<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 MARCH 31, 1998
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 MARCH 31, 1998, REGISTRANT HAD OUTSTANDING 99,176,153 SHARES OF COMMON STOCK.
<PAGE> 2
ATMEL CORPORATION
FORM 10-Q
QUARTER ENDED MARCH 31, 1998
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at March 31, 1998
and December 31, 1997
1
Condensed Consolidated Income Statements for the three
months ended March 31, 1998 and March 31, 1997 2
Consolidated Statements of Cash Flows for the three months
ended March 31, 1998 and March 31, 1997 3
Consolidated Statements of Comprehensive Income for the
three months ended March 31, 1998 and March 31, 1997 4
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
</TABLE>
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<PAGE> 3
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ATMEL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
-------------- -----------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 140,064 $ 174,310
Short-term investments 88,879 63,222
Accounts receivable 282,421 216,991
Inventories 203,552 124,336
Prepaid taxes and other current assets 83,809 119,358
---------- ----------
TOTAL CURRENT ASSETS 798,725 698,217
Other assets 51,800 42,338
Long-term investments 93,766 95,536
Fixed assets, net 1,078,461 985,949
---------- ----------
TOTAL ASSETS $2,022,752 $1,822,040
========== ==========
CURRENT LIABILITIES
Current portion of long-term debt $ 183,713 $ 67,522
Trade accounts payable and other accrued liabilities 304,593 290,890
Income taxes payable 9,769 0
Deferred income on shipments to distributors 28,411 25,256
---------- ----------
TOTAL CURRENT LIABILITIES 526,486 383,668
Long-term debt less current portion 629,283 571,389
Deferred income taxes 34,499 34,499
---------- ----------
TOTAL LIABILITIES 1,190,268 989,556
---------- ----------
Put warrants 58,930 46,050
---------- ----------
SHAREHOLDERS' EQUITY
Common stock and other 303,696 334,303
Retained earnings 469,858 452,131
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 773,554 786,434
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,022,752 $1,822,040
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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ATMEL CORPORATION
CONDENSED CONSOLIDATED INCOME STATEMENTS
(In thousands, except per-share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1998 1997
--------- ---------
<S> <C> <C>
NET REVENUES $ 260,392 $ 252,946
EXPENSES
Cost of sales 164,192 136,377
Research and development 36,659 29,171
Selling, general and administrative 27,826 25,943
--------- ---------
TOTAL EXPENSES 228,677 191,491
--------- ---------
OPERATING INCOME 31,715 61,455
Interest and other expenses, net (4,443) (1,858)
--------- ---------
INCOME BEFORE TAXES 27,272 59,597
Taxes on income 9,545 20,859
--------- ---------
NET INCOME $ 17,727 $ 38,738
========= =========
BASIC NET INCOME PER SHARE $ 0.18 $ 0.39
========= =========
DILUTED NET INCOME PER SHARE $ 0.18 $ 0.38
========= =========
SHARES USED IN BASIC NET INCOME PER SHARE CALCULATIONS 99,127 99,038
========= =========
SHARES USED IN DILUTED NET INCOME PER SHARE CALCULATIONS 100,122 101,505
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE> 5
ATMEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1998 1997
--------- ---------
<S> <C> <C>
CASH FROM OPERATING ACTIVITIES
Net income $ 17,727 $ 38,738
Items not requiring the use of cash
Depreciation and amortization 47,235 34,176
Other 4,509 4,775
Changes in operating assets and liabilities
Accounts receivable (5,624) (19,588)
Inventories (34,032) (14,199)
Prepaid taxes and other assets 35,549 (6,426)
Trade accounts payable and other accrued liabilities (41,319) (3,743)
Income taxes payable 9,769 20,859
Deferred income on shipments to distributors 3,155 1,816
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 36,969 56,408
--------- ---------
CASH FROM INVESTING ACTIVITIES
Acquisition of fixed assets (75,936) (100,863)
Acquisition of other assets (12,534) (1,072)
Acquisition of Temic Telefunken Microelectronic (108,252) 0
Purchase of investments (147,782) (16,265)
Sale or maturity of investments 123,895 18,884
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (220,609) (99,316)
--------- ---------
CASH FROM FINANCING ACTIVITIES
Proceeds from capital leases and notes 189,426 69,329
Principal payments on capital leases and notes (26,462) (21,738)
Proceeds from settlement of warrants 0 4,425
Repurchase of stock (16,623) 0
Issuance of common stock 4,474 3,601
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 150,815 55,617
--------- ---------
EFFECT OF FOREIGN CURRENCY TRANSLATION ADJUSTMENT (1,421) (6,810)
--------- ---------
NET CASH PROVIDED (USED) (34,246) 5,899
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 174,310 104,113
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 140,064 $ 110,012
========= =========
INTEREST PAID $ 8,682 $ 6,303
INCOME TAXES PAID $ 68 $ 2,115
FIXED ASSET PURCHASES IN ACCOUNTS PAYABLE $ 36,849 $ 70,907
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE> 6
ATMEL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1998 1997
--------- ---------
<S> <C> <C>
Net income $ 17,727 $ 38,738
Other comprehensive income, net of tax:
Foreign currency translation adjustments (3,626) (4,427)
Unrealized gains on securities 143 81
--------- ---------
Other comprehensive income (3,483) (4,346)
--------- ---------
Comprehensive income $ 14,244 $ 34,392
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE> 7
ATMEL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(In thousands, except per share data)
(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 March 31, 1998 and the results of
operations and cash flows for the three month periods ended March 31, 1998 and
1997. 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, 1997.
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 and
comprise the following:
<TABLE>
<CAPTION>
MARCH 31, 1998 DECEMBER 31, 1997
-------------- -----------------
<S> <C> <C>
Materials and purchased parts $ 12,063 $ 10,527
Work in progress 191,489 113,809
-------- --------
TOTAL $203,552 $124,336
======== ========
</TABLE>
3. NET INCOME PER SHARE
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 128, Earnings Per Share (SFAS 128) effective with the year ended
December 31, 1997. All prior period net income per-share amounts have been
restated to comply with SFAS 128 as well as the two-for-one stock splits paid on
April 11, 1994, and August 8, 1995.
In accordance with the disclosure requirements of SFAS 128, a reconciliation of
the numerator and denominator of basic and diluted net income per share is
provided as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1998 1997
------- -------
<S> <C> <C>
Basic and diluted net income (numerator) $17,727 $38,738
======= =======
</TABLE>
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<PAGE> 8
<TABLE>
<S> <C> <C>
Shares used in basic net income per share calculations (denominator):
Weighted average shares of common stock outstanding 99,127 99,038
======= =======
Shares used in diluted net income per share calculations (denominator):
Weighted average shares of common stock outstanding 99,127 99,038
Dilutive effect of stock options 995 2,467
------- -------
100,122 101,505
======= =======
Basic net income per share $ 0.18 $ 0.39
======= =======
Diluted net income per share $ 0.18 $ 0.38
======= =======
</TABLE>
In connection with the Company's stock repurchase program announced in January
1998 to purchase up to 5,000 shares of its common stock, the Company has
purchased 1,000 shares of its common stock during the three months ended March
31, 1998. The average purchase price of the shares repurchased was $16.62 per
share.
4. PUT WARRANTS
The Company has sold put warrants to an independent third party during the three
months ended March 31, 1998 and used the proceeds from the sale of the put
warrants to purchase call warrants. The put warrants entitle the holder to sell
shares of the Company's common stock to the Company at contractual prices. The
call warrants entitle the Company to buy, at contractual prices, from the same
independent third party shares of the Company's common stock. The outstanding
put and call warrants, which expire between May 1, 1998 and March 5, 1999, are
exercisable at any time before maturity and may be settled in cash, at the
Company's option. The maximum contractual repurchase obligation of $58,930 has
been reclassified from shareholders' equity to put warrants as of March 31,
1998. There was no impact on basic and diluted net income per share in the three
months ended March 31, 1998.
5. TEMIC ACQUISITION
On March 1, 1998, the Company acquired the integrated circuit business of Temic
Telefunken Mircoelectronic (Temic) of Hielbronn, Germany, a wholly owned
subsidiary of Daimler-Benz A.G., for approximately $108,000 cash. Temic designs,
manufactures and sells analog, microcontroller and ASIC products that service
the automotive, telecommunications, consumer and industrial markets. The
Company's operating results for the three months ended March 31, 1998 included
approximately one month of the results of Temic which were not material to the
Company. Accordingly, the Company has not provided pro-forma information for the
acquisition of Temic. The Company's consolidated balance sheet as of March 31,
1998 reflected a preliminary allocation of the purchase price of Temic, which
resulted in an increase in inventory, accounts receivable, fixed assets, current
liabilities and long-term liabilities. A portion of the purchase price will be
allocated to in-process research and development expense upon the completion of
a valuation study. At the time of filing this Form 10-Q, the valuation study is
still in progress. When the valuation study is completed, the results of
operations for the first quarter ended March 31, 1998 will be amended to reflect
this in-process research and development expense.
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<PAGE> 9
6. CONTINGENCIES
The Company is involved in certain patent related legal matters, in the ordinary
course of business. No provision for any liability that may result upon the
resolution of these matters has been made in the accompanying financial
statements nor is the amount or range of possible loss, if any, reasonably
estimable.
The Company has been named as a defendant in a patent infringement lawsuit
that was filed on January 21, 1998. The plaintiff contends that certain of the
Company's devices infringe seven patents it allegedly owns and is seeking a
judgment of infringement for each of these asserted patents and other costs.
The Company is reviewing the lawsuit and believes that the complaints are
without merit. No assurance can be given, however, that this matter will be
resolved in the Company's favor.
7. RECENT ACCOUNTING PRONOUNCEMENT
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position (SOP) 98-5, Reporting on the Costs of Start-Up Activities.
The SOP is effective for the Company's fiscal year ended December 31, 1999 and
will require the effect of adoption be reported as a cumulative effect of change
in accounting principle. The Company is studying the impact of this change of
accounting principle on its 1999 financial statements.
8. SUBSEQUENT EVENT
In April 1998, the Company completed a zero coupon convertible debt financing,
which raised approximately $115,000. The debt is convertible, at the option of
the holder, into the Company's common stock at the rate of 13.983 shares per
$1,000 principal amount at maturity of the debt. The effective interest rate of
the debt is 5.5 percent per annum. The net proceeds were used to repay a
short-term loan of approximately $110,000 with Nationsbank which was originally
borrowed to finance the acquisition of Temic. The debt is not redeemable by the
Company prior to April 21, 2003. Thereafter, the debt will be redeemable for
cash, at the option of the Company in whole at any time or in part from time to
time at redemption prices equal to the issue price plus accrued interest. At the
option of the holder as of April 21, 2003, 2008 and 2013, the Company may be
required to redeem the debt at prices equal to the issue price plus accrued
interest. The Company may, at its option, elect to redeem the debt for cash
or common stock of the Company, or any combination thereof.
-7-
<PAGE> 10
9. COMPREHENSIVE INCOME
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income (SFAS 130), effective with
its 1998 fiscal year. The income tax effect of each element of comprehensive
income for the three months ended March 31, 1998 is as follows:
<TABLE>
<CAPTION>
TAX
BEFORE-TAX (EXPENSE) NET-OF-TAX
AMOUNT OR BENEFIT AMOUNT
---------- ---------- ----------
<S> <C> <C> <C>
Foreign currency translation adjustments $(5,578) $ 1,952 $ (3,626)
------- ------- --------
Unrealized gains on securities 220 (77) 143
------- ------- --------
Other comprehensive income $(5,358) $ 1,875 $ (3,483)
======= ======= ========
</TABLE>
The accumulated balances of other comprehensive income at March 31, 1998 are
summarized as follows:
<TABLE>
<CAPTION>
CURRENT
BEGINNING PERIOD ENDING
BALANCE CHANGE BALANCE
---------- ---------- ----------
<S> <C> <C> <C>
Foreign currency translation adjustments $(6,449) $(3,626) $(10,075)
Unrealized gain (loss) on securities (654) 143 (511)
------- ------- --------
$(7,103) $(3,483) $(10,586)
======= ======= ========
</TABLE>
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<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Investors are cautioned that certain statements in this Form 10-Q are forward
looking statements that involve risks and uncertainties. Words such as
"expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates,"
and 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 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), continued financial turmoil in the Asian markets,
risks associated with product demand and market acceptance risks, the impact of
competitive products and pricing, delays in new product development,
manufacturing capacity utilization, product mix 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. The Company
undertakes no obligation to update any forward looking statements in this Form
10-Q.
The following table sets forth for the periods indicated certain operating data
as a percentage of net revenues:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
1998 1997
---- ----
<S> <C> <C>
NET REVENUES 100.0 % 100.0 %
EXPENSES
Cost of sales 63.0 53.9
Research and development 14.1 11.5
Selling, general and administrative 10.7 10.3
----- -----
TOTAL EXPENSES 87.8 75.7
OPERATING INCOME 12.2 24.3
Interest and other expense, net (1.7) (0.7)
------- -------
INCOME BEFORE TAXES 10.5 23.6
Taxes on income 3.7 8.2
------ ------
NET INCOME 6.8 % 15.4 %
====== =====
</TABLE>
NET REVENUES
Net revenues increased 2.9 percent to $260.4 million in the quarter ended March
31, 1998 from $252.9 million in the corresponding quarter of 1997. This moderate
increase was primarily attributable to the inclusion of revenues from Temic's
integrated business, a recent acquisition by the Company. See Note 5 (Temic
Acquisition) in Notes to Condensed Financial Statements for a discussion on
Temic acquisition.
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<PAGE> 12
Excluding the revenue contribution from Temic, net revenues for the first
quarter ended March 31, 1998 would have decreased by approximately 5.0 percent
compared to the corresponding quarter of 1997. The decrease was primarily due to
the continued excess manufacturing capacity in the semiconductor industry. The
excess capacity led to abnormal price erosion for the Company's non-volatile
memory products from which the Company derived more than half of its revenues in
the first quarter of 1998. The Company's quarterly revenues and operating
results have become increasingly dependent upon orders booked and shipped within
a given quarter. To the extent this trend continues, the Company's quarterly
results will be less predictable and subject to greater variability.
In recent years, the Company has significantly expanded its international
operations, most recently through its acquisition of Temic. International sales
and operations are subject to a variety of risks, including those arising from
currency fluctuations, tariffs, trade barriers, taxes, export license
requirements and foreign government regulations. Because most of the Company's
foreign sales are denominated in U.S. dollars, the Company's products become
less price competitive in countries with currencies declining in value against
the dollar. In particular, the Company's operating results for the first quarter
of 1998 were adversely impacted in part by a strengthening of the U.S. dollar
against local currencies in the markets in which the Company sells products.
There can be no assurance that the Company will not experience similar adverse
effects in the future. In addition, the continuance or worsening of the adverse
business and financial conditions in Asia, where more than 40.0 percent of the
Company's revenues are generated, would likely have a material adverse effect on
the Company's operating results in the future.
COST OF SALES
Cost of sales as a percentage of net revenues increased to 63.0 percent in the
first quarter of 1998, from 53.9 percent in the corresponding period of 1997.
The increase in cost of sales as a percentage of net revenues was primarily due
to excess manufacturing capacity resulting from increases in fixed costs
associated with the expansion of wafer fabrication facilities in Colorado
Springs, Colorado and Rousset, France, lower product margins in many of the
Company's non-volatile memory products and the inclusion of $16.5 million of
additional cost of sales from Temic. The lower product margins were attributable
to a smaller revenue base over which to spread fixed costs and the erosion of
average selling prices that were not matched with a corresponding decrease in
manufacturing cost.
The Company expects competitive pressures to increase in its markets from
existing companies and new entrants, which among other things could further
accelerate the trend of such decreasing average selling price. Accordingly,
there can be no assurance that the Company will be able to sustain its recent
gross margins. The Company has lowered its capital expenditure plan in 1998 and
will focus on implementing chemical, mechanical planarization (CMP), 0.35-micron
and 0.25-micron technologies in its wafer manufacturing facilities.
Implementation of these technologies will enable the Company to achieve cost
reductions through die shrinks. However, production delays, difficulties in
achieving acceptable yields at its Colorado Springs or its Rousset facility or
overcapacity could materially and adversely affect the Company's gross margin
and future operating results.
RESEARCH AND DEVELOPMENT
As a percentage of net revenues, research and development cost increased to 14.1
percent in the first quarter of 1998, from 11.5 percent in the corresponding
quarter of 1997. Research and development expense increased 25.7 percent from
$29.2 million in the first quarter of 1997 to $36.7 million in the
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<PAGE> 13
first quarter of 1998. The increase was primarily due to the Company's continued
investment in the shrinking of the die size of its integrated circuits from
0.65-micron to 0.5-micron line widths, enhancement of mature products,
development of new products, advanced CMOS process technology, manufacturing
improvements, the costs associated with increasing production capacity in
Colorado Springs and Rousset and the inclusion of Temic's research and
development expense. 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
Selling, general and administrative expenses increased by 7.3 percent to $27.8
million in the first quarter of 1998 from $$25.9 million in the first quarter of
1997. The increase was largely due to headcount increases in both domestic and
foreign operations, legal costs related to patent infringement lawsuit and the
inclusion of Temic's selling, general and administrative expense. As a
percentage of net revenues, selling, general and administration expenses were
10.7 percent for the first quarter of 1998 and 10.3 percent for the
corresponding quarter of 1997. The Company expects selling general and
administrative expenses to increase due primarily to expansions in international
markets, legal costs associated with intellectual property litigation and
provision for doubtful accounts receivable.
INTEREST AND OTHER EXPENSES, NET
The Company reported $4.4 million of net interest and other expenses for the
first quarter of 1998, compared to $1.9 million of net interest and other
expenses for the corresponding period of 1997. The increase in net interest and
other expenses was primarily due to a combination of higher interest expense
associated with the increase in borrowings used to finance the expansion of the
Company's fabrication facilities in Colorado Springs, and Rousset, to finance
the acquisition of Temic during the first quarter of 1998 offset by a portion of
interest expense capitalized in the first quarter of 1997 in connection with
the construction of the Company's fabrication facility in Rousset.
TAXES ON INCOME
The Company's effective tax rates were 35.0 percent for both the three months
ended March 31, 1998 and 1997.
NET INCOME
Net income of $17.7 million for the first quarter of 1998 decreased by 54.2
percent from $38.8 million in the corresponding period of the prior year.
RISKS ASSOCIATED WITH TEMIC ACQUISITION
The Company acquired Temic on March 1, 1998. While the Company believes the
Temic acquisition is in the best interest of the Company and its shareholders,
there can be no assurance that management of the Company will be successful in
its efforts to integrate the operations of Temic. There are significant risks
associated with the Temic acquisition, including but not limited to difficulties
in integration of product offerings, manufacturing operations and coordination
of sales and marketing and research and development efforts. The difficulties of
Temic integration may be increased by the necessity of coordinating
geographically separated organizations, the complexity of
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<PAGE> 14
the technologies being integrated and the necessity of integrating personnel
with disparate business backgrounds and combining two corporate cultures. The
integration of operations following Temic acquisition requires the dedication of
management resources that may distract attention from day-to-day business and
may disrupt key research and development, marketing or sales efforts. The
inability of management to successfully integrate the Temic acquisition could
have a material adverse effect on the business, operating results and financial
condition of the Company.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company had $228.9 million in cash and short-term
investments, an increase of $8.6 million from December 31, 1997, and $272.2
million in net working capital, a decrease of $42.3 million from December 31,
1997. At March 31, 1998, the Company also had long-term investments of $93.8
million, a decrease of $1.8 million from December 31, 1997. These investments
consisted of United States government obligations and state and municipal
securities.
During the three months ended March 31, 1998, the Company generated net cash
flows from operations of $37.0 million. Net cash used in investments was $220.6
million, due to acquisitions of fixed and other assets of $88.5 million,
investment in Temic of $108.3 million, purchases of marketable securities of
$147.8 million, offset by sale of marketable securities of $123.9 million. Net
cash provided from financing activities was $150.8 million, due to funding from
capital leases and bank borrowings of $189.4 million and proceeds from stock
issuance of $4.5 million, offset by payments of capital leases and notes payable
of $26.5 million and payments of $16.6 million for the repurchase of one million
shares of the Company's common stock. The $189.4 million of capital lease and
bank borrowings included a $110.0 million of short-term loan from Nationsbank
which was used to finance the acquisition of Temic. This short-term loan with
Nationsbank was subsequently repaid from the net proceeds received in connection
with the zero coupon convertible debt financing completed in April 1998. See
Note 8 (Subsequent Event) in the Notes to Condensed Financial Statements for a
discussion on zero coupon convertible debt.
The Company believes that its existing sources of liquidity, together with cash
flows from operations, leasing financing on equipment and other short- and
medium-term bank borrowing, will be sufficient to meet the Company's liquidity
and capital requirements through 1998. 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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<PAGE> 15
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company has been named as a defendant in a patent infringement lawsuit that
was filed on January 21, 1998. The plaintiff contends that certain of the
Company's devices infringe seven patents it allegedly owns and is seeking a
judgment of infringement for each of these asserted patents and other costs. The
Company is reviewing the lawsuit and believes that the complaints are without
merit. No assurance can be given, however, that this matter will be resolved in
the Company's favor.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits:
<TABLE>
<S> <C>
27.1 Financial Data Schedule - March 31, 1998
27.2 Financial Data Schedule - June 30, 1996
27.3 Financial Data Schedule - September 30, 1996
27.4 Financial Data Schedule - December 31, 1996
27.5 Financial Data Schedule - March 31, 1997
27.6 Financial Data Schedule - June 30, 1997
27.7 Financial Data Schedule - September 30, 1997
27.8 Financial Data Schedule - December 31, 1997
</TABLE>
(B) Reports on Form 8-K:
There were no reports filed on Form 8-K during the quarter ended March
31, 1998.
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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 its behalf by the
undersigned, thereunto duly authorized.
ATMEL CORPORATION
--------------------------------------------
(Registrant)
MAY 14, 1998 /s/ GEORGE PERLEGOS
--------------------------------------------
GEORGE PERLEGOS
President, Chief Executive Officer
(Principal Executive Officer)
MAY 14, 1998 /s/ KRIS CHELLAM
--------------------------------------------
KRIS CHELLAM
Vice President, Finance and Administration
(Principal Financial and Accounting Officer)
-14-
<PAGE> 17
<TABLE>
Exhibits
Number Description
- ------ -----------
<S> <C>
27.1 Financial Data Schedule - March 31, 1998
27.2 Financial Data Schedule - June 30, 1996
27.3 Financial Data Schedule - September 30, 1996
27.4 Financial Data Schedule - December 31, 1996
27.5 Financial Data Schedule - March 31, 1997
27.6 Financial Data Schedule - June 30, 1997
27.7 Financial Data Schedule - September 30, 1997
27.8 Financial Data Schedule - December 31, 1997
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000872448
<NAME> ATMEL CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 140,064
<SECURITIES> 88,879
<RECEIVABLES> 306,479
<ALLOWANCES> 24,058
<INVENTORY> 203,552
<CURRENT-ASSETS> 798,725
<PP&E> 1,476,758
<DEPRECIATION> 398,297
<TOTAL-ASSETS> 2,022,752
<CURRENT-LIABILITIES> 526,486
<BONDS> 629,283
0
0
<COMMON> 303,696
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,022,752
<SALES> 260,392
<TOTAL-REVENUES> 260,392
<CGS> 164,192
<TOTAL-COSTS> 228,677
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 123
<INTEREST-EXPENSE> 10,880
<INCOME-PRETAX> 27,272
<INCOME-TAX> 9,545
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,727
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.18
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000872448
<NAME> ARMEL CORPORATION
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 98,177
<SECURITIES> 63,672
<RECEIVABLES> 149,489
<ALLOWANCES> 19,746
<INVENTORY> 65,165
<CURRENT-ASSETS> 404,476
<PP&E> 856,248
<DEPRECIATION> 155,518
<TOTAL-ASSETS> 1,217,814
<CURRENT-LIABILITIES> 359,592
<BONDS> 191,789
0
0
<COMMON> 270,593
<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> 7,193
<INTEREST-EXPENSE> 5,471
<INCOME-PRETAX> 146,462
<INCOME-TAX> 51,262
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 95,200
<EPS-PRIMARY> 0.97
<EPS-DILUTED> 0.95
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000872448
<NAME> ATMEL CORPORATION
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 108,637
<SECURITIES> 62,995
<RECEIVABLES> 184,943
<ALLOWANCES> 26,076
<INVENTORY> 65,575
<CURRENT-ASSETS> 441,231
<PP&E> 994,996
<DEPRECIATION> 181,763
<TOTAL-ASSETS> 1,358,436
<CURRENT-LIABILITIES> 361,854
<BONDS> 244,221
0
0
<COMMON> 273,643
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,358,436
<SALES> 789,176
<TOTAL-REVENUES> 789,176
<CGS> 397,113
<TOTAL-COSTS> 564,609
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 14,788
<INTEREST-EXPENSE> 7,698
<INCOME-PRETAX> 227,501
<INCOME-TAX> 79,423
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 148,078
<EPS-PRIMARY> 1.51
<EPS-DILUTED> 1.47
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 104,113
<SECURITIES> 53,165
<RECEIVABLES> 202,788
<ALLOWANCES> 28,273
<INVENTORY> 70,320
<CURRENT-ASSETS> 460,023
<PP&E> 1,081,028
<DEPRECIATION> 213,605
<TOTAL-ASSETS> 1,455,914
<CURRENT-LIABILITIES> 336,402
<BONDS> 278,576
0
0
<COMMON> 339,421
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,455,914
<SALES> 1,070,288
<TOTAL-REVENUES> 1,070,288
<CGS> 539,215
<TOTAL-COSTS> 764,816
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 19,347
<INTEREST-EXPENSE> 12,851
<INCOME-PRETAX> 309,153
<INCOME-TAX> 107,431
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 201,722
<EPS-PRIMARY> 2.06
<EPS-DILUTED> 2.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000872448
<NAME> ATMEL CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 110,012
<SECURITIES> 46,241
<RECEIVABLES> 223,506
<ALLOWANCES> 30,424
<INVENTORY> 84,519
<CURRENT-ASSETS> 498,190
<PP&E> 1,179,656
<DEPRECIATION> 242,140
<TOTAL-ASSETS> 1,571,419
<CURRENT-LIABILITIES> 372,107
<BONDS> 318,607
0
0
<COMMON> 368,702
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,571,419
<SALES> 252,946
<TOTAL-REVENUES> 252,946
<CGS> 136,377
<TOTAL-COSTS> 191,491
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,323
<INTEREST-EXPENSE> 6,303
<INCOME-PRETAX> 59,597
<INCOME-TAX> 20,859
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38,738
<EPS-PRIMARY> 0.39
<EPS-DILUTED> 0.38
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000872448
<NAME> ATMEL CORPORATION
<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> 236,847
<ALLOWANCES> 20,015
<INVENTORY> 103,045
<CURRENT-ASSETS> 614,326
<PP&E> 1,255,211
<DEPRECIATION> 277,048
<TOTAL-ASSETS> 1,722,848
<CURRENT-LIABILITIES> 307,894
<BONDS> 508,811
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> 2,397
<INTEREST-EXPENSE> 13,164
<INCOME-PRETAX> 101,759
<INCOME-TAX> 35,613
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 66,146
<EPS-PRIMARY> 0.67
<EPS-DILUTED> 0.64
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000872448
<NAME> ATMEL CORPORATION
<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> 282,576
<ALLOWANCES> 21,967
<INVENTORY> 124,296
<CURRENT-ASSETS> 699,241
<PP&E> 1,303,989
<DEPRECIATION> 314,189
<TOTAL-ASSETS> 1,818,292
<CURRENT-LIABILITIES> 350,996
<BONDS> 529,735
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> 5,020
<INTEREST-EXPENSE> 21,831
<INCOME-PRETAX> 148,453
<INCOME-TAX> 51,958
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 96,495
<EPS-PRIMARY> 0.97
<EPS-DILUTED> 0.92
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000872448
<NAME> ATMEL CORPORATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 174,310
<SECURITIES> 63,222
<RECEIVABLES> 241,614
<ALLOWANCES> 24,623
<INVENTORY> 124,336
<CURRENT-ASSETS> 698,217
<PP&E> 1,340,561
<DEPRECIATION> 354,612
<TOTAL-ASSETS> 1,822,040
<CURRENT-LIABILITIES> 383,668
<BONDS> 571,389
0
0
<COMMON> 334,303
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,822,040
<SALES> 958,282
<TOTAL-REVENUES> 958,282
<CGS> 602,239
<TOTAL-COSTS> 933,233
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 51,884
<INTEREST-EXPENSE> 31,155
<INCOME-PRETAX> 6,001
<INCOME-TAX> 4,200
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,801
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
