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 QUARTAR ENDED SEPTEMBER 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
incorporation or organization) Identification Number)
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 September 30, 1996, Registrant had outstanding 98,309,211 shares of Common
Stock.
<PAGE>
ATMEL CORPORATION
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1996
INDEX
Page
----
Part I: Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at September 30,
1996 and December 31, 1995 1
Condensed Consolidated Income Statements for the
three and nine month periods ended September 30,
1996 and September 30, 1995 2
Consolidated Statements of Cash Flows for the nine
months ended September 30, 1996 and September 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
-i-
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
Atmel Corporation
Condensed Consolidated Balance Sheets
(Dollars in thousands)
<CAPTION>
September 30, 1996 December 31, 1995
------------------ -----------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 108,637 $105,534
Short-term investments 62,995 74,454
Accounts receivable, net 158,867 101,599
Inventories 65,575 48,542
Prepaid taxes and other current assets 45,157 35,933
---------- --------
Total current assets 441,231 366,062
Other assets 15,981 9,684
Long-term investments 87,991 71,590
Fixed assets, net 813,233 472,285
---------- --------
Total assets $1,358,436 $919,621
========== ========
Current liabilities:
Current portion of long-term debt $ 71,659 $ 47,203
Trade accounts payable and other accrued liabilities 245,854 154,549
Income taxes payable 12,534 9,765
Deferred income on shipments to distributors 31,807 21,948
---------- --------
Total current liabilities 361,854 233,465
Long-term debt less current portion 244,221 88,455
Deferred income taxes 8,933 8,933
Put warrants 73,099 0
Shareholders' equity:
Common stock 273,643 340,160
Retained earnings 396,686 248,608
---------- --------
Total shareholders' equity 670,329 588,768
---------- --------
Total liabilities and shareholders' equity $1,358,436 $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 Nine Months Ended
(Unaudited) (Unaudited)
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net revenues $280,332 $168,784 $789,176 $433,950
Expenses:
Cost of sales 141,511 86,131 397,113 222,395
Research and development 29,239 17,142 81,104 48,228
Selling, general and administrative 29,359 19,674 86,392 52,039
-------- -------- -------- --------
Total expenses 200,109 122,947 564,609 322,662
Operating income 80,223 45,837 224,567 111,288
Interest income, net 816 1,447 2,934 3,208
-------- -------- -------- --------
Income before taxes 81,039 47,284 227,501 114,496
Taxes on income 28,161 16,077 79,423 38,929
-------- -------- -------- --------
Net income $ 52,878 $ 31,207 $148,078 $ 75,567
======== ======== ======== ========
Earnings per share $0.53 $0.31 $1.48 $0.78
======== ======== ======== ========
Common shares and equivalents 100,695 100,513 100,392 96,862
======== ======== ======== ========
<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>
Nine Months Ended
September 30,
1996 1995
---- ----
<S> <C> <C>
Cash from operating activities
Net income $ 148,078 $ 75,567
Items not requiring the use of cash
Depreciation and amortization 76,786 41,355
Other (749) 0
Changes in operating assets and liabilities
Accounts receivable (57,704) (10,718)
Inventories (17,034) (2,587)
Prepaid taxes and other assets (9,224) (1,525)
Trade accounts payable and other accrued liabilities 100,882 (24,309)
Income taxes payable 2,768 12,001
Deferred income on shipments to distributors 9,859 3,244
--------- ---------
Net cash provided by operating activities 253,662 93,028
--------- ---------
Cash from investing activities
Acquisition of fixed assets (419,575) (143,877)
Acquisition of other assets (11,246) (9,334)
Purchase of investments (72,469) (52,786)
Sale or maturity of investments 67,528 40,754
--------- ---------
Net cash used by investing activities (435,762) (165,243)
--------- ---------
Cash from financing activities
Issuance of common stock 9,037 110,746
Issuance of notes payable 38,990 15,984
Principal payments on notes (1,498) (1,173)
Proceeds from capital leases 182,345 45,465
Principal payments on capital leases (38,591) (27,837)
--------- ---------
Net cash provided by financing activities 190,283 143,185
--------- ---------
Effect of foreign currency translation adjustment (5,080) 0
--------- ---------
Net cash provided 3,103 70,970
Cash at beginning of period 105,534 35,556
--------- ---------
Cash at end of period $ 108,637 $ 106,526
========= =========
Interest paid $ 8,280 $ 5,875
Issuance of common stock for purchase of other assets $ 2,625 $ 2,879
Income taxes paid $ 78,309 $ 21,231
Fixed asset purchases in accounts payable $ 5,836 $ 18,154
<FN>
The accompanying notes are an integral part of these
consolidated financial statements.
</FN>
</TABLE>
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<PAGE>
Atmel Corporation
Notes to Consolidated Financial Statements
September 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 September 30, 1996 and the results
of operations and cash flows for the three month and nine month periods ended
September 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.
September 30, 1996 December 31, 1995
------------------ -----------------
Materials and purchased parts $11,193 $ 6,340
Work in progress 54,382 42,202
------- -------
Total $65,575 $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 nine months ended September 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 September 30, 1996. There was no
impact on earnings per share in the nine months ended September 30, 1996 and no
warrants were exercisable during that period.
-4-
<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
nine months ended September 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 Condition 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 and present 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
The following table sets forth for the periods indicated certain operating data
as a percentage of total revenues:
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
Net revenues 100.0% 100.0% 100.0% 100.0%
Expenses
Cost of sales 50.5 51.0 50.3 51.2
Research and development 10.4 10.2 10.3 11.1
Selling, general and administrative 10.5 11.7 10.9 12.0
----- ----- ----- ------
Total expenses 71.4 72.9 71.5 74.3
Operating income 28.6 27.1 28.5 25.7
Interest income, net 0.3 0.8 0.4 0.7
----- ----- ----- ------
Income before taxes 28.9 27.9 28.9 26.4
Taxes on income 10.0 9.5 10.1 9.0
----- ----- ----- ------
Net income 18.9% 18.4% 18.8% 17.4%
===== ===== ===== =====
Net revenues increased 66.1 percent to $280.3 million in the quarter ended
September 30, 1996 from $168.8 million in the corresponding quarter of 1995. The
majority of this growth was from the
-5-
<PAGE>
Company's products sold primarily to the computer peripheral, telecommunication
and consumer markets. Net revenues for the first nine months ended September 30,
1996 grew 81.9 percent to $789.2 million over the same period last year from
$433.9 million. Similar to the quarter ended September 30, 1996, the majority of
this growth was due to the increase in the unit volume sales of the Company's
products as well as from the inclusion of revenues from Atmel ES2, the Company's
subsidiary acquired in April 1995. The Company's book-to-bill ratio fell below
1.0 during the third quarter of 1996 due principally to weakness and increased
competition for EPROM products, as well as reflecting the downturn experienced
by the semiconductor industry in the first nine months of 1996. The company
believes that 1996 fourth quarter revenues and earnings could be flat with the
third quarter of 1996. A continuation of current industry conditions could
adversely affect the Company's operating results.
Cost of sales as a percentage of net revenues declined to 50.5 percent in the
third quarter of 1996, from 51.0 percent in the corresponding period of 1995 and
for the first nine months to 50.3 percent in 1996 from 51.2 percent in the
corresponding period in 1995. The decrease in cost of sales as a percentage of
net revenues was primarily due to increased unit output from the Company's
manufacturing facilities worldwide. Cost of sales could be negatively impacted
if the Company is unable to utilize the capacity from its Colorado Springs
facility or the facility that is under construction in Rousset, France.
As a percentage of revenues, research and development increased to 10.4 percent
in the third quarter of 1996, from 10.2 percent in the corresponding quarter of
1995. As a percentage of revenues, research and development for the first nine
months of 1996 decreased to 10.3 percent from 11.1 percent. The decrease is
primarily due to a large portion of the cost associated with the new fabrication
facility in Colorado Springs, Colorado which was allocated to research and
development expense in 1995. Research and development expense increased 70.6
percent from $17.1 million in the third quarter of 1995 to $29.2 million in the
third quarter of 1996. Research and development expense for the first nine
months of 1996 increased 68.2 percent to $81.1 million from $48.2 million in the
corresponding period of 1995. The increase was primarily due to increased
staffing and related costs to support the Company's ongoing program to reduce
the size of its integrated circuits, currently from 0.6 micron to 0.5 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, and support new emerging markets
with advanced products.
Selling, general and administrative expense increased 49.2 percent to $29.4
million in the third quarter of 1996 from $19.7 million in the third quarter of
1995, while declining as a percentage of revenues from 11.7 percent in 1995 to
10.5 percent in 1996. Selling, general and administrative expense for the first
nine months of 1996 increased 66.0 percent to $86.4 million from $52.0 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.
Interest income from the Company's investment in treasury bonds, municipal
securities, corporate bonds, and money market funds, 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.
-6-
<PAGE>
The Company's effective tax rate for the first nine months increased to 34.9
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
Net income of $52.9 million for the third quarter of 1996 increased by 69.4
percent from $31.2 million in the corresponding period of the prior year. Net
income for the first nine months of 1996 increased 96.0 percent to $148.1
million from $75.6 million of the corresponding period of 1995.
Liquidity and Capital Resources
At September 30, 1996, the Company had $171.6 million in cash and short-term
investments, a decrease of $8.4 million from December 31, 1995, and $79.4
million in net working capital, a decrease of $53.2 million from December 31,
1995. At September 30, 1996, the Company had long-term investments of $88.0
million, an increase of $16.4 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
September 30, 1996, Atmel ES2 has drawn down $87.0 million from the foregoing
financing arrangement. During the nine months ended September 30, 1996, the
Company obtained $123.8 million of lease financing for a period of four to eight
years. The average annual interest rate on this lease financing is 6.73%. At
September 30, 1996 the long-term debt as a percentage of shareholders' equity
increased to 36.4 percent compared to 15 percent at December 31, 1995.
During the nine months ended September 30, 1996, the Company generated net cash
flows from operations of $253.7 million and made fixed assets additions of
approximately $419.6 million, principally for expanding manufacturing capacities
at Colorado Springs, Colorado and Rousset, France. The Company currently plans
to spend an additional $100.0 million through 1996 for completion of its new
manufacturing facility in France.
The Company believes that its existing cash balance in excess of $250.0 million,
together with cash flows from operations and other funding sources currently in
place should be sufficient to meet the Company's liquidity and capital
requirements through June 1997. 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
There were no matters submitted to a vote of securities holders during the
quarter ended September 30, 1996.
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
September 30, 1996.
-8-
<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)
November 12, 1996 /s/ GEORGE PERLEGOS
---------------------------------------------
George Perlegos
President, Chief Executive Officer
(Principal Executive Officer)
November 12, 1996 /s/ KRIS CHELLAM
---------------------------------------------
Kris Chellam
Vice President, Finance and Administration
(Principal Financial and Accounting Officer)
-9-
EXHIBIT 11.1
Atmel Corporation
Statement of Computation of Earnings Per Share
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
Weighted average shares outstanding
for the period
Common stock 98,100 96,911 97,831 93,679
Dilutive employee stock options
and warrants 2,595 3,602 2,561 3,183
------- ------- ------- -------
Total common and common
equivalent shares 100,695 100,513 100,392 96,862
======= ======= ======== =======
Net income $52,878 $31,207 $148,078 $75,567
======= ======= ======== =======
Earnings per share $ 0.53 $ 0.31 $ 1.48 $ 0.78
======= ======= ======== =======
Fully diluted earnings per share does not differ significantly from primary
earnings per share.
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 108,637
<SECURITIES> 62,995
<RECEIVABLES> 158,867
<ALLOWANCES> 0
<INVENTORY> 65,575
<CURRENT-ASSETS> 441,231
<PP&E> 813,233
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,358,436
<CURRENT-LIABILITIES> 361,854
<BONDS> 0
<COMMON> 273,643
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,358,436
<SALES> 280,332
<TOTAL-REVENUES> 280,332
<CGS> 141,511
<TOTAL-COSTS> 200,109
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 81,039
<INCOME-TAX> 28,161
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52,878
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.53
</TABLE>
