UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
====== EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JUNE 30, 1996
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 0-19032
ATMEL CORPORATION
(Registrant)
California 77-0051991
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
2325 Orchard Parkway, San Jose, California 95131
(Address of principal executive offices)
(408) 441-0311
Registrant's telephone number
Indicate by a 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
----- -----
On June 30, 1996, Registrant had outstanding 98,022,907 shares of Common Stock.
<PAGE>
<TABLE>
ATMEL CORPORATION
FORM 10-Q
QUARTER ENDED JUNE 30, 1996
INDEX
-----
<CAPTION>
Page
----
<S> <C> <C>
Part I: Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at June 30, 1996 and December 31,
1995 1
Condensed Consolidated Income Statements for the
three and six month periods ended June 30, 1996
and June 30, 1995 2
Consolidated Statements of Cash Flows for the six months ended June 30,
1996 and June 30, 1995 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Part II: Other Information
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 10
</TABLE>
-i-
<PAGE>
<TABLE>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Atmel Corporation
Condensed Consolidated Balance Sheets
(Dollars in thousands)
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 98,177 $ 105,534
Short-term investments 63,672 74,454
Accounts receivable, net 129,743 101,599
Inventories 65,165 48,542
Prepaid taxes and other current assets 47,719 35,933
---------- ----------
Total current assets 404,476 366,062
Other assets 17,370 9,684
Long-term investments 95,238 71,590
Fixed assets, net 700,730 472,285
---------- ----------
Total assets $1,217,814 $ 919,621
========== ==========
Current liabilities:
Current portion of long-term debt $ 62,278 $ 47,203
Trade accounts payable and other accrued liabilities 231,036 154,549
Income taxes payable 4,150 9,765
Deferred income on shipments to distributors 32,128 21,948
---------- ----------
Total current liabilities 329,592 233,465
Long-term debt less current portion 191,789 88,455
Deferred income taxes 8,933 8,933
Put warrants 73,099 0
Shareholders' equity:
Common stock 270,593 340,160
Retained earnings 343,808 248,608
---------- ----------
Total shareholders' equity 614,401 588,768
---------- ----------
Total liabilities and shareholders' equity $1,217,814 $ 919,621
========== ==========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
-1-
<PAGE>
<TABLE>
Atmel Corporation
Condensed Consolidated Income Statements
(Amounts in thousands, except per share data)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues $268,748 $145,906 $508,844 $265,166
Expenses:
Cost of sales 134,959 74,873 255,602 136,264
Research and development 28,009 16,745 51,865 31,086
Selling, general and administrative 29,424 18,229 57,033 32,365
--------- --------- --------- ----------
Total expenses 192,392 109,847 364,500 199,715
--------- --------- --------- ----------
Operating income 76,356 36,059 144,344 65,451
Interest income, net 1,016 1,112 2,118 1,761
--------- --------- --------- ---------
Income before taxes 77,372 37,171 146,462 67,212
Taxes on income 27,081 12,638 51,262 22,852
--------- --------- --------- ----------
Net income $ 50,291 $ 24,533 $ 95,200 $ 44,360
========= ========= ========= ==========
Earnings per share $ 0.50 $ 0.26 $ 0.95 $ 0.47
========= ========= ========= ==========
Common shares and equivalents 100,896 95,790 100,634 95,020
========= ========= ========= ==========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
-2-
<PAGE>
<TABLE>
Atmel Corporation
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
<CAPTION>
Six Months Ended
June 30,
1996 1995
---- ----
<S> <C> <C>
Cash from operating activities
Net income $ 95,200 $ 44,360
Items not requiring the use of cash
Depreciation and amortization 49,320 25,955
Other 638 0
Changes in operating assets and liabilities
Accounts receivable (29,447) (9,395)
Inventories (16,624) (1,139)
Prepaid taxes and other assets (11,786) (948)
Trade accounts payable and other accrued liabilities 78,264 (17,434)
Income taxes payable (5,616) 3,539
Deferred income on shipments to distributors 10,180 1,649
----------- -----------
Net cash provided by operating activities 170,129 46,587
----------- -----------
Cash from investing activities
Acquisition of fixed assets (273,352) (101,841)
Acquisition of other assets (11,251) (9,083)
Purchase of investments (51,806) (13,432)
Sale or maturity of investments 38,941 16,443
----------- -----------
Net cash used by investing activities (297,468) (107,913)
----------- -----------
Cash from financing activities
Issuance of common stock 5,185 108,156
Principal payments on notes (936) (784)
Proceeds from capital leases and notes 143,967 18,056
Principal payments on capital leases (23,956) (17,687)
------------ -----------
Net cash provided by financing activities 124,260 107,741
----------- -----------
Effect of foreign currency translation adjustment (4,278) 0
----------- -----------
Net cash provided (used) (7,357) 46,415
Cash at beginning of period 105,534 35,556
----------- -----------
Cash at end of period $ 98,177 $ 81,971
=========== ===========
Interest paid $ 4,843 $ 3,587
Issuance of common stock for purchase of other assets $ 2,625 $ 0
Income taxes paid $ 57,303 $ 13,882
Fixed asset purchases in accounts payable $ 13,636 $ 8,910
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
-3-
<PAGE>
Atmel Corporation
Notes to Consolidated Financial Statements
June 30, 1996
(Dollars in thousands)
(Unaudited)
1. Basis of Presentation and Accounting Policies
These unaudited interim financial statements reflect all normal recurring
adjustments which are, in the opinion of management, necessary to present
fairly, in all material respects, the financial position of Atmel Corporation
(Company or Atmel) and its subsidiaries as of June 30, 1996 and the results of
operations and cash flows for the three month and six month periods ended June
30, 1996 and 1995. Because all of the disclosures required by generally accepted
accounting principles are not included, these interim statements should be read
in conjunction with the audited financial statements and notes thereto in the
Company's Annual Report to Shareholders for the year ended December 31, 1995.
The year-end condensed balance sheet data was derived from the audited financial
statements and does not include all of the disclosures required by generally
accepted accounting principles. The income statements for the periods presented
are not necessarily indicative of results to be expected for any future period,
nor for the entire year.
2. Inventories
Inventories are stated at the lower of cost (first-in, first-out for materials
and purchased parts and average cost for work in progress) or market.
June 30, 1996 December 31, 1995
------------- -----------------
Materials and purchased parts $ 9,348 $ 6,340
Work in progress 55,817 42,202
-------- ---------
Total $65,165 $48,542
======== =========
3. Earnings Per Share
Earnings per share is computed using the weighted average number of common and
common equivalent shares outstanding during the period. Common equivalent shares
consist of outstanding stock options.
4. Put Warrants
In connection with the Company's stock repurchase program, put warrants were
sold to an independent third party during the six months ended June 30, 1996.
The put warrants entitle the holder to sell shares of Atmel common stock to the
Company at specified prices. The Company received $9,223 from the sale of the
put warrants. The warrants expire at various dates between January 22, 1997 and
May 28, 1997 and may be settled in cash at Atmel's option. The maximum potential
repurchase obligation of $73,099 has been reclassified from shareholders' equity
to put warrants as of June 30, 1996. There was no impact on earnings per share
in the six months ended June 30, 1996 and no warrants were exercised during that
period.
<PAGE>
Additionally, during the same period the Company used the proceeds from the sale
of the put warrants to purchase call warrants. These warrants entitle the
Company to buy from the same independent third party shares of Atmel common
stock. The call warrants have similar expiry dates as the put warrants and may
be settled in cash at Atmel's option. No call warrant was exercised during the
six months ended June 30, 1996.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Investors are cautioned that the Management's Discussion and Analysis of
Financial Conditions and Results of Operation contains certain trend analysis
and other forward-looking statements that involve risks and uncertainties.
Actual events and results may differ materially due to the effect of changing
economic conditions, conditions in the overall semiconductor market (including
the historic cyclicality of the industry), product demand and market acceptance
risks, the impact of competitive products and pricing, product development and
technological risks and other risk factors identified from time to time in the
Company's Security and Exchange Commission filings.
Results of Operations
<TABLE>
The following table sets forth for the periods indicated certain operating data
as a percentage of total revenues:
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues 100.0% 100.0% 100.0% 100.0%
Expenses
Cost of sales 50.2 51.3 50.2 51.4
Research and development 10.4 11.5 10.2 11.7
Selling, general and administrative 11.0 12.5 11.2 12.2
------ ------ ------ ------
Total expenses 71.6 75.3 71.6 75.3
Operating income 28.4 24.7 28.4 24.7
Interest income, net 0.4 0.8 0.4 0.7
------ ------ ------ ------
Income before taxes 28.8 25.5 28.8 25.4
Taxes on income 10.1 8.7 10.1 8.6
------ ------ ------ ------
Net income 18.7% 16.8% 18.7% 16.8%
====== ====== ====== ======
</TABLE>
Net revenues increased 84.2 percent to $268.7 million in the quarter ended June
30, 1996 from $145.9 million in the corresponding quarter of 1995. The majority
of this growth was from increases in unit
-5-
<PAGE>
volume of Flash and EPROM products sold to the computer peripheral,
telecommunication and consumer markets, particularly in Asia and Japan. Net
revenues for the first six months ended June 30, 1996 grew 91.9 percent to
$508.8 million over the same period last year from $265.2 million. Similar to
the quarter ended June 30, 1996, the majority of this growth was from increases
in unit volume of Flash and EPROM products sold as well as from the inclusion of
revenues from Atmel ES2, the Company's subsidiary acquired in April 1995.
Cost of sales as a percentage of net revenues declined to 50.2 percent in the
second quarter of 1996, from 51.3 percent in the corresponding period of 1995
and for the first six months to 50.2 percent from 51.4 percent. The decrease in
cost of sales as a percentage of net revenues was primarily due to increased
unit output from the Company's new fabrication facility in Colorado Springs,
Colorado, resulting in lower fixed costs attributed to each product. Cost of
sales could be negatively impacted if the Company is unable to utilize the
additional capacity from its Colorado Springs facility or the facility that is
under construction in Rousset, France.
As a percentage of revenues, research and development decreased to 10.4 percent
in the second quarter of 1996, from 11.5 percent in the corresponding quarter of
1995 and for the first six months to 10.2 percent from 11.7 percent. In 1995, a
large portion of the cost associated with the new fabrication facility in
Colorado Springs, Colorado was allocated to research and development expense due
to the early phase of manufacturing ramp up. Research and development expense
increased 67.3 percent from $16.7 million in the second quarter of 1995 to $28.0
million in the second quarter of 1996. Research and development expense for the
first six months of 1996 increased 66.8 percent to $51.9 million from $31.1
million in the corresponding period of 1995. The increase was primarily due to
the Company's ongoing program to reduce the size of its integrated circuits,
currently from 0.6 micron to 0.35 micron line widths; enhancement of mature
products; development of new products and advanced CMOS and BiCMOS process
technology. The Company believes that continued investment in process technology
and product development are essential for it to remain competitive in the
markets it serves.
Selling, general and administrative expense increased 61.4 percent to $29.4
million in the second quarter of 1996 from $18.2 million in the second quarter
of 1995, while declining as a percentage of revenues from 12.5 percent in 1995
to 11.0 percent in 1996. Selling, general and administrative expense for the
first six months of 1996 increased 76.2 percent to $57.0 million from $32.4
million in the corresponding period of 1995. The increase in expenditures is due
to the addition of sales and administrative personnel to meet the growth of the
Company's business as well as expenses incurred with the move of the Company's
offices in San Jose, California, during April 1996.
Interest income, net of interest expense on capital lease financing and other
borrowings and net of foreign exchange gain/loss from the movements of the
United States dollar, particularly against the Japanese Yen, has remained
relatively constant for the periods under comparison as a larger average cash
balance offset lower interest rates in 1996.
The Company's effective tax rate for the first six months increased to 35.0
percent from 34.0 percent of the corresponding period of 1995. The increase was
primarily due to the expiration of federal research and development credit.
-6-
<PAGE>
Net income of $50.3 million for the second quarter of 1996 increased by 105.0
percent from $24.5 million in the corresponding period of the prior year. Net
income for the first six months of 1996 increased 114.6 percent to $95.2 million
from $44.4 million of the corresponding period of 1995.
Liquidity and Capital Resources
At June 30, 1996, the Company had $161.8 million in cash and short-term
investments, a decrease of $18.1 million from December 31, 1995, and $74.9
million in net working capital, a decrease of $57.7 million from December 31,
1995. At June 30, 1996, the Company had long-term investments of $95.2 million,
an increase of $23.6 million from December 31, 1995. In addition, Atmel ES2, the
Company's subsidiary located in Rousset, France, has obtained approximately
$65.0 million of long-term financing, plus an option to obtain an additional
$80.0 million medium-term credit line from a consortium of banks and insurance
companies. The Company is the guarantor of this financing. As of June 30, 1996,
Atmel ES2 has drawn down $52.1 million from the foregoing financing arrangement.
During the six months ended June 30, 1996, the Company obtained $66.9 million of
lease financing for a period of four to eight years. The average annual interest
rate on this lease financing is 6.5%. In April 1996, the Company also obtained
approximately $25 million of long-term financing from a Japanese bank. This $25
million loan is denominated in Japanese Yen and matures in April 1999. The loan
requires monthly interest only payment at an interest rate of 2.62% per annum.
During the six months ended June 30, 1996, the Company generated net cash flows
from operations of $170.1 million and made fixed assets additions of
approximately $273.4 million, principally for expanding fabrication capacities
at Colorado Springs, Colorado and Rousset, France. The Company currently plans
to spend an additional $150.0 million through 1996 to continue the expansion of
its wafer fabrication facilities.
The Company believes that its existing sources of liquidity, together with cash
flows from operations, should be sufficient to meet the Company's liquidity and
capital requirements through 1996. The Company may, however, seek additional
equity or debt financing to fund the expansion of its wafer fabrication capacity
or other projects; the timing and amount of such capital requirements cannot be
precisely determined at this time.
-7-
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Securities Holders
At the Company's Annual Meeting of Stockholders held on April 24, 1996, the
following matters were voted upon by stockholders pursuant to proxies solicited
pursuant to Regulation 14A:
The following individuals were elected to the Board of Directors:
Votes For Votes Withheld
---------- --------------
George Perlegos 74,784,834 1,081,989
Gust Perlegos 74,768,822 1,098,001
Tsung-Ching Wu 74,742,453 1,124,370
Norm Hall 74,292,474 1,574,349
T. Peter Thomas 74,879,599 987,224
<TABLE>
The following proposals were approved at the Company's Annual Meeting of
Stockholders:
<CAPTION>
Affirmative Negative
Votes Votes Abstained
----------- -------- ---------
<C> <C> <C> <C> <C>
1. Approval of the Company's 1996 Stock Plan and
reservation of 4,000,000 shares of Common Stock for
issuance thereunder 69,391,578 5,564,322 151,218
2. Ratify the appointment of Coopers & Lybrand LLP as
independent auditors for the fiscal year ending
December 31, 1996 75,523,881 56,506 85,136
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits:
11.1 Statement of Computation of Earnings Per Share.
(B) Reports on Form 8-K:
There were no reports filed on Form 8-K during the quarter ended June
30, 1996.
-8-
EXHIBIT 11.1
<TABLE>
Atmel Corporation
Statement of Computation of Earnings Per Share
(In thousands, except per share data)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average shares outstanding for the period
Common stock 97,872 92,750 97,696 92,064
Dilutive employee stock options and warrants 3,024 3,040 2,938 2,956
--------- --------- --------- ---------
Total common and common equivalent shares 100,896 95,790 100,634 95,020
========= ========= ========= =========
Net income $ 50,291 $ 24,533 $ 95,200 $ 44,360
========= ========= ========= =========
Earnings per share $ 0.50 $ 0.26 $ 0.95 $ 0.47
========= ========= ========= =========
</TABLE>
Fully diluted earnings per share does not differ significantly from primary
earnings per share.
-9-
<PAGE>
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.
ATMEL CORPORATION
-------------------------------------------
(Registrant)
August 12, 1996 /s/ GEORGE PERLEGOS
-------------------------------------------
George Perlegos
President, Chief Executive Officer
(Principal Executive Officer)
August 12, 1996 /s/ KRIS CHELLAM
-------------------------------------------
Kris Chellam
Vice President, Finance and Administration
(Principal Financial and Accounting Officer)
-10-
<PAGE>
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.
ATMEL CORPORATION
-------------------------------------------
(Registrant)
August , 1996
-------------------------------------------
George Perlegos
President, Chief Executive Officer
(Principal Executive Officer)
August , 1996
-------------------------------------------
Kris Chellam
Vice President, Finance and Administration
(Principal Financial and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 98,177
<SECURITIES> 63,672
<RECEIVABLES> 129,743
<ALLOWANCES> 0
<INVENTORY> 65,165
<CURRENT-ASSETS> 404,476
<PP&E> 700,730
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,217,814
<CURRENT-LIABILITIES> 329,592
<BONDS> 0
<COMMON> 270,593
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,217,814
<SALES> 508,844
<TOTAL-REVENUES> 508,844
<CGS> 255,602
<TOTAL-COSTS> 364,500
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 146,462
<INCOME-TAX> 51,262
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 95,200
<EPS-PRIMARY> 0.95
<EPS-DILUTED> 0.95
</TABLE>
