<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark one)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities Act
of 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1996
or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities Act
of 1934
For the transition period from to
Commission file number: 0-20784
TRIDENT MICROSYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 77-0156584
(State or other jurisdiction of (I.R.S. Employer identification No.)
incorporation or organization)
189 North Bernardo Avenue, Mountain View, CA 94043-5216
(Address of principal executive offices) (Zip code)
(415) 691-9211
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
The number of shares of the registrant's $0.001 par value Common Stock
outstanding at December 31, 1996 was 12,724,609
This document (including exhibits) contains 17 pages.
<PAGE> 2
TRIDENT MICROSYSTEMS, INC.
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I: FINANCIAL INFORMATION
Item 1: Unaudited Financial Information
Condensed Consolidated Balance Sheet - December 31, 1996 and
June 30, 1996 3
Condensed Consolidated Statement of Operations for the Three Months
and Six Months Ended December 31, 1996 and 1995 4
Condensed Consolidated Statement of Cash Flows for the Six Months
Ended December 31, 1996 and 1995 5
Notes to the Unaudited Condensed Consolidated Financial Statements 6
Item 2: Management's Discussion and Analysis of Financial Condition 7
and Results of Operations
PART II: OTHER INFORMATION:
Item 1: Legal Proceedings Not Applicable
Item 2: Changes in Securities Not Applicable
Item 3: Defaults upon Senior Securities Not Applicable
Item 4: Submission of Matters to Vote by Security Holders 14
Item 5: Other Information Not Applicable
Item 6: Exhibits and Reports on Form 8-K 15
Signatures 16
</TABLE>
<PAGE> 3
TRIDENT MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
(Unaudited)
--------- ---------
<S> <C> <C>
Current assets:
Cash, cash equivalents $ 58,111 $ 16,894
Short-term investments 475 24,334
Accounts receivable, net 18,631 16,872
Inventories 19,642 26,866
Deferred income taxes 3,767 3,838
Prepaid expenses and other assets 5,474 7,140
--------- ---------
Total current assets 106,100 95,944
--------- ---------
Property and equipment, net 5,403 5,628
Investment in joint ventures 13,716 13,716
Other assets 9,818 12,222
--------- ---------
Total assets $ 135,037 $ 127,510
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 20,703 $ 24,084
Accrued expenses and other liabilities 10,535 7,632
Income taxes payable 3,999 5,610
--------- ---------
Total current liabilities 35,237 37,326
--------- ---------
Stockholders' equity:
Capital stock 39,005 38,279
Notes receivable from stockholders (585) (585)
Retained earnings 61,380 52,490
--------- ---------
Total stockholders' equity 99,800 90,184
--------- ---------
Total liabilities and stockholders equity $ 135,037 $ 127,510
========= =========
</TABLE>
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<PAGE> 4
TRIDENT MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
----------------------------------- ----------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $51,865 $41,348 $96,703 $77,914
Cost of sales 33,452 25,844 63,027 48,842
------- ------- ------- -------
Gross margin 18,413 15,504 33,676 29,072
Research and development expenses 5,706 4,277 10,741 8,155
Sales, general and administrative expenses 5,434 4,188 10,832 7,783
------- ------- ------- -------
Income from operations 7,273 7,039 12,103 13,134
Interest income, net 618 543 972 1,073
------- ------- ------- -------
Income before income taxes 7,891 7,582 13,075 14,207
Provision for income taxes 2,526 2,426 4,185 4,546
------- ------- ------- -------
Net income $ 5,365 $ 5,156 $ 8,890 $ 9,661
======= ======= ======= =======
Net income per share $ 0.38 $ 0.38 $ 0.64 $ 0.72
======= ======= ======= =======
Common and common equivalent shares used
in computing per share amount 14,225 13,591 13,926 13,450
======= ======= ======= =======
</TABLE>
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<PAGE> 5
TRIDENT MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
------------------------
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,890 $ 9,660
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation & amortization 1,386 845
Provision for doubtful accounts and sales returns 114 (4)
Loss on disposal of fixed assets -- (111)
Amortization of deferred compensation -- 117
Changes in assets & liabilities:
Accounts receivable (1,873) (3,193)
Inventories 7,224 268
Prepaid expenses and other current assets 1,737 222
Other assets 2,404 (217)
Accounts payable (3,381) 2,190
Accrued liabilities 2,903 1,095
Income tax payable (1,611) 2,132
-------- --------
Net cash provided by operating activities 17,793 13,004
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment to vendor under capacity agreement -- (16,800)
Sale of short-term investments, net 23,859 15,162
Purchase of property and equipment (1,161) (950)
-------- --------
Net cash provided by (used in) investing activities 22,698 (2,588)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 726 1,666
Principal repayment by stockholder of note receivable -- 49
-------- --------
Net cash provided by financing activities 726 1,715
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 41,217 12,131
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 16,894 30,609
======== ========
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 58,111 $ 42,740
======== ========
</TABLE>
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<PAGE> 6
TRIDENT MICROSYSTEMS, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
In the opinion of Trident Microsystems, Inc. (the "Company"), the
consolidated financial statements reflect all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the financial
position, operating results and cash flows for those periods presented. The
condensed consolidated financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission and are not
audited. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. These condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto
for the year ended June 30, 1996 included in the Company's annual report on Form
10-K filed with the Securities and Exchange Commission.
The results of operations for the interim periods presented are not
necessarily indicative of the results that may be expected for any other period
or for the entire fiscal year which ends June 30, 1997.
NOTE 2: INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31, 1996 June 30, 1996
----------------- -------------
<S> <C> <C>
Work in process $ 7,883 $ 15,150
Finished goods 11,759 11,716
---------- ----------
$ 19,642 $ 26,866
========== ==========
</TABLE>
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<PAGE> 7
ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth the percentages that statement of
operations items are to net sales for the three and six months ended December
31, 1996 and 1995:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
Cost of sales 64.5 62.5 65.2 62.7
----- ----- ----- -----
Gross margin 35.5 37.5 34.8 37.3
Research and development 11.0 10.3 11.1 10.5
Selling, general and administrative 10.5 10.2 11.2 10.0
----- ----- ----- -----
Income from operations 14.0 17.0 12.5 16.8
Interest income, net 1.2 1.3 1.0 1.4
----- ----- ----- -----
Income before income taxes 15.2 18.3 13.5 18.2
Provision for income taxes 4.9 5.8 4.3 5.8
----- ----- ----- -----
Net income 10.3% 12.5% 9.2% 12.4%
===== ===== ===== =====
</TABLE>
Net Sales
Net sales for the three months ended December 31, 1996 were $51.9
million or 25% over the $41.3 million reported in the three months ended
December 31, 1995. Net sales for the six months ended December 31, 1996 were
$96.7 million or 24% over the $77.9 million reported in the six months ended
December 31, 1995. The increases in net sales were attributable to increases in
unit volume of higher performance graphical user interface (GUI) accelerator
products for both desktop and mobile computers. Desktop products accounted for
59% of the Company's sales in both the three and six month periods ended
December 31, 1996 while notebook products accounted for 35% of sales in both the
three and six month periods ended December 31, 1996. A richer mix of higher
average selling prices (ASPs) notebook products also offset much of the effect
of declining ASPs from other products, especially 64-bit desktop video graphics
products. Sales of 64-bit graphics controllers and notebook graphics controllers
rose to 40% and 35% of total sales for the six months ended December 31, 1996
period from 26% and 11%, respectively, for the year earlier period.
The Company continues to make major efforts to design products to fill
the needs of leading PC systems manufacturers and adapter card manufacturers.
Sales to North American and European customers increased to 25% in the three
months ended December 31, 1996 from 14% in the three months ended December 31,
1995. Sales to North American and European customers increased to 28% in the six
months ended December 31, 1996 from 16% in the same prior fiscal year period.
The Company expects Asian customers will continue to account for a significant
portion of the Company's sales. Sales
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<PAGE> 8
to Asian customers, primarily in Hong Kong, Taiwan, Korea and Japan, accounted
for approximately 75% in the three months ended December 31, 1996 down from 86%
in the same period prior fiscal year. Sales to Asian customers accounted for
approximately 72% in the six months ended December 31, 1996, down from 84% in
the same prior fiscal year period. Sales to the Company's top three customers
and their affiliates accounted for 16%, 15% and 13% of net sales for the three
months ended December 31, 1996 compared to 22%, 15% and 9% of net sales for the
same prior fiscal year period. Sales to the Company's top three customers and
their affiliates accounted for 20%, 14% and 11% of net sales for the six months
ended December 31, 1996 compared to 18%, 14% and 10% of net sales for the same
prior fiscal year period. Substantially all of the sales transactions were
denominated in U.S. dollars during both periods.
The Company plans to continuously introduce new and higher performance
desktop and notebook graphics controller and multimedia video products which it
will seek to sell to existing customers as well as new customers in Asia, North
America and Europe. The Company's future success depends upon the regular and
timely introduction of these and other new products and upon those products
meeting customer requirements. There can be no assurance that the Company will
be able to successfully complete the development of these products or to
commence shipments of these products in a timely manner, or that product
specifications will not be changed during the development period. In addition,
even if regularly and timely developed and shipped, there can be no assurance
that the products described above will be well accepted in the market place.
Gross Margin
Gross margin decreased to 36% of net sales for the three months ended
December 31, 1996 from 37% for the three months ended December 31, 1995. Gross
margin decreased to 35% of net sales for the six months ended December 31, 1996
from 37% for the same prior fiscal year period. The decrease in the gross margin
was primarily the result of price declines in the desktop video graphic
products, especially in the 64-bit video graphics products which were a larger
percentage of sales in the current periods and standard cost adjustments which
are taken to adjust inventory values as the Company continues to lower the cost
of manufacturing its products.
The Company believes that prices of semiconductor products will decline
over time as availability and competition increase and advanced products are
introduced. The Company expects to see particularly intense pressure over the
next few months leading to added pressures on gross margin in the desktop
graphics products. However, the company expects that the effect of this pressure
will begin to be offset with new product introductions, if they are successful,
particularly in the fourth quarter of this fiscal year. The Company continues to
maintain a strategy based on maintaining gross margins through the introduction
of new products with higher margins, reducing manufacturing costs accomplished
through the Company's custom design methodology and the migrating to the newest
process technology and taking advantage of the economies of scale of volume
production. As a result, the Company depends upon the success of new product
development and the timely introduction of new products, as well as upon the
achievement of its manufacturing cost reduction efforts. There can be no
assurance that the Company can successfully or timely develop and introduce new
products or that it can continue to successfully reduce manufacturing costs.
-8-
<PAGE> 9
Research and Development
Research and development expenditures increased to $5.7 million in the
three months ended December 31, 1996 from $4.3 million in the three months ended
December 31, 1995. In the six months ended December 31, 1996, research and
development increased to $10.7 million from $8.2 million in the same period in
the last fiscal year. The increases in expenditures in the three and six months
periods ended December 31, 1996 were primarily due to increased headcount and
associated personnel-related costs, increased outside engineering services, and
increased non-recurring engineering (NRE) expenses. Research and development
expenditures as a percentage of net sales increased to 11% of net sales in both
the three months and six month ended December 31, 1996 from 10% of net sales in
three and six months ended December 31, 1995. The Company has increased its
research and development efforts to introduce new products and intends to
continue making substantial investments in research and development.
Selling, General and Administrative
Selling, general and administrative expenditures increased to $5.4
million in the three months ended December 31, 1996 from $4.2 million in the
three months ended December 31, 1995. Selling, general and administrative
expenditures increased to $10.8 million for the six months ended December 31,
1996 from $7.8 million for the six months ended December 31, 1995. The increases
in selling costs were primarily due to increased personnel-related costs for
increased sales staff in the U.S. and Asia, additional commissions due to
distributors and sales representatives as a result of higher sales through such
channels and increased promotional activities. Selling, general and
administrative expenditures as a percentage of net sales increased to 11% of net
sales from 10% of net sales in the both the three and six months ended December
31, 1996 and 1995. The Company expects to continue to increase selling, general
and administrative expenditures in order to support its broadening product lines
to a larger number of customers and as a result of increased sales efforts
directed at leading PC systems manufacturers.
Interest Income, Net
The amount of interest income earned by the Company varies directly
with the amount of its cash, cash equivalents, short-term investments and
long-term investments and the prevailing interest rates. Interest income
decreased slightly in the six months ended December 31, 1996 from same prior
year period as a result of lower average cash levels invested by the Company due
to the $13.7 million foundry venture contribution that occurred in January 1996.
A portion of the interest income earned by the Company was in tax exempt
instruments which are not subject to federal income taxes.
Provision for Income Taxes
As a percentage of income before income taxes, the provision for
income taxes was 32% for the both the three months and six month periods ended
December 31, 1996 and 1995. The effective income tax rates were below the U.S.
statutory rate primarily because operations in foreign countries were subject
to lower income tax rates and a portion of earned interest was not subject to
U.S. federal income tax.
-9-
<PAGE> 10
CERTAIN FACTORS AFFECTING THE COMPANY'S BUSINESS
Certain statements herein are forward looking statements, including
those regarding the Company's intention to continue to introduce new products,
expected sales to Asian customers, the Company's expectations regarding pricing
pressures and the Company's plan to invest in research and development and in
selling, general, and administrative. The actual results could vary from the
Company's expectations, and are subject to a number of risks and dependent on a
variety of factors, including those set forth below.
The Company's business is influenced by a variety of factors which
include the overall market for desktop and notebook PC computers, the general
economic climate, the success of the Company's customers and their resultant net
orders, seasonal customer demand, timing of new product introductions,
marketplace acceptance of new product offerings, overall product mix,
competitors' activities and the availability of foundry and assembly capacities.
The Company's future operating results are also influenced by its dynamic
product area and by its planned growth in expenditures and the relation of
planned increased expenses to future operating results as well as by a variety
of global, political, regulatory and foreign exchange factors. These factors
will all affect the Company's results and there can be no assurance of the
Company's future operating results.
The Company supplies components to a variety of OEM customers that in
turn sell their products into the overall PC marketplace. Their success
influences the overall net orders that the Company may receive and attempt to
fill. Should there be a downturn in the overall PC business or should the
existing customers not be in a position to place orders or to accept order
fulfillment, the Company's performance would be adversely impacted and there can
be no assurance that the Company would be successful in achieving offsetting
orders. The success of the Company's marketing and sales efforts can also be
affected by changes in the global graphics marketplace. Because the Company's
customers distribute their products worldwide, such factors as shifts in market
share from Asian clone makers to other manufacturers have in the past affected
the Company's operating results. It is likely that future shifts would continue
to influence the Company's business. Since a substantial portion of the
Company's revenues has been and are expected to continue to be generated from
customers in Asia, it is likely that the Company's operating results will
fluctuate with changes in the Asian economies, particularly those of Taiwan and
Hong Kong. Past performance has indicated that seasonal performance variations
should be expected with the historic slowest PC sales occurring during the
summer. This factor influences when the Company's customers place their orders
and when delivery is required.
Because the Company operates in the increasingly competitive graphics
controller product area, timely introductions of new products are required. In
order to be able to timely introduce new products a number of risk factors have
to be overcome. A fundamental business risk is whether or not the Company can
continue to develop products that will be accepted by a fast-changing
marketplace. The Company attempts to determine which products have a high
likelihood of marketplace acceptance and attempts to create functional and
manufacturable designs for those products. However, the Company can not assure
that product development, the timing of the product introductions or the
marketplace acceptance of current products or of products to be developed will
be successful. The Company continues to invest in research and development and
in the personnel required to support new product introductions and new customers
including leading PC systems manufacturers. Should there be a shortfall in the
Company's business performance, the Company's financial results would be
adversely impacted by the planned growth in expenditures. Additional influences
on the Company's performance will be the actions of existing or future
competitors, the development of new technologies, the incorporation of graphics
functionality into other PC
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<PAGE> 11
system components and possible claims by third parties of infringement of patent
or similar intellectual property rights.
The Company relies upon several independent foundries to manufacture
its products either in finished or in wafer form, and orders production either
on contract or spot basis. The Company's ability to supply product to its
customers is thus dependent upon its continuing relationships with those
foundries and in turn upon their uninterrupted ability to supply the Company's
product. In calendar year 1995, there was a worldwide shortage of advanced
process technology foundry capacity. To respond to this shortage, the Company
entered into a number of contracts providing for additional capacity. Certain of
such contracts require substantial advance payments. There can be no assurance
that the Company will obtain sufficient foundry capacity to meet customer
demands in the future, particularly if that demand should increase, or that the
additional capacity from current foundries and new foundry sources will be
available and will satisfy the Company's requirements on a timely basis or at
acceptable quality or per unit prices.
The Company's products are assembled and tested by a variety of
independent subcontractors. The Company's reliance on independent assembly and
testing houses to provide these services involves a number of risks, including
the absence of guaranteed capacity and reduced control over delivery schedules,
quality assurance and costs.
Constraints or delays in the supply of the Company's products, whether
due to the factors above or to other unanticipated factors, could have adverse
effects on the Company's results. Such adverse effects could include the Company
electing to purchase products from higher cost sources and which could result in
lower orders, or inability to fulfill orders, resulting in the loss of orders.
The market price of the Company's Common Stock has been, and may
continue to be, extremely volatile. Factors such as new product announcements by
the Company or its competitors, quarterly fluctuations in the Company's
operating results, the performance of leading PC manufacturers and general
conditions in the high technology and in the graphics controller market may have
a significant impact on the market price of the Company's Common Stock.
The Company has recently experienced a period of significant growth,
which has and could continue to strain its limited personnel, financial and
other resources. In particular, the sale and distribution of products to
numerous leading PC systems manufacturers in diverse markets and the
requirements of such manufacturers for design support places substantial demands
on the Company's research and development and sales functions. Continued
expansion of sales and distribution of products to numerous large system
manufacturing customers, should it occur, would require expansion of the
Company's research and development, production and marketing and sales
capabilities. Sales growth, should it occur, will require additional foundry
capacity and the Company has contracted to expand available foundry capacity.
Future results will in part depend upon and could be significantly impacted by
the Company's ability to manage its resources to support future activities and
upon its ability to finance further expanded foundry capitalization and
production costs.
The Company's future operating results also may be affected by various
factors which are beyond the Company's control. These include adverse changes in
general economic conditions, political instability, governmental regulation or
intervention affecting the personal computer industry, government regulation
resulting from U.S. foreign and trade policy, fluctuations in foreign exchange
rates particularly with regard to the relationship of the U.S. dollar and Asian
currencies. The Company is unable to predict future economic, political,
regulatory and foreign exchange changes and cannot determine their impact on
future performance.
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<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1996, the Company's principal sources of liquidity
included cash and cash equivalents of $58.1 million and short-term investments
of $0.5 million.
In the six months ended December 31, 1996, $22.5 million of cash was
provided by operating activities mainly as a result of profitable operations and
adjustment of non-cash expenses, an increase in accrued expenses and other
liabilities and decreases in inventories and prepaid expenses; offset in part by
an increase in accounts receivable and decreases in accounts payable and income
taxes payable. Capital expenditures were $1.1 million for the six month period.
In order to obtain a supply of wafers sufficient to meet possible
increased demand, and especially to obtain wafers manufactured using advanced
process technologies, the Company entered into an agreement in June 1995 with
Taiwan Semiconductor Manufacturing Company ("TSMC"), the Company's major
foundry, under which the Company is committed to purchase and TSMC is committed
to provide a certain number of wafers each year through December 31, 1999. In
addition, the Company has the option to purchase an additional amount of wafers
each year during the period. The Company made a prepayment of $16.8 million in
August 1995. The payment can be applied to partially offset the price of wafers
purchased under the option, but is not refundable except in certain
circumstances. Based on the timing specified in the supply agreement, the
prepayment will be applied at a rate of $4.8 million per year for fiscal years
ending June 30, 1997 through 1999 and $2.4 million for the fiscal year ending
June 30, 2000. During the three months ended September 30, 1996, $2.4 million
was applied against outstanding accounts payable to TSMC. The Company uses the
guideline of FAS 121 to assess whether the value of the prepayment is impaired
periodically.
In August 1995, the Company also entered into a joint venture agreement
with United Microelectronics Corporation ("UMC"), one of the Company's current
foundries, under which the Company is committed to invest approximately $55
million in three installments for certain equity ownership in a joint venture
with UMC and other venture partners to establish a new foundry. The Company made
the first payment amounting to $13.7 million in January 1996. The Company made
an additional contribution of $26 million in January 1997. A remaining payment
under the joint venture agreement is estimated at $15 million during fiscal year
1998. Under the agreement, the new foundry guarantees to the Company a certain
percentage of its total wafer supply. The payments including the final payment
are denominated in Net Taiwan dollars, and therefore the Company bears the risk
and receives the benefit of fluctuations in the Taiwanese dollar until the time
of the final payment. To date, the Company has benefited from changes in the
exchange rate but there can be no assurance that the amount of the final payment
in U.S. dollars will not be increased above the expected amount due to future
fluctuations in the exchange rate.
These investments with TSMC and UMC are intended to secure capacity so
that the Company can meet expected increased demand, should it occur, and are an
investment in the future of the Company. However, there are certain risks
associated with these methods including the ability of the Company to utilize
the capacity for which it has made substantial investments and the ability of
UMC, together with its partners, to successfully build the new foundry. These
agreements and the risks associated with these and other foundry relationships,
are described under the caption "Business-Manufacturing" of the Form 10-K Annual
Report.
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<PAGE> 13
In May 1996, the Company obtained a credit facility of an unsecured
revolving line of credit of $15 million with a maturity date of December 31,
1997. Under the terms of the line of credit , the Company may elect to convert a
portion or the total credit into a three-year term loan. The facility requires
the Company to comply with certain covenants regarding financial ratios and
reporting requirements. There were no borrowings under the line of credit as of
December 31, 1996.
The Company will continue to consider possible transactions to secure
additional foundry capacity when and if circumstances warrant the need. The
aforementioned agreements with TSMC and UMC have utilized a significant amount
of the Company's available funds. However, the Company believes its current
resources are sufficient to meet its needs for at least the next twelve months.
In addition to the $15 million line of credit, the Company regularly considers
transactions to finance its activities, including debt and equity offerings and
new credit facilities or other financing transaction.
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<PAGE> 14
PART II: OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
Not applicable
ITEM 2: CHANGES IN SECURITIES
Not applicable
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4: SUBMISSIONS OF MATTERS TO VOTE BY SECURITY HOLDERS
On December 12, 1996, the Company held its 1996 Annual Meeting of the
Stockholders at the Company in Mountain View, California.
<TABLE>
<CAPTION>
Against / Broker
For Withheld Abstain Non-Votes
---------- -------- ------- ---------
<S> <C> <C> <C> <C>
1. Election of Class I Directors:
Charles Dickinson 10,506,797 210,055 0 0
Yasushi Chikagami 10,685,401 31,451 0 0
2. Ratification of the appointment
of Price Waterhouse LLP as the
Company's independent public
accountants for the fiscal year
ending June 30, 1997: 10,698,096 11,057 0 0
</TABLE>
ITEM 5: OTHER INFORMATION
Not applicable.
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<PAGE> 15
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
The following exhibits are filed with this Form:
Exhibit Description
11.1 Statement Re Computation of Per Share Earnings. (1)
27.1 Financial.Data Schedule. (2)
(1) Filed herewith.
(2) Filed electronically.
The Company did not file any reports on Form 8-K during the quarter
ended December 31, 1996.
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<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on February 11, 1997 on its
behalf by the undersigned thereunto duly authorized.
Trident Microsystems, Inc.
(Registrant)
/s/ Frank C. Lin
- --------------------------------------------------
Frank C. Lin
President, Chief Executive Officer
and Chairman of the Board
(Principal Executive Officer)
/s/ Peter J. Mangan
- --------------------------------------------------
Peter J. Mangan
Corporate Controller
(Principal Financial and Accounting Officer)
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<PAGE> 17
EXHIBIT INDEX
Exhibit Description
11.1 Statement Re Computation of Per Share Earnings. (1)
27.1 Financial.Data Schedule. (2)
(1) Filed herewith.
(2) Filed electronically.
<PAGE> 1
EXHIBIT 11.1
TRIDENT MICROSYSTEMS, INC.
COMPUTATION OF NET INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
--------------------- ---------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Income $ 5,365 $ 5,156 $ 8,890 $ 9,661
------- ------- ------- -------
Weighted average outstanding stocks 12,683 12,120 12,649 12,018
Weighted average incremental common
equivalents from dilutive stock options 1,542 1,471 1,277 1,432
------- ------- ------- -------
Weighted average common and common equivalent shares 14,225 13,591 13,926 13,450
------- ------- ------- -------
Net income per share $ 0.38 $ 0.38 $ 0.64 $ 0.72
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 58,111
<SECURITIES> 475
<RECEIVABLES> 18,631
<ALLOWANCES> 0
<INVENTORY> 19,642
<CURRENT-ASSETS> 106,100
<PP&E> 5,403
<DEPRECIATION> 0
<TOTAL-ASSETS> 135,037
<CURRENT-LIABILITIES> 35,237
<BONDS> 0
0
0
<COMMON> 39,005
<OTHER-SE> 60,795
<TOTAL-LIABILITY-AND-EQUITY> 135,037
<SALES> 51,865
<TOTAL-REVENUES> 51,865
<CGS> 33,452
<TOTAL-COSTS> 33,452
<OTHER-EXPENSES> 11,140
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (618)
<INCOME-PRETAX> 7,891
<INCOME-TAX> 2,526
<INCOME-CONTINUING> 5,365
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,365
<EPS-PRIMARY> .38
<EPS-DILUTED> .38
</TABLE>
