from 69% to approximately 73% as
compared with the same period in 1999. EDRAM cost of product sales for the
quarter ended September 30, 1999 and 2000 was 71% in each period. Cost of sales
associated with the Company's FRAM products increased during the quarter from
65% in 1999 to approximately 73% in 2000. Reductions in cost of sales realized
from improvements associated with manufacturing substantially all FRAM products
at alliance foundry manufacturing facilities were more than offset by the
reduction of average unit selling prices during the quarter for selected high
volume EEPROM replacement opportunities to take advantage of shortages in the
EEPROM market.
RESEARCH AND DEVELOPMENT. Combined research and development expenses for the
quarter ended September 30, 2000 increased $459,000 to $3.3 million, an
increase of 16% as compared with the same period in 1999. This increase is due
to increased activity in the FRAM joint development program with Fujitsu and
costs related to the development of new FRAM and EDRAM products.
SALES, GENERAL AND ADMINISTRATIVE EXPENSES. Sales, general and administrative
expenses for the quarter ended September 30, 2000 increased $690,000 to $2.9
million, an increase of 31% as compared to the same period in 1999. This
increase is primarily attributable to incremental general and administrative
costs and goodwill amortization related to the Company's Mushkin subsidiary,
which was acquired in June 2000.
STOCK-BASED COMPENSATION. During the quarter ended September 30, 2000, the
Company recognized $206,000 of non-cash expenses for stock based compensation.
In September 1999, certain officers of the Company were granted options to
purchase common stock of the Company at $2.25 per share (the closing
price on the date of grant), subject to shareholder approval to amend the
Company's 1995 Stock Option Plan. These options vest 50% on March 31, 2000 and
50% on March 31, 2001. The Company's shareholders approved the amendment to
the 95 Plan on December 22, 1999. On that date, the closing price of the
Company's common stock was $7.41 per share. The intrinsic value of stock based
compensation related to the stock options is $2,539,000 and is recognized as
non-cash compensation expense over the vesting period of the options. The
Company will recognize the remaining compensation expense as of September 30,
2000 of $408,000 ratably over the next two quarters.
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INTEREST EXPENSE, RELATED PARTY. Related party interest expense increased
$61,000 for the quarter ended September 30, 2000, as compared to the same
period in 1999, due to the amortization of debt discount related to the Fund's
long-term promissory note, which was not present during the quarter ended
September 30, 1999.
OTHER INCOME, NET. Other income, net decreased by $116,000 to $120,000 in the
quarter ended September 30, 2000, as compared with the same period in 1999.
This decrease is attributable to reclaim credits from excess precious metal
processing materials during the quarter ended September 30, 1999, which did not
occur in 2000.
MINORITY INTEREST IN NET LOSS OF SUBSIDIARY. Minority interest increased by
$153,000 to $153,000 in the quarter ended September 30, 2000 as compared with
the same period in 1999. This increase is the result of the sale of 20% of
EMS, previously a wholly owned subsidiary of the Company, to Infineon in
January 2000. The minority interest reflects Infineon's share of EMS's loss
for the quarter ended September 30, 2000.
NET LOSS APPLICABLE TO COMMON SHARES. Memo adjustments to net loss to arrive at
net loss applicable to common shares were as follows:
During the quarter ended September 30, 2000, combined preferred stock
dividends, and accretion of redeemable preferred stock declined by $65,000 to
$31,000, as compared to the same period in 1999. This decrease is due to fewer
preferred shares being outstanding during the quarter ended September 30, 2000.
In addition, the gain on preferred stock settlements decreased by approximately
$3.2 million to zero, which is due to a gain from preferred stock settlement
occurring during the third quarter of 1999. No such transaction occurred
during the quarter ended September 30, 2000.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1999
REVENUES. Total revenues for the nine months ended September 30, 2000
increased $1.9 million, or 10% from the nine months ended September 30, 1999.
Revenue from product sales increased $2.5 million, or 23% for the nine months
ended September 30, 2000, as compared to the same period in 1999. EDRAM
product revenues for the nine months ended September 30, 2000 increased $2.4
million to $10.3 million, an increase of 30% as compared to the same period in
1999. The increase in EDRAM product sales is primarily attributable to sales
revenue of the Company's Mushkin subsidiary, which was acquired in June 2000,
offset by a decline in the EDRAM 4-megabit product sales. A decreasing demand
for the Company's 4-megabit EDRAM products is expected to continue to occur in
future periods as the Company continues to focus its sales and development
efforts on higher density 16-megabit and 64-megabit memory products.
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FRAM product revenues for the nine months ended September 30, 2000 increased
$85,000 to $2.8 million, an increase of 3% as compared to the same period in
1999. This increase is attributable in part to increased availability of FRAM
products from the Company's foundry partners, a wider product portfolio due to
bringing new products to market partially offset by the selective reduction of
average selling prices for high volume EEPROM replacement programs to take
advantage of shortages in the EEPROM market.
License and development fees for the nine months ended September 30, 2000
decreased $500,000 to $2 million, a decrease of 20% as compared to the same
period in 1999. This decrease is due to additional milestone achievements
occurring during the quarter ended September 30, 1999, as compared to the nine
months ended September 30, 2000.
Royalty revenue decreased by $1.5 million to $27,000 in the nine months ended
September 30, 2000 as compared to the same period in 1999. This decrease was
primarily due to $1.5 million of royalty income recorded in the quarter ended
September 30, 1999 under a FRAM licensing agreement with an existing licensee.
Customer-sponsored research and development revenue for the nine months ended
September 30, 2000 increased by $1.4 million to $4.7 million, an increase of
40% as compared to the same period in 1999. This increase resulted primarily
from process development activities with one of the Company's existing FRAM
licensees and new product development programs in our Enhanced Memory Systems
subsidiary.
COST OF SALES. Overall cost of product sales as a percentage of product
revenues during the nine months ended September 30, 2000 increased from 59% to
approximately 66% as compared with the same period in 1999. EDRAM cost of
product sales for the nine months ended September 30, 2000 increased from 53%
to 64%, as compared to the same period in 1999. This increase was due to
increased sales of higher cost HSDRAM products through our Mushkin subsidiary
which was acquired in June 2000. Cost of sales associated with the Company's
FRAM products for the nine months ended September 30, 2000 decreased from 78%
to 69%, as compared to the same period in 1999. This improvement was due to
wafer pricing improvements realized at one of our manufacturing foundry
partners combined with improved manufacturing yields.
RESEARCH AND DEVELOPMENT. Combined research and development expenses for the
nine months ended September 30, 2000 increased $1.3 million to $9.6 million, an
increase of 15% as compared with the same period in 1999. This increase is due
to increased activity in the FRAM joint development program with Fujitsu and
costs related to the development of new FRAM and EDRAM products.
SALES, GENERAL AND ADMINISTRATIVE EXPENSES. Sales, general and administrative
expenses for the nine months ended September 30, 2000 increased $624,000 to
$7.8 million, an increase of 9% as compared to the same period in 1999. This
increase is primarily attributable to incremental general and administrative
costs and goodwill amortization related to the Company's Mushkin subsidiary,
which was acquired in June 2000.
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STOCK-BASED COMPENSATION. During the nine months ended September 30, 2000, the
Company recognized $2.0 million of non-cash expenses for stock based
compensation. In September 1999, certain officers of the Company were granted
options to purchase common stock of the Company at $2.25 per share (the closing
price on the date of grant), subject to shareholder approval to amend the
Company's 1995 Stock Option Plan. These options vest 50% on March 31, 2000 and
50% on March 31, 2001. The Company's shareholders approved the amendment to
the 95 Plan on December 22, 1999. On that date, the closing price of the
Company's common stock was $7.41 per share. The intrinsic value of stock based
compensation related to the stock options is $2.5 million and is recognized as
non-cash compensation expense over the vesting period of the options. The
Company will recognize the remaining compensation expense as of September 30,
2000 of $408,000 ratably over the next two quarters.
INTEREST EXPENSE, RELATED PARTY. Related party interest expense increased
$329,000 for the nine month period ended September 30, 2000, as compared to the
same period in 1999. This increase is due to the amortization of debt discount
related to the Fund's long-term promissory note, which was not present during
the nine months ended September 30, 1999.
MINORITY INTEREST IN NET LOSS OF SUBSIDIARY. Minority interest increased by
$456,000 to $456,000 in the nine months ended September 30, 2000 as compared
with the same period in 1999. This increase is the result of the sale of 20%
of EMS, previously a wholly owned subsidiary of the Company, to Infineon in
January 2000. The minority interest reflects Infineon's share of EMS's loss
for the nine months ended September 30, 2000.
NET LOSS APPLICABLE TO COMMON SHARES. Memo adjustments to net loss to arrive at
net loss applicable to common shares were as follows:
During the nine months ended September 30, 2000, combined preferred stock
dividends, and accretion of redeemable preferred stock decreased by $772,000 to
$92,000. This decrease is due to fewer preferred shares outstanding during
the nine months ended September 30, 2000 and the accretion of the discount on
preferred stock issued in February 1998 ended in April 1999. In addition, the
gain on preferred stock settlements decreased by approximately $3.8 million to
zero, which is due to the gains from preferred stock settlements occurring
during the nine months ended September 30, 1999. No such transaction occurred
during the nine months ended September 30, 2000.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, because revenues generated from operations and licensing
have been insufficient to fund operations, the Company has depended for funding
principally on its stockholders, and in particular from 1989 until February
1995 on Oren L. Benton ("Benton"), a former principal stockholder and director
and the former Chief Executive Officer of the Company, and from 1989 through
1997 on the National Electrical Benefit Fund (the "Fund"), a principal
stockholder of the Company. Benton and the Fund financed the Company's cash
flow requirements through equity investments and loans, most of which were
subsequently converted into equity. The Company does not expect to be able to
meet its future liquidity needs from either Benton or the Fund.
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Cash flow used for operations increased from $3.9 million for the nine months
ended September 30, 1999, to $7.2 million in fiscal 2000. Cash used to fund
operating losses, after non-cash charges, increased $1.7 million for the
nine-month period ending September 30, 2000 as compared to the same period in
1999. Additionally, for the nine months ending September 30, 2000, working
capital requirements increased $1.6 million as compared to 1999.
Accounts receivable increases of approximately $1.2 million since the end of
1999 are primarily attributable to increases in outstanding trade receivables
due to the Company.
Inventories increased to $6.3 million during the nine month period ended
September 30, 2000, from $4.2 million at the end of 1999. Inventory levels
increased primarily due to increased FRAM wafer and finished product shipments
from the Company's manufacturing alliance partners during the period.
Accounts payable and accrued liabilities increased approximately $137,000
during the nine months ended September 30, 2000, from $4.1 million at the end
of 1999 to $4.2 million at September 30, 2000.
Cash used in investing activities was $176,000 for the nine months ended
September 30, 2000, compared to $2.1 million for the same period in 1999.
During 2000, cash of $665,000 acquired in connection with the acquisition of
Mushkin Inc. was offset by $841,000 in expenditures for capital equipment and
intellectual property. Capital expenditures were $369,000 in the nine months
ended September 30, 2000 compared to $217,000 in the nine-month period ended
September 30, 1999. Equipment and plant expenditures are expected to be
minimal during the fourth quarter of 2000. An amount of $472,000 was expended
for intellectual property in the nine months ended September 30, 2000, a
decrease of approximately $1.4 million from the same period in 1999.
In the first nine months of 2000, net cash provided by financing activities was
$5.8 million, which was raised from the issuance of common stock, primarily
from the exercise of common stock warrants. During the nine months ended
September 30, 1999, net cash used in financing activities was $3.9 million,
which primarily consisted of $3.3 million of cash used to effect the Company's
preferred stock settlement.
The Company is currently involved in a patent interference proceeding (see
Note 10 - "Contingencies - Patent Interference Proceeding.") If the Company is
ultimately unsuccessful in these proceedings, there would be no retroactive
cash payment requirements from the Company to the junior party as a result of
such an adverse decision. While the Company cannot accurately estimate the
financial effects of such a result, the Company believes that such a result
could, depending on when a final non-appealable judgment is ultimately
rendered, materially adversely affect the Company's FRAM product business and
operating results and, thus, have a materially adverse effect on the Company's
financial condition as a whole.
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During the remainder of 2000 and in 2001, the Company will continue to receive
cash from product sales and ongoing FRAM and EDRAM customer-sponsored research
and development programs. An increase in product sales activity and new
technology license agreements is anticipated in 2001. The Company had $9.1
million in cash and cash equivalents at September 30, 2000. In view of the
Company's expected future working capital requirements in connection with the
design, manufacturing and sale of its FRAM and EDRAM products, the Company's
projected continuing research and development expenditures, other operating
expenditures and the potential results of pending patent litigation, the
Company may be required to seek additional equity or debt financing soon after
year-end 2000. There is no assurance, however, that the Company will be able
to obtain such financing on terms acceptable to the Company, or at all. Any
issuance of common or preferred stock to obtain additional funding would result
in further dilution of existing stockholders' interests in Ramtron. The
inability to obtain additional financing when needed would have a material
adverse effect on the business, financial condition and operating results and
could adversely affect the Company's ability to continue its business
operations.
OUTLOOK
The Company expects revenues will continue to be sporadic in the foreseeable
future until the Company's products gain wider market acceptance and can be
manufactured in increased volumes and in a more cost-effective manner. The
Company has historically depended and continues to depend on revenues from new
license arrangements and upon the achievement of milestones under the
Company's existing and new license agreements as the major contributor of
positive quarterly operating results. Such license revenue does not typically
occur on a consistent basis and is, therefore, expected to create substantial
fluctuations in the Company's future quarterly revenues and results of
operations. Further, the adoption of SAB 101 (See Note 2 - New Accounting
Standards) may have the effect of delaying revenue recognition on new license
arrangements.
The Company is continuing its efforts to improve and increase commercial
production and sales of its EDRAM and FRAM products, decrease the cost of
producing such products and develop and commercialize new EDRAM and FRAM
products.
There can be no assurance that all of the Company's foundry and alliance
partners will be able to achieve commercial production of the products
currently in development. If such commercial production is not achieved or is
not achieved in a timely manner, the Company's results of operations could be
materially adversely affected.
MARKET RISK
There have been no material changes in market risk related to the Company's
financial instruments since December 31, 1999.
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PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company is currently involved in a patent interference proceeding (see Note
10 - "Contingencies - Patent Interference Proceedings". The Patent Office
decided the interference on May 6, 1997, holding that all of the claims were
patentable to National, one of the "junior" parties. The other "junior" party,
the Department of the Navy, was not granted any patent claims pursuant to the
interference proceedings. On June 20, 1997, the Company filed a Request for
Reconsideration with the Patent Office concerning the interference decision.
Pursuant to the Request for Reconsideration, the Company requested that five
separate issues be reconsidered because, from the Company's perspective, they
were either ignored or misconstrued in the original decision. A decision on
the Request for Reconsideration was issued on November 19, 1998, again holding
that all of the claims were patentable to National. On January 9, 1999, the
Company appealed the decision of the Patent Office on one of the interference
counts directly to the Court of Appeals for the Federal Circuit. On
February 2, 2000 the Court of Appeals vacated and remanded the decision of the
Patent Office for further proceedings. The Company also filed complaints in
Federal District Court in the District of Columbia seeking a review of the
decision of the Patent Office on the remaining interference counts, which are
still pending. The Company remains in possession of the issued United States
Patent and retains all rights associated with such patent while it pursues its
appeal options. The "junior" party has received no rights associated with this
patent decision and will not receive any such rights as long as the appeal
process continues.
ITEMS 2 - 3 NONE
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On October 3, 2000, the Company held its 2000 Annual Meeting of Common
Stockholders (the "Annual Meeting") in Colorado Springs, Colorado. Proxies
for the meeting were solicited by the Board of Directors of the Company
pursuant to Regulation 14A under the Securities and Exchange Act of 1934.
At the Annual Meeting, the Company's stockholders elected the following
persons as directors of the Company:
Name Votes For Votes Against
----------------------- ----------- -------------
L. David Sikes 13,312,968 356,713
Greg B. Jones 13,319,003 350,678
William G. Howard 13,574,959 94,722
Eric A. Balzer 13,574,439 95,242
Albert J. Hugo-Martinez 13,567,805 101,876
At the Annual Meeting, the Company's stockholders approved, with 4,969,504
votes cast in favor, 592,148 votes cast against and 25,813 abstentions, an
amendment to the Company's 1995 Stock Option Plan to increase the number of
shares authorized for issuance under such plan by 1,200,000 shares to a
cumulative total of 3,000,000.
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At the Annual Meeting, the Company's stockholders also approved, with
13,610,648 votes cast in favor, 38,967 votes cast against and 20,066
abstentions, the ratification of the appointment of Arthur Andersen LLP as
independent public accountants of the Company for the fiscal year ending
December 31, 2000.
ITEM 5 - NONE
ITEM 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
On July 24, 2000, the Registrant filed an Amendment No. 2 to a report on
Form 8-K filed on June 15, 2000. The item reported were Item 5 - "Other
Events" and Item 7 - "Financial Statements and Exhibits."
On August 16, 2000, the Registrant filed a report on Form 8-K. The items
reported were Item 5 - "Other Events" and Item 7 - "Financial Statements
and Exhibits."
On October 10, 2000, the Registrant filed a report on Form 8-K. The items
reported were Item 5 - "Other Events" and Item 7 - "Financial Statements
and Exhibits."
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RAMTRON INTERNATIONAL CORPORATION
(Registrant)
November 10, 2000 /S/ LuAnn D. Hanson
-------------------------
LuAnn D. Hanson
Chief Financial Officer
(Principal Accounting Officer)
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