<PAGE> 1
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 SEPTEMBER 30, 1997
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
incorporation or organization) 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, 1997, REGISTRANT HAD OUTSTANDING 99,638,591 SHARES OF COMMON
STOCK.
<PAGE> 2
ATMEL CORPORATION
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at September 30,
1997 and December 31, 1996 1
Condensed Consolidated Income Statements for the three and
nine month periods ended September 30, 1997 and September
30, 1996 2
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1997 and September 30, 1996 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 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
</TABLE>
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PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ATMEL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
(Unaudited)
------------------ -----------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 166,691 $ 104,113
Short-term investments 63,135 53,165
Accounts receivable, net 260,609 174,515
Inventories 124,296 70,320
Prepaid taxes and other current assets 84,510 57,910
---------- ----------
TOTAL CURRENT ASSETS 699,241 460,023
Other assets 27,218 23,849
Long-term investments 102,033 104,619
Fixed assets, net 989,800 867,423
---------- ----------
TOTAL ASSETS $1,818,292 $1,455,914
========== ==========
CURRENT LIABILITIES:
Current portion of long-term debt $ 74,905 $ 71,615
Trade accounts payable and other accrued liabilities 237,701 236,852
Income taxes payable 10,444 0
Deferred income on shipments to distributors 27,946 27,935
---------- ----------
TOTAL CURRENT LIABILITIES 350,996 336,402
Long-term debt less current portion 529,735 278,576
Deferred income taxes 22,935 22,935
---------- ----------
TOTAL LIABILITIES 903,666 637,913
Put warrants 16,200 28,250
SHAREHOLDERS' EQUITY:
Common stock 351,601 339,421
Retained earnings 546,825 450,330
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 898,426 789,751
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,818,292 $1,455,914
========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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<PAGE> 4
ATMEL CORPORATION
CONDENSED CONSOLIDATED INCOME STATEMENTS
(Amounts in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
(Unaudited) (Unaudited)
------------------------ -----------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET REVENUES $ 240,050 $ 280,332 $ 717,932 $ 789,176
EXPENSES:
Cost of sales 135,572 141,511 397,849 397,113
Research and development 29,624 29,239 88,152 81,104
Selling, general and administrative 24,459 29,359 74,763 86,392
--------- --------- --------- ---------
TOTAL EXPENSES 189,655 200,109 560,764 564,609
Operating income 50,395 80,223 157,168 224,567
Interest and other income (expense), net (3,701) 816 (8,715) 2,934
--------- --------- --------- ---------
Income before taxes 46,694 81,039 148,453 227,501
Taxes on income 16,345 28,161 51,958 79,423
--------- --------- --------- ---------
NET INCOME $ 30,349 $ 52,878 $ 96,495 $ 148,078
========= ========= ========= =========
EARNINGS PER SHARE $ 0.30 $ 0.53 $ 0.95 $ 1.48
========= ========= ========= =========
COMMON SHARES AND EQUIVALENTS 102,136 100,695 101,742 100,392
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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ATMEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------
1997 1996
--------- ---------
<S> <C> <C>
CASH FROM OPERATING ACTIVITIES
Net income $ 96,495 $ 148,078
Items not requiring the use of cash
Depreciation and amortization 111,093 76,786
Other 13,870 (749)
Changes in operating assets and liabilities
Accounts receivable (85,550) (57,704)
Inventories (53,976) (17,034)
Prepaid taxes and other assets (26,600) (9,224)
Trade accounts payable and other accrued liabilities (31,202) 100,882
Income taxes payable 10,444 2,768
Deferred income on shipments to distributors 11 9,859
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 34,585 253,662
--------- ---------
CASH FROM INVESTING ACTIVITIES
Acquisition of fixed assets (229,295) (419,575)
Acquisition of other assets (4,510) (11,246)
Purchase of investments (68,615) (72,469)
Sale or maturity of investments 61,231 67,528
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (241,189) (435,762)
--------- ---------
CASH FROM FINANCING ACTIVITIES
Proceeds from issuance of convertible bonds 150,000 0
Proceeds from capital leases 124,272 182,345
Proceeds from issuance of notes payable 56,815 38,990
Principal payments on capital leases (59,215) (38,591)
Principal payments on notes (3,720) (1,498)
Proceeds from settlement of warrants 4,425 0
Issuance of common stock 12,599 9,037
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 285,176 190,283
--------- ---------
EFFECT OF FOREIGN CURRENCY TRANSLATION ADJUSTMENT (15,994) (5,080)
--------- ---------
NET CASH PROVIDED 62,578 3,103
CASH AT BEGINNING OF PERIOD 104,113 105,534
--------- ---------
CASH AT END OF PERIOD $ 166,691 $ 108,637
========= =========
INTEREST PAID $ 19,206 $ 8,280
ISSUANCE OF COMMON STOCK FOR PURCHASE OF OTHER ASSETS $ 0 $ 2,625
INCOME TAXES PAID $ 38,157 $ 78,309
FIXED ASSET PURCHASES IN ACCOUNTS PAYABLE $ 37,757 $ 5,836
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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ATMEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(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, 1997 and the results
of operations and cash flows for the three month and nine month periods ended
September 30, 1997 and 1996. 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, 1996. 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.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
Materials and purchased parts $ 10,271 $ 11,123
Work in progress 114,025 59,197
-------- --------
TOTAL $124,296 $ 70,320
======== ========
</TABLE>
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.
The Financial Accounting Standards Board recently issued Statement No. 128 (SFAS
128), Earnings Per Share, which establishes standards for computing and
presenting earnings per share (EPS) and applies to entities with publicly held
common stock or potential common stock. SFAS 128 simplifies the standards for
computing EPS and makes them comparable to international standards. It replaces
the presentation of primary EPS with a presentation of basic EPS. It also
requires dual presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic EPS computation to
the numerator and denominator of the diluted EPS computation. The Company is
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required to adopt the provisions of SFAS 128 in its financial statements for the
year ending December 31, 1997 and is studying the impact of its implementation
on the financial statements.
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,
1997. The put warrants entitle the holder to sell shares of Atmel common stock
to the Company at specified prices. The Company received $2,088 from the sale of
the put warrants. The warrants expire on May 1, 1998, are exercisable, at
Atmel's option, at any time before maturity and may be settled in cash at
Atmel's option. The maximum potential repurchase obligation of $16,200 has been
reclassified from shareholders' equity to put warrants as of September 30, 1997.
There was no impact on earnings per share in the nine months ended September 30,
1997.
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 date as the put warrants, are
exercisable at any time before maturity and may be settled in cash at Atmel's
option. During the nine months ended September 30, 1997, the Company received
$4,425 from settlement of warrants. There was no impact on earnings per share in
the nine months ended September 30, 1997.
5. RECENT PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement No. 130
(SFAS 130), Reporting Comprehensive Income. SFAS 130 establishes standards of
disclosure and financial statement display for reporting total comprehensive
income and its individual components. It is effective for the Company's fiscal
year 1998.
Also in June 1997, The Financial Accounting Standards Board issued Statement No.
131 (SFAS 131), Disclosures About Segments of an Enterprises and Related
Information. SFAS 131 changes current practice under SFAS 14 by establishing a
new framework on which to base segment reporting (referred to as the management
approach) and also requires interim reporting of segment information. It is
effective for the Company's fiscal year 1998.
The Company is studying the implications of these new statements and the impact
of their implementation on the financial statements.
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. Words
such as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates," variations of such words and similar expressions are intended to
identify such
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forward looking statements. These statements are based on current expectations
and projections about the semiconductor industry and assumptions made by the
management and are not guarantees of future performance. Therefore, actual
events and results may differ materially from those expressed or forecasted in
the forward looking statements due to factors such as the effect of changing
economic conditions, material changes in currency exchange rates, conditions in
the overall semiconductor market (including the historic cyclicality of the
industry), risks associated with product demand and market acceptance risks, the
impact of competitive products and pricing, delays in new product development
and technological risks and other risk factors identified in the Company's
filings with the Securities and Exchange Commission, including the Company's
Form 10-K Report.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain operating data
as a percentage of total revenues:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET REVENUES 100.0% 100.0% 100.0% 100.0%
EXPENSES
Cost of sales 56.5 50.5 55.4 50.3
Research and development 12.3 10.4 12.3 10.3
Selling, general and administrative 10.2 10.5 10.4 10.9
---- ---- ----- -----
TOTAL EXPENSES 79.0 71.4 78.1 71.5
OPERATING INCOME 21.0 28.6 21.9 28.5
Interest income, net (1.5) 0.3 (1.2) 0.4
---- ---- ----- -----
INCOME BEFORE TAXES 19.5 28.9 20.7 28.9
Taxes on income 6.8 10.0 7.2 10.1
---- ---- ----- -----
NET INCOME 12.7% 18.9% 13.5% 18.8%
==== ==== ===== =====
</TABLE>
Net revenues decreased 14.4 percent to $240.1 million in the quarter ended
September 30, 1997 from $280.3 million in the corresponding quarter of 1996. Net
revenues for the first nine months ended September 30, 1997 decreased 9.0
percent to $717.9 million over the same period last year from $789.2 million.
The decrease was primarily due to the strengthening of the U.S. dollar,
increased price competition in the Company's EPROM and other non-volatile memory
businesses.
Cost of sales as a percentage of net revenues increased to 56.5 percent in the
third quarter of 1997, from 50.5 percent in the corresponding period of 1996 and
for the first nine months to 55.4 percent from 50.3 percent. The increase in
cost of sales as a percentage of net revenues was primarily due to lower
revenues which were not matched with a corresponding fall in expenses as a
result of the increase in operating costs associated with the expansion of the
Company's existing wafer fabrication facilities in Colorado Springs, Colorado
and Rousset, France. In addition, the decline in average selling price of mature
products and the impact on net revenues because of the strengthening of the U.S.
dollar against international currencies also negatively impacted the cost of
sales as a percentage of net revenues. The Company plans to incur additional
capital expenditures during the remainder of 1997 to increase its wafer
fabrication capacity in its existing facilities and also for installation of
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equipment at its new facility in Rousset. As a result of the increase in fixed
costs and operating expenses related to this planned expansion of capacity, the
Company expects that its gross margin could deteriorate further in the future.
As a percentage of net revenues, research and development increased to 12.3
percent in the third quarter of 1997, from 10.4 percent in the corresponding
quarter of 1996 and for the first nine months to 12.3 percent from 10.3 percent.
Research and development expense increased 1.3 percent from $29.2 million in the
third quarter of 1996 to $29.6 million in the third quarter of 1997. Research
and development expense for the first nine months of 1997 increased 8.7 percent
to $88.2 million from $81.1 million in the corresponding period of 1996. The
increase was primarily due to the Company's continued investment in the
shrinking of the die size of its integrated circuits, currently from 0.65-micron
to 0.5-micron line widths; development of 0.35-micron process technology,
enhancement of mature products; development of new products, advanced CMOS
process technology, manufacturing improvements and the costs associated with
increasing production capacity in Colorado Springs and Rousset. 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 is
committed to high levels of expenditures for research and development.
Selling, general and administrative expense decreased in absolute dollars to
$24.5 million in the third quarter of 1997 from $29.4 million in the third
quarter of 1996, and declined as a percentage of net revenues from 10.5 percent
in 1996 to 10.2 percent in 1997. Selling, general and administrative expense for
the first nine months of 1997 decreased in absolute dollars to $74.8 million
from $86.4 million in the corresponding period of 1996. The decrease was
primarily due to the fact that the Company's selling, general and administrative
expense in 1996 included additional provisions for bad debts and legal expenses
and sales commissions were lower for 1997 due to the decline in net revenues.
The Company reported $3.7 million of net interest expense for the third quarter
of 1997, compared to $0.8 million of net interest income for the corresponding
period of 1996. For the first nine months of 1997, the net interest expense was
$8.7 million, compared to $2.9 million of net interest income in the
corresponding period of 1996. The decline in net interest income was primarily
due to higher interest expense associated with the increase in borrowings used
to finance the expansion and construction of the Company's wafer fabrication
facilities in Colorado Springs and Rousset, respectively, and realized foreign
exchange losses on accounts receivables due to the strengthening of the U.S.
dollar.
The Company's effective tax rate remained at 35.0 percent for the first nine
months of 1997.
Net income of $30.3 million for the third quarter of 1997 decreased by 42.6
percent from $52.9 million in the corresponding period of the prior year. Net
income for the first nine months of 1997 decreased 34.8 percent to $96.5 million
from $148.1 million in the corresponding period of 1996.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Company had $229.8 million in cash and short-term
investments, an increase of $72.5 million from December 31, 1996, and $348.2
million in net working capital, an increase of $224.6 million from December 31,
1996. At September 30, 1997, the Company had long-term investments of $102.0
million, a decrease of $2.6 million from December 31, 1996. These investments
consisted of United States government obligations, state and municipal
securities and
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corporate bonds. In May 1997, Atmel S.A., a wholly owned subsidiary of the
Company, completed a convertible debt financing, which raised approximately $150
million, to fund the continued expansion of its wafer fabrication facilities in
Colorado Springs and Rousset, as well as for working capital and other general
corporate purposes.
During the nine months ended September 30, 1997, the Company generated net cash
flows from operations of $34.6 million and spent $229.3 million on fixed assets,
principally for expanding wafer fabrication capacities at Colorado Springs and
Rousset. The Company currently plans to spend an additional $100.0 million
through 1997 to complete the expansion of its wafer fabrication facilities.
The Company believes that its existing sources of liquidity, together with cash
flows from operations, lease financing on equipment and other short- and
medium-term bank borrowing, will be sufficient to meet the Company's liquidity
and capital requirements through 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. There can be no assurance that such financing
would be available in amounts or terms acceptable to the Company.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits:
11.1 Statement of Computation of Earnings Per Share.
27 Financial Data Schedule
(B) Reports on Form 8-K:
There were no reports filed on Form 8-K during the quarter ended
September 30, 1997.
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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, 1997 /S/ GEORGE PERLEGOS
---------------------------------------------
GEORGE PERLEGOS
President, Chief Executive Officer
(Principal Executive Officer)
NOVEMBER 12, 1997 /S/ KRIS CHELLAM
---------------------------------------------
KRIS CHELLAM
Vice President, Finance and Administration
(Principal Financial and Accounting Officer)
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INDEX TO EXHIBITS
Exhibit Number Description
- -------------- -----------
11.1 Statement of Computation of Earnings
Per Share
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 11.1
ATMEL CORPORATION
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
WEIGHTED AVERAGE SHARES OUTSTANDING FOR
THE PERIOD
Common stock 99,506 98,100 99,299 97,831
Dilutive employee stock options and
warrants 2,630 2,595 2,443 2,561
-------- -------- -------- --------
TOTAL COMMON AND COMMON EQUIVALENT
SHARES 102,136 100,695 101,742 100,392
======== ======== ======== ========
NET INCOME $ 30,349 $ 52,878 $ 96,495 $148,078
======== ======== ======== ========
EARNINGS PER SHARE $ 0.30 $ 0.53 $ 0.95 $ 1.48
======== ======== ======== ========
</TABLE>
Fully diluted earnings per share does not differ significantly from primary
earnings per share.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 166,691
<SECURITIES> 63,135
<RECEIVABLES> 260,609
<ALLOWANCES> 0
<INVENTORY> 124,296
<CURRENT-ASSETS> 699,241
<PP&E> 989,800
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,818,292
<CURRENT-LIABILITIES> 350,996
<BONDS> 0
0
0
<COMMON> 351,601
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,818,292
<SALES> 717,932
<TOTAL-REVENUES> 717,932
<CGS> 397,849
<TOTAL-COSTS> 560,764
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,715
<INCOME-PRETAX> 148,453
<INCOME-TAX> 51,958
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 96,495
<EPS-PRIMARY> 0.95
<EPS-DILUTED> 0.95
</TABLE>
