<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 JUNE 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 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, 1997, REGISTRANT HAD OUTSTANDING 99,402,499 SHARES OF COMMON STOCK.
<PAGE> 2
ATMEL CORPORATION
FORM 10-Q
QUARTER ENDED JUNE 30, 1997
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at June 30, 1997
and December 31, 1996 1
Condensed Consolidated Income Statements for
the three and six month periods ended June
30, 1997 and June 30, 1996 2
Consolidated Statements of Cash Flows for the six months
ended June 30, 1997 and June 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 4. Submission of Matters to a Vote of Security Holders 9
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
(In thousands)
<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31, 1996
---------- ----------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 172,610 $ 104,113
Short-term investments 51,255 53,165
Accounts receivable, net 216,832 174,515
Inventories 103,045 70,320
Prepaid taxes and other current assets 70,584 57,910
---------- ----------
TOTAL CURRENT ASSETS 614,326 460,023
Other assets 26,642 23,849
Long-term investments 103,717 104,619
Fixed assets, net 978,163 867,423
---------- ----------
TOTAL ASSETS $1,722,848 $1,455,914
========== ==========
CURRENT LIABILITIES:
Current portion of long-term debt $ 71,551 $ 71,615
Trade accounts payable and other accrued liabilities 206,533 236,852
Income taxes payable 2,598 0
Deferred income on shipments to distributors 27,212 27,935
---------- ----------
TOTAL CURRENT LIABILITIES 307,894 336,402
Long-term debt less current portion 508,811 278,576
Deferred income taxes 22,935 22,935
---------- ----------
TOTAL LIABILITIES 839,640 637,913
Put warrants 16,200 28,250
SHAREHOLDERS' EQUITY:
Common stock 350,532 339,421
Retained earnings 516,476 450,330
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 867,008 789,751
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,722,848 $1,455,914
========== ==========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
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<PAGE> 4
ATMEL CORPORATION
CONDENSED CONSOLIDATED INCOME STATEMENTS
(In thousands, except per-share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET REVENUES: $ 224,936 $ 268,748 $ 477,882 $ 508,844
EXPENSES:
Cost of sales 125,900 134,959 262,277 255,602
Research and development 29,357 28,009 58,528 51,865
Selling, general and administrative 24,361 29,424 50,304 57,033
--------- --------- --------- ---------
TOTAL EXPENSES 179,618 192,392 371,109 364,500
--------- --------- --------- ---------
Operating income 45,318 76,356 106,773 144,344
Interest income (expense), net (3,156) 1,016 (5,014) 2,118
--------- --------- --------- ---------
Income before taxes 42,162 77,372 101,759 146,462
Taxes on income 14,754 27,081 35,613 51,262
--------- --------- --------- ---------
NET INCOME $ 27,408 $ 50,291 $ 66,146 $ 95,200
========= ========= ========= =========
EARNINGS PER SHARE $ 0.27 $ 0.50 $ 0.65 $ 0.95
========= ========= ========= =========
SHARES USED IN PER-SHARE CALCULATION 101,246 100,896 101,545 100,634
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
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<PAGE> 5
ATMEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1997 1996
--------- ---------
<S> <C> <C>
CASH FROM OPERATING ACTIVITIES
Net income $ 66,146 $ 95,200
Items not requiring the use of cash
Depreciation and amortization 70,660 49,320
Other 9,939 638
Changes in operating assets and liabilities
Accounts receivable (40,532) (29,447)
Inventories (32,725) (16,624)
Prepaid taxes and other assets (12,674) (11,786)
Trade accounts payable and other accrued liabilities (55,161) 78,264
Income taxes payable 2,598 (5,616)
Deferred income on shipments to distributors (723) 10,180
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 7,528 170,129
--------- ---------
CASH FROM INVESTING ACTIVITIES
Acquisition of fixed assets (181,709) (273,352)
Acquisition of other assets (2,510) (11,251)
Purchase of investments (34,904) (51,806)
Sale or maturity of investments 37,716 38,941
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (181,407) (297,468)
--------- ---------
CASH FROM FINANCING ACTIVITIES
Proceeds from issuance of convertible bonds 150,000 0
Proceeds from capital leases and notes 136,234 143,967
Principal payments on notes (2,654) (936)
Principal payments on capital leases (41,043) (23,956)
Proceeds from settlement of warrants 4,425 0
Issuance of Common Stock 7,723 5,185
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 254,685 124,260
--------- ---------
EFFECT OF FOREIGN CURRENCY TRANSLATION ADJUSTMENT (12,309) (4,278)
--------- ---------
NET CASH PROVIDED (USED) 68,497 (7,357)
CASH AT BEGINNING OF PERIOD 104,113 105,534
--------- ---------
CASH AT END OF PERIOD $ 172,610 $ 98,177
========= =========
INTEREST PAID $ 12,495 $ 4,843
ISSUANCE OF COMMON STOCK FOR PURCHASE OF OTHER ASSETS $ 0 $ 2,625
INCOME TAXES PAID $ 29,748 $ 57,303
FIXED ASSET PURCHASES IN ACCOUNTS PAYABLE $ 30,548 $ 13,636
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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<PAGE> 6
ATMEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(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, 1997 and the results of
operations and cash flows for the three month and six month periods ended June
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>
JUNE 30, 1996 DEC. 31, 1996
-------- --------
<S> <C> <C>
Materials and purchased parts $ 11,459 $ 11,123
Work in progress 91,586 59,197
-------- --------
TOTAL $103,045 $ 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), Accounting for Earning 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
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Company is 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 second quarter of 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. During the six months ended June 30, 1997, the Company received $4,425
from settlement of warrants. The maximum potential repurchase obligation of
$16,200 has been reclassified from shareholders' equity to put warrants as of
June 30, 1997. There was no impact on earnings per share in the six months ended
June 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. There was no impact on earnings per share in the six months ended June
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 forward looking statements. These statements are based on current
expectations and projections about
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<PAGE> 8
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 net revenues:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1997 1996 1997 1996
---- ---- ----- -----
<S> <C> <C> <C> <C>
NET REVENUES 100.0 % 100.0 % 100.0% 100.0%
EXPENSES
Cost of sales 56.0 50.2 54.9 50.2
Research and development 13.1 10.4 12.2 10.2
Selling, general and administrative 10.8 11.0 10.5 11.2
---- ---- ----- -----
TOTAL EXPENSES 79.9 71.6 77.7 71.6
OPERATING INCOME 20.1 28.4 22.3 28.4
Interest income (expense), net (1.4) 0.4 (1.0) 0.4
---- ---- ----- -----
INCOME BEFORE TAXES 18.7 28.8 21.3 28.8
Taxes on income 6.6 10.1 7.5 10.1
---- ---- ----- -----
NET INCOME 12.1 % 18.7 % 13.8 % 18.7 %
==== ==== ===== =====
</TABLE>
Net revenues decreased 16.3 percent to $224.9 million in the quarter ended June
30, 1997 from $268.7 million in the corresponding quarter of 1996. Net revenues
for the first six months ended June 30, 1997 decreased 6.1 percent to $477.9
million over the same period last year from $508.8 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 business and
delays in qualifications of the Company's new Flash products.
Cost of sales as a percentage of net revenues increased to 56.0 percent in the
second quarter of 1997, from 50.2 percent in the corresponding period of 1996
and for the first six months to 54.9 percent from 50.2 percent. The increase in
cost of sales as a percentage of net revenues was primarily due to lower
revenues which was not matched with a corresponding fall in expenses as a result
of the capital and operating costs associated with the expansion of the
Company's existing wafer fabrication facilities in Colorado Springs, Colorado
and Rousset, France, as well as the decline in average selling price related to
the mature products and the impact on net revenues of the strengthening of the
U.S. dollar against international currencies. The Company plans to incur
substantial capital expenditures during the remainder of 1997 to increase its
wafer fabrication capacity in its existing facilities and also for installation
of equipment at its new facility in Rousset. As a result of the increase in
fixed costs and
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<PAGE> 9
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 13.1
percent in the second quarter of 1997, from 10.4 percent in the corresponding
quarter of 1996 and for the first six months to 12.2 percent from 10.2 percent.
Research and development expense increased 4.8 percent from $28.0 million in the
second quarter of 1996 to $29.4 million in the second quarter of 1997. Research
and development expense for the first six months of 1997 increased 12.9 percent
to $58.5 million from $51.9 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
$24.4 million in the second quarter of 1997 from $29.4 million in the second
quarter of 1996, and declined as a percentage of net revenues from 11.0 percent
in 1996 to 10.8 percent in 1997. Selling, general and administrative expense for
the first six months of 1997 decreased in absolute dollars to $50.3 million from
$57.0 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 as well
as lower sales commissions for 1997 due to the decline in revenues.
The Company reported $3.2 million of net interest expense for the second quarter
of 1997, compared to $1.0 million of net interest income for the corresponding
period of 1996. For the first six months of 1997, the net interest expense was
$5.0 million, compared to $2.1 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 six
months of 1997.
Net income of $27.4 million for the second quarter of 1997 decreased by 45.5
percent from $50.3 million in the corresponding period of the prior year. Net
income for the first six months of 1997 decreased 30.5 percent to $66.1 million
from $95.2 million in the corresponding period of 1996.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company had $223.9 million in cash and short-term
investments, an increase of $66.6 million from December 31, 1996, and $306.4
million in net working capital, an increase of $182.8 million from December 31,
1996. At June 30, 1997, the Company had long-term investments of $103.7 million,
a decrease of $0.9 million from December 31, 1996. These investments consisted
of state and municipal securities, United States government obligations and
corporate bonds. In May 1997, Atmel S.A., a wholly owned subsidiary of the
Company, completed a convertible debt financing,
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<PAGE> 10
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 six months ended June 30, 1997, the Company generated net cash flows
from operations of $7.5 million and spent $181.7 million on fixed assets,
principally for expanding wafer fabrication capacities at Colorado Springs and
Rousset. The Company currently plans to spend an additional $180.0 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
At the Company's Annual Meeting of Stockholders held on April 30, 1997, 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:
<TABLE>
<CAPTION>
Votes For Votes Withheld
(Shares In Thousands) (Shares In Thousands)
--------------------- ---------------------
<S> <C> <C>
George Perlegos 84,900 1,197
Gust Perlegos 84,883 1,214
Tsung-Ching Wu 84,903 1,194
Norm Hall 84,864 1,233
T. Peter Thomas 85,077 1,020
</TABLE>
The following proposal was approved at the Company's Annual Meeting of
Stockholders:
<TABLE>
<CAPTION>
Affirmative Negative
Votes Votes Abstained
(Sh In '000) (Sh In '000) (Sh In '000)
------------ ------------ ------------
<S> <C> <C> <C>
Ratify the appointment of Coopers &
Lybrand LLP as independent auditors for the
fiscal year ending December 31, 1997 85,863 82 143
</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, 1997.
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<PAGE> 12
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 13, 1997 /S/ GEORGE PERLEGOS
------------------------------
GEORGE PERLEGOS
President, Chief Executive Officer
(Principal Executive Officer)
AUGUST 13, 1997 /S/ KRIS CHELLAM
------------------------------
KRIS CHELLAM
Vice President, Finance and Administration
(Principal Financial and Accounting Officer)
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<PAGE> 13
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBITS
- -------- --------
11.1 Statement fo 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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
WEIGHTED AVERAGE SHARES OUTSTANDING
FOR THE PERIOD
Common stock 99,354 97,872 99,196 97,696
Dilutive employee stock options and warrants 1,892 3,024 2,349 2,938
-------- -------- -------- --------
SHARES USED IN PER-SHARE CALCULATION 101,246 100,896 101,545 100,634
======== ======== ======== ========
NET INCOME $ 27,408 $ 50,291 $ 66,146 $ 95,200
======== ======== ======== ========
EARNINGS PER SHARE $ 0.27 $ 0.50 $ 0.65 $ 0.95
======== ======== ======== ========
</TABLE>
Fully diluted earnings per share does not differ
significantly from primary earnings per share.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 172,610
<SECURITIES> 51,255
<RECEIVABLES> 216,832
<ALLOWANCES> 0
<INVENTORY> 103,045
<CURRENT-ASSETS> 614,326
<PP&E> 978,163
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,722,848
<CURRENT-LIABILITIES> 307,894
<BONDS> 0
0
0
<COMMON> 350,532
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,722,848
<SALES> 477,882
<TOTAL-REVENUES> 477,882
<CGS> 262,277
<TOTAL-COSTS> 371,109
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,014
<INCOME-PRETAX> 101,759
<INCOME-TAX> 35,613
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 66,146
<EPS-PRIMARY> 0.65
<EPS-DILUTED> 0.65
</TABLE>
