ATMEL CORP
10-Q, 2000-05-11
SEMICONDUCTORS & RELATED DEVICES
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<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, 2000


                                       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)


            DELAWARE                                    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 MAY 5, 2000, REGISTRANT HAD OUTSTANDING 221,804,579 SHARES OF COMMON STOCK.


<PAGE>   2


                                ATMEL CORPORATION

                                    FORM 10-Q

                          QUARTER ENDED MARCH 31, 2000


                                      INDEX



<TABLE>
<CAPTION>
                                                                                        PAGE
                                                                                        ----
<S>                                                                                     <C>
PART I:  FINANCIAL INFORMATION

         Item 1.   Financial Statements

                   Condensed Consolidated Balance Sheets at March 31, 2000
                   and December 31, 1999                                                   1

                   Condensed Consolidated Statements of Operations for the
                   three months ended March 31, 2000 and March 31, 1999                    2

                   Condensed Consolidated Statements of Cash Flows for the
                   three months ended March 31, 2000 and March 31, 1999                    3

                   Condensed Consolidated Statements of Comprehensive Income
                   for the three months ended March 31, 2000 and March 31,                 4
                   1999

                   Notes to Condensed Consolidated Financial Statements                    5

         Item 2.   Management's Discussion and Analysis of Financial
                   Condition and Results of Operations                                     8

         Item 3.   Quantitative and Qualitative Disclosures About Market Risk             14

PART II: OTHER INFORMATION

         Item 1.   Legal Proceedings                                                      15

         Item 2.   Changes in Securities and Use of Proceeds                              15

         Item 6.   Exhibits and Reports on Form 8-K                                       15

SIGNATURES                                                                                16
</TABLE>


<PAGE>   3

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                                ATMEL CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                         MARCH 31, 2000    December 31, 1999
                                                         --------------    -----------------
                                                          (unaudited)
<S>                                                      <C>               <C>
CURRENT ASSETS
     Cash and cash equivalents                             $   802,684        $   251,272
     Short term investments                                    159,036            161,190
     Accounts receivable                                       305,232            281,843
     Inventories                                               270,048            274,065
     Other current assets                                       75,489             70,938
                                                           -----------        -----------
          TOTAL CURRENT ASSETS                               1,612,489          1,039,308

     Fixed assets, net                                       1,039,864            938,562
     Other assets                                               36,757             37,040
                                                           -----------        -----------
          TOTAL ASSETS                                     $ 2,689,110        $ 2,014,910
                                                           ===========        ===========

CURRENT LIABILITIES
     Current portion of long-term debt                     $   144,975        $   147,166
     Trade accounts payable                                    281,744            278,562
     Accrued liabilities and other                             116,156             94,584
     Deferred income on shipments to distributors               30,030             31,500
                                                           -----------        -----------
          TOTAL CURRENT LIABILITIES                            572,905            551,812

     Convertible notes                                         278,019            275,899
     Long-term debt less current portion                       382,856            378,134
     Deferred income taxes                                       7,586              7,586
                                                           -----------        -----------
          TOTAL LIABILITIES                                  1,241,366          1,213,431
                                                           -----------        -----------

STOCKHOLDERS' EQUITY
     Common stock                                            1,018,095            397,167
     Accumulated other comprehensive loss                      (67,675)           (51,160)
     Retained earnings                                         497,324            455,472
                                                           -----------        -----------
          Total stockholders' equity                         1,447,744            801,479
                                                           -----------        -----------

          TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY       $ 2,689,110        $ 2,014,910
                                                           ===========        ===========
</TABLE>


  The accompanying notes are an integral part of these condensed consolidated
                             financial statements.



                                       1
<PAGE>   4

                                ATMEL CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In thousands, except per-share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                         Three Months Ended
                                                                              March 31,
                                                                        2000             1999
                                                                      ---------        ---------
<S>                                                                   <C>              <C>
NET REVENUES                                                          $ 429,186        $ 290,037

EXPENSES
     Cost of revenues                                                   252,722          186,165
     Research and development                                            61,913           47,229
     Selling, general and administrative                                 45,110           35,920
                                                                      ---------        ---------
          TOTAL OPERATING EXPENSES                                      359,745          269,314
                                                                      ---------        ---------

OPERATING INCOME                                                         69,441           20,723
Interest and other income (expenses), net                                (4,048)           5,367
                                                                      ---------        ---------

INCOME BEFORE TAXES                                                      65,393           26,090
Income tax provision                                                    (23,541)          (9,392)
                                                                      ---------        ---------
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE                     41,852           16,698
Cumulative effect of accounting change, net of tax effect                    --          (29,068)
                                                                      ---------        ---------
NET INCOME (LOSS)                                                     $  41,852        $ (12,370)
                                                                      =========        =========

BASIC NET INCOME (LOSS) PER SHARE:
     INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE             $    0.20        $    0.09
     CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAX EFFECT               --            (0.15)
                                                                      ---------        ---------
NET INCOME (LOSS)                                                     $    0.20        $   (0.06)
                                                                      =========        =========

DILUTED NET INCOME (LOSS) PER SHARE:
     INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE             $    0.19        $    0.09
     CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAX EFFECT               --            (0.15)
                                                                      ---------        ---------
NET INCOME (LOSS)                                                     $    0.19        $   (0.06)
                                                                      =========        =========

SHARES USED IN BASIC NET INCOME (LOSS) PER SHARE CALCULATIONS           213,485          199,976
                                                                      =========        =========

SHARES USED IN DILUTED NET INCOME (LOSS) PER SHARE CALCULATIONS         239,328          199,976
                                                                      =========        =========
</TABLE>



  The accompanying notes are an integral part of these condensed consolidated
                             financial statements.



                                       2
<PAGE>   5

                                ATMEL CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                           Three Months Ended
                                                                               March 31,
                                                                         2000             1999
                                                                       ---------        ---------
<S>                                                                    <C>              <C>
CASH FROM OPERATING ACTIVITIES
     Net income (loss)                                                 $  41,852        $ (12,370)
     Items not requiring the use of cash
          Depreciation and amortization                                   51,547           47,200
          Cumulative effect of accounting change, net of taxes                --           29,068
          Loss (gain) on sale of fixed assets                              1,963          (12,474)
          Other                                                            7,074           (2,230)
     Changes in operating assets and liabilities
          Accounts receivable                                            (24,700)          (5,434)
          Inventories                                                      4,017             (379)
          Prepaid taxes and other assets                                  (5,773)          26,092
          Trade accounts payable and other accrued liabilities            18,443          (24,844)
          Income taxes payable                                                --           (6,516)
          Deferred income on shipments to distributors                    (1,470)          (4,042)
                                                                       ---------        ---------
               NET CASH PROVIDED BY OPERATING ACTIVITIES                  92,953           34,071
                                                                       ---------        ---------

CASH FROM INVESTING ACTIVITIES
     Acquisition of fixed assets                                        (168,992)         (15,570)
     Sales of fixed assets                                                 1,280           18,794
     Acquisition of other assets                                              --             (579)
     Purchase of investments                                             (11,106)         (31,215)
     Sale or maturity of investments                                      13,945           38,938
                                                                       ---------        ---------
             NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES        (164,873)          10,368
                                                                       ---------        ---------

CASH FROM FINANCING ACTIVITIES
     Proceeds from capital leases and notes                               33,719            4,817
     Principal payments on capital leases and notes                      (22,756)         (24,003)
     Payment for settlement of warrants                                       --           (2,467)
     Issuance of common stock                                            620,928            3,622
                                                                       ---------        ---------
           NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES           631,891          (18,031)
                                                                       ---------        ---------

Effect of foreign currency on cash and cash equivalents                   (7,438)          (6,498)
                                                                       ---------        ---------

Net increase in cash and cash equivalents                                551,412           19,910
Cash and cash equivalents at beginning of period                         251,272          161,721
                                                                       ---------        ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                             $ 802,684        $ 181,631
                                                                       =========        =========
INTEREST PAID                                                          $   7,856        $   8,937
INCOME TAXES PAID                                                      $      41        $   4,560
FIXED ASSET PURCHASES IN ACCOUNTS PAYABLE                              $  89,381        $   2,683
</TABLE>


  The accompanying notes are an integral part of these condensed consolidated
                             financial statements.



                                       3
<PAGE>   6

                                ATMEL CORPORATION
            CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                 (in thousands)
                                    Unaudited


<TABLE>
<CAPTION>
                                                             Three Months Ended
                                                                  March 31,
                                                            2000            1999
                                                          --------        --------
<S>                                                       <C>             <C>
     Net income (loss)                                    $ 41,852        $(12,370)

     Other comprehensive income (loss), net of tax:
          Foreign currency translation adjustments         (16,079)        (13,844)
          Unrealized gains (losses) on securities             (436)            867
                                                          --------        --------
     Other comprehensive income (loss)                     (16,515)        (12,977)
                                                          --------        --------

     Comprehensive income (loss)                          $ 25,337        $(25,347)
                                                          ========        ========
</TABLE>


  The accompanying notes are an integral part of these condensed consolidated
                             financial statements.



                                       4
<PAGE>   7

                                ATMEL CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000
                      (In thousands, except per share data)
                                   (Unaudited)


1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES

These unaudited interim financial statements reflect our financial position and
that of our subsidiaries as of March 31, 2000. The statements also show our
results of operations, comprehensive income (loss) and cash flows for the three
month periods ended March 31, 2000 and 1999. These interim statements include
all normal recurring adjustments which we believe are necessary to fairly
present our financial position. All material intercompany balances have been
eliminated. 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 included in our Annual
Report to Shareholders filed on Form 10-K for the year ended December 31, 1999.
The year end condensed balance sheet data was derived from our 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 that we expect for any future period,
nor for the entire year. Prior year amounts have been reclassified to conform
with current presentation.

2. INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out for raw
materials and purchased parts and average cost for work in progress) or market,
and are comprised of the following:

<TABLE>
<CAPTION>
                                              March 31, 2000  December 31, 1999
                                              --------------  -----------------
<S>                                           <C>              <C>
Raw materials and purchased parts                $ 23,744         $ 19,527
Finished goods                                     66,764           61,840
Work in progress                                  179,540          192,698
                                                 --------         --------
Total                                            $270,048         $274,065
                                                 ========         ========
</TABLE>

3. SHORT TERM INVESTMENTS

Short term investments are stated at cost plus any applicable unamortized
premium or discount.

4. NET INCOME (LOSS) PER SHARE

A reconciliation of the numerator and denominator of basic and diluted net
income (loss) per share is provided in the following table. All shares have been
restated to reflect the 2-for-1 stock split effected in December 1999.



                                       5
<PAGE>   8

<TABLE>
<CAPTION>
                                                                                           Three Months Ended
                                                                                                March 31,
                                                                                         2000              1999
                                                                                       ---------         ---------
<S>                                                                                    <C>               <C>
Basic net income (loss) (numerator)                                                    $  41,852         ($ 12,370)

Interest saved on convertible bonds, net of taxes                                          2,478                 0

Diluted net income (loss) (numerator)                                                  $  44,330         ($ 12,370)
                                                                                       =========         =========

Shares used in basic net income (loss) per share calculations (denominator):
  Weighted average shares of common stock outstanding (basic)                            213,485           199,976

Dilutive effect of stock options                                                           7,872                 0
Dilutive effect of convertible bonds                                                      17,971                 0

Shares used in diluted net income (loss) per share calculations (denominator):
  Weighted average shares of common stock outstanding (diluted)                          239,328           199,976
                                                                                       =========         =========

Basic net income (loss) per share                                                      $    0.20         ($   0.06)
                                                                                       =========         =========

Diluted net income (loss) per share                                                    $    0.19         ($   0.06)
                                                                                       =========         =========
</TABLE>


For the three months ended March 31, 1999 we excluded 16,522 of potential common
shares from the calculation of diluted earnings per share because their effect
was antidilutive.

5. OPERATING SEGMENTS

We have four reportable segments, each of which requires different design,
development and marketing resources to produce and sell semiconductor integrated
circuits: Application Specific Integrated Circuits (ASIC), Logic, Nonvolatile
Memories (NVM) and Temic.

Information about segments:

<TABLE>
<CAPTION>
                                                                             Nonvolatile
                                               ASIC             Logic          Memories          Temic            Total
                                             --------         --------         --------         --------         --------
<S>                                          <C>              <C>            <C>                <C>              <C>
THREE MONTHS ENDED MARCH 31, 2000
Net revenues from external customers         $101,516         $ 30,044         $227,684         $ 69,942         $429,186
Segment operating income                       21,137            4,619           49,618            8,664           84,038

THREE MONTHS ENDED MARCH 31, 1999
Net revenues from external customers         $ 79,624         $ 20,260         $124,083         $ 66,070         $290,037
Segment operating income                       17,978            3,186           12,216              940           34,320
</TABLE>


Reconciliations of segment information to financial statements:

<TABLE>
<CAPTION>
                                                  Three Months Ended March 31,
                                                      2000         1999
                                                    --------       --------
<S>                                               <C>              <C>
Operating income
Total income for reportable segments                $ 84,038       $ 34,320
Unallocated amounts:
    Corporate R&D                                    (13,000)       (13,475)
    Corporate expenses                                (1,597)          (122)
                                                    --------       --------
Consolidated operating income before
    interest, taxes, and cumulative effect of
    accounting change                               $ 69,441       $ 20,723
                                                    ========       ========
</TABLE>



                                       6
<PAGE>   9

6. RECENT ACQUISITIONS

On January 6, 2000 the Company completed the purchase of an 8 inch wafer
fabrication facility located in Irving, Texas. The facility is approximately
650,000 square feet and the Company intends to install 0.18-micron manufacturing
equipment during 2000.

7. RECENT DEVELOPMENTS

Public Offering. On February 3, 2000 Atmel sold 18,000,000 shares of common
stock at a price of $35.50 per share. We intend to use the net proceeds of
$611,820 to fund capital expenditures and for working capital and general
corporate purposes.

TCS Acquisition. On February 16, 2000, we signed a contract to acquire
Thomson-CSF Semiconducteurs Specifique (TCS), a wholly-owned subsidiary of
Thomson-CSF. The purchase will be completed after we receive approvals from
appropriate French government departments. We do not expect any difficulties in
obtaining the necessary approvals. TCS specializes in the development and
manufacture of ASICs, including image sensors, as well as analog, digital and
radio frequency ASICs, and products manufactured using SiGe processes. TCS
products are used in such applications as digital cameras, fingerprint sensors,
GPS and RF chips, which we believe will provide us with an enhanced ability to
provide integrated solutions for the wireless and consumer end markets.



                                       7
<PAGE>   10

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

Safe Harbor for Forward-Looking Statements under the Securities Litigation
Reform Act of 1995: 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, political instability -- including war -- in countries where the Company
manufactures and/or sells its products; disruptions in production or business
systems due to year 2000 issues; conditions in the overall semiconductor market
(including the historic cyclicality of the industry); continued financial
turmoil in the worldwide market; 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 Report on
Form 10-K. The Company undertakes no obligation to update any forward looking
statements in this Form 10-Q.

RESULTS OF OPERATIONS

The following table shows certain operating data as a percentage of net
revenues:

<TABLE>
<CAPTION>
                                                  Three Months Ended
                                                      March 31,
                                                 2000          1999
                                                ------        ------
<S>                                             <C>           <C>
NET REVENUES                                    100.00%       100.00%

EXPENSES
     Cost of revenues                             58.9          64.2
     Research and development                     14.4          16.3
     Selling, general and administrative          10.5          12.4
                                                ------        ------
TOTAL EXPENSES                                    83.8          92.9

OPERATING INCOME                                  16.2           7.1
Interest and other income (expenses), net         -1.0           1.9
                                                ------        ------
INCOME BEFORE TAXES                               15.2           9.0
Income tax provision                              -5.5          -3.2
                                                ------        ------
INCOME BEFORE CUMULATIVE EFFECT OF
    ACCOUNTING CHANGE                              9.7           5.8
Cumulative effect of accounting change              --         -10.0
                                                ------        ------
Net income (loss)                                9.7 %        -4.3 %
                                                ======        ======
</TABLE>

NET REVENUES

Atmel's net revenues by segment for the three months ended March 31, 2000 and
1999 are summarized in the following table:



                                       8
<PAGE>   11

<TABLE>
<CAPTION>
                           Three Months Ended
(in thousands)                  March 31,
Segment                    2000         1999           Increase
- ------------------       --------       --------       --------
<S>                      <C>            <C>            <C>
ASIC                     $101,516       $ 79,624       $ 21,892
Logic                      30,044         20,260          9,784
Nonvolatile Memory        227,684        124,083        103,601
Temic                      69,942         66,070          3,872
                         --------       --------       --------
Total                    $429,186       $290,037       $139,149
                         ========       ========       ========
</TABLE>

Atmel's revenues increased 48% to $429 million in the quarter ended March 31,
2000 from $290 million in the corresponding quarter of 1999. Revenue for every
segment increased in the first quarter compared to one year ago, but the largest
increase was in the nonvolatile memory (NVM) segment which has benefited from
continuing growth in wireless communications markets.

ASIC segment revenues grew by $22 million in the first quarter of 2000 over the
same period in 1999 due to growth in unit volumes and higher selling prices.
Sales of ASICs designed for use in wireless communications were a significant
factor in the revenue increase.

Logic segment revenues increased nearly $10 million in the first quarter of 2000
compared to the same quarter of 1999 because unit shipments increased
significantly and average selling prices remained stable.

Nonvolatile Memory revenues increased $104 million in the first quarter of 2000
compared to the same period in 1999. The current quarter experienced
significantly higher unit shipments and stronger selling prices than a year ago.
Nonvolatile Memory revenues have been strong in part because of demand for parts
used in wireless telecommunications.

The Company's net revenues by geographic area for the three-month periods ended
March 31, 2000 and 1999 are summarized as follows (in millions):

<TABLE>
<CAPTION>
                    Three Months Ended
                         March 31
Region               2000         1999
- ------              ------       ------
<S>                 <C>          <C>
North America       $136.4       $ 97.7
Europe               144.3         90.1
Asia                 113.9         71.4
Japan                 34.6         24.6
                    ------       ------
                    $429.2       $283.8
                    ======       ======
</TABLE>

North American sales increased in the first quarter of 2000 compared to 1999 due
to more unit shipments at stronger prices. Sales outside North America as a
percent of total sales increased almost 3% in the first quarter of 2000 to 68%.
Sales to Europe increased 2% or $54 million in the first quarter of 2000
compared to the same period in 1999 due to significant growth in unit shipments
to the wireless communications industry. Sales to Asia increased less than 2%,
or $43 million, to $114 million in the first quarter of 2000, compared to sales
of $71 million in the first quarter of 1999 due to significant unit shipment
growth.



                                       9
<PAGE>   12

In the first quarter of 2000, approximately 21% of sales were denominated in
foreign currencies compared to 25% in the first quarter of 1999. Exchange rate
changes from the corresponding quarter in 1999 did not have a material effect on
revenues.

COST OF REVENUES
Our cost of revenues as a percentage of net revenues decreased to 59% in the
first quarter of 2000, compared with 64% in the first quarter of 1999. The
decrease in cost of revenues as a percentage of net revenues was the result of
manufacturing efficiencies we gained from greater utilization of our wafer
fabrication facilities and a higher unit base over which we spread the fixed
costs of operating our fabrication facilities.

In 2000 we expect capital expenditures to be about $1 billion, up from $180
million in 1999. These expenditures will be focused on developing leading edge
manufacturing capacity. We expect to make equipment purchases to add 0.18-micron
capacity, and also to incur development expenses for next generation process
technologies.

Production delays, difficulties in achieving acceptable yields at our
manufacturing facilities or industry wide overcapacity could materially and
adversely affect our gross margin and future operating results.

RESEARCH AND DEVELOPMENT
As a percentage of net revenue, research and development cost decreased to 14%
from 16% in the first quarter 1999. In dollar amounts spent, research and
development expenses increased 31% in the first quarter of 2000, compared with
the corresponding quarter in 1999. The increase has been primarily due to our
continued investment in the shrinking of the die size of our integrated circuits
from 0.5-micron line widths to 0.35-micron, 0.25-micron, and 0.18-micron line
widths; enhancement of mature products; development of new products; advanced
CMOS, BiCMOS, and silicon germanium process technologies; manufacturing
improvements; and the costs associated with increasing production capacity in
Colorado Springs and Rousset. We believe that continued investments in process
technology and product development are essential for us to remain competitive in
the markets we serve, and we are committed to high levels of expenditures for
research and development.

SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased by 26% to $45 million in
the first quarter of 2000 from $36 million in the first quarter of 1999 due to
higher selling expenses associated with increased sales. As a percentage of net
revenues, selling, general and administrative expenses were 11% for the first
quarter of 2000, compared with 12% for the first quarter of 1999.

INTEREST AND OTHER INCOME (EXPENSES), NET
We reported ($4) million of net interest and other expenses for the first
quarter of 2000, compared to $5 million of net interest and other income for the
corresponding period of 1999. In the first quarter of 1999 we recorded a $15
million pre-tax gain related to the sale of certain assets in other income. We
have no significant other income in the current quarter.

INCOME TAX PROVISION
Atmel's effective tax rate was 36% for the three months ended March 31, 2000 and
March 31, 1999. For the remainder of 2000 we expect the effective tax rate to
continue at 36%.



                                       10
<PAGE>   13

NET INCOME
Net income of $42 million for the first quarter of 2000 marked a $54 million
increase from the loss of $12 million for the first quarter of 1999. The
increase corresponds directly to the increase in net revenues and improved
manufacturing efficiencies we discussed above.

LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, we had $803 million in cash and cash equivalents, an increase
of $552 million from December 31, 1999. The large increase is almost entirely
due to receipt of proceeds from a secondary stock offering completed on February
3, 2000. Also as a result of the stock offering, our working capital more than
doubled to just over $1 billion, compared to about $487 million at December 31,
1999. Accounts receivable increased 8% to $305 million at March 31, 2000 from
$282 million at December 31, 1999. The average days of accounts receivable
outstanding were 65 days and 67 days for the first quarter of 2000 and the
fourth quarter of 1999. We monitor collection risks and provide an adequate
allowance for doubtful accounts related to these risks. While there can be no
guarantee of collecting these receivables, we believe that substantially all net
receivables will be collected, given our customer's current credit ratings, and
we expect that average days outstanding will decrease while business conditions
remain strong. For the three months ended March 31, 1999, there were no material
write-offs of accounts receivables. Inventories decreased $4 million to $270
million at March 31, 2000 from $274 million at December 31, 1999, the net effect
of increasing work in process at our Rousset wafer fabrication facility while
decreasing stockpiles of processed wafers in order to meet customer demands.

We believe that our existing sources of liquidity, together with cash flows from
operations, lease financing on equipment and other short- and medium-term bank
borrowings, will be sufficient to meet our liquidity and capital requirements
through 2000. We may, however, seek additional equity or debt financing to fund
the expansion of our 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
acceptable amounts or terms.

CASH FLOW
From Operating Activities: During the three months ended March 31, 2000, net
cash provided by operations increased $59 million to $93 million, compared to
$34 million in the same period of 1999. The largest increase, $43 million, was
in "Trade accounts payable and other accrued liabilities."

From Investing Activities: Net cash used in investing activities was $166
million for the three months ended March 31, 2000 compared to net cash provided
by investing activities of $10 million in the first quarter of 1999. The single
largest investment was for the purchase of an 8 inch wafer manufacturing
facility in Irving, Texas. We will fund the remaining capital expenditure budget
in 2000 for approximately $800 million (to be used for equipment purchases and
development expense) using a combination of existing cash, sale of short-term
investments, and equipment lease financing.

From Financing Activities: In the first quarter of 2000, net cash provided by
financing activities was $632 million compared to net cash used in financing
activities of $18 million in the first quarter of 1999, a change of $650
million. The majority of the new cash, $612 million, is from the proceeds of the
stock offering completed in February 2000.



                                       11
<PAGE>   14

OUR REVENUE AND OPERATING RESULTS FLUCTUATE SIGNIFICANTLY DUE TO A VARIETY OF
FACTORS

Our future operating results will be subject to quarterly variations based upon
a wide variety of factors, many of which are not within our control. These
factors include:

- -   the cyclical nature of both the semiconductor industry and the markets
    addressed by our products;

- -   fluctuations in manufacturing yields;

- -   the timing of introduction of new products;

- -   the timing of customer orders;

- -   price erosion;

- -   changes in mix of products sold;

- -   the extent of utilization of manufacturing capacity;

- -   product obsolescence;

- -   availability of supplies and raw materials;

- -   price competition and other competitive factors; and

- -   fluctuations in currency exchange rates.

Any unfavorable changes in these factors could harm our operating results.

In particular, we believe that our future sales growth will depend substantially
on the success of our new products. Our new products are generally incorporated
into our customers' products or systems at the design stage. However, design
wins may precede volume sales by a year or more. We may not be successful in
achieving design wins or any design win may not result in future revenues, which
depend in large part on the success of the customer's end product or system. We
expect the average selling price of each of our products to decline as
individual products mature and competitors enter the market. To offset average
selling price decreases, we rely primarily on reducing costs in the
manufacturing of those products, increased unit sales to absorb fixed costs, and
introducing new, higher priced products which incorporate advanced features or
integrated technologies to address new or emerging markets. To the extent that
such cost reductions and new product introductions do not occur in a timely
manner, our operating results could be harmed. From time to time, our quarterly
revenues and operating results can become more dependent upon orders booked and
shipped within a given quarter and, accordingly, our quarterly results can
become less predictable and subject to greater variability.

In addition, our continued success will depend in large part on the continued
growth of various electronics industries that use semiconductors, including
manufacturers of computers, telecommunications equipment, automotive
electronics, industrial controls, consumer electronics, data networking
equipment and military equipment. Our success will also depend upon a better
supply and demand balance within the industry.



                                       12
<PAGE>   15

YEAR 2000 RISKS
We have executed a plan to make our computer systems, applications, computer and
manufacturing equipment, and facilities year 2000 ready. To date, none of these
systems has experienced material difficulties from the transition to year 2000.

FOREIGN CURRENCY RISK
When we take a foreign order denominated in a local currency we will receive
fewer dollars than we initially anticipated if that local currency weakens
against the dollar before we collect our funds. In addition to reducing revenue,
this risk will negatively affect our operating results.

We partially counterbalance this risk in Europe by our significant operations
there whose costs are denominated in European currencies. Negative impacts on
revenue are offset by positive impacts on costs. In Japan, our yen denominated
sales are also subject to the exchange rate risk, but we do not have significant
operations there with which to counterbalance our exposure. Sales denominated in
yen were 7% of our revenue in the first quarter of 2000.

Sales denominated in foreign currencies were 21% in the first quarter of 2000,
compared to 25% in the comparable quarter of 1999.

We also face the risk that our accounts receivables denominated in foreign
currencies will be devalued if such foreign currencies weaken quickly and
significantly against the dollar. Because we have European assets and
liabilities in local currencies, we do not hedge accounts receivables
denominated in European currencies. However, our accounts receivables in yen are
hedged using a loan denominated in yen of approximately equal amount

LITIGATION RISKS
We have from time to time received, and may in the future receive,
communications from third parties asserting patent or other intellectual
property rights covering our products or processes. In the past, we have
received specific allegations from major companies alleging that certain of our
products infringe patents owned by such companies. If any litigation were to
occur as a result of such allegations in the future, and we do not prevail in
any such litigation, and are unable to obtain a satisfactory license, our
results of operations may be adversely affected.

In addition, the semiconductor industry is characterized by vigorous protection
and pursuit of intellectual property rights or positions, which have on occasion
resulted in significant and often protracted and expensive litigation. In the
past, we have been involved in such litigation, which adversely affected our
operating results. We cannot assure you that intellectual property claims will
not be made against us in the future or that we will not be prohibited from
using the technologies subject to any such claims or be required to obtain
licenses and make corresponding royalty payments. In addition, the necessary
management attention to and legal costs associated with litigation can have a
significant adverse effect on operating results.



                                       13
<PAGE>   16

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

MARKET RISK SENSITIVE INSTRUMENTS
We do not use derivative financial instruments in our operations.

INTEREST RATE RISK
We maintain investment portfolio holdings of various issuers, types and
maturities whose values are dependent upon short-term interest rates. We
generally classify these securities as available for sale, and consequently
record them on the balance sheet at fair value with unrealized gains and losses
being recorded as a separate part of stockholders' equity. We do not currently
hedge these interest rate exposures.

Given our current profile of interest rate exposures and the maturities of our
investment holdings, we believe that an unfavorable change in interest rates
would not have a significant negative impact on our investment portfolio or
statement of operations through December 31, 2000.

Atmel has short term debt, long term debt and capital leases totaling $806
million at March 31, 2000. Approximately $648 million of these borrowings have
fixed interest rates. Approximately $158 million of floating rate debt is based
on the Euro and EuroYen interest rates. We do not hedge either of these interest
rates and could be negatively affected should either of these rates increase
significantly. A hypothetical 40 basis point increase in both of these interest
rates would have a $0.6 million adverse impact on income before taxes on Atmel's
Consolidated Statements of Operations for 2000. While there can be no assurance
that both of these rates will remain at current levels, we believe these rates
will not increase significantly (defined as an increase of more than 40 basis
points) and cause any harm to our operations and financial position.



                                       14
<PAGE>   17

PART II OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS
Atmel is not a party to any legal proceedings that management believes could
have a material adverse effect on our operating results.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS
On February 3, 2000 Atmel sold 18,000,000 shares of common stock at a price of
$35.50 per share. We intend to use the net proceeds of $611,820 to fund capital
expenditures and for working capital and general corporate purposes.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(A) Exhibit:

27.1    Financial Data Schedule

(B) Reports on Form 8-K:

None



                                       15
<PAGE>   18

                                   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 11, 2000                            /S/  GEORGE PERLEGOS
                                  -----------------------------------
                                           GEORGE PERLEGOS
                                   President, Chief Executive Officer
                                   (Principal Executive Officer)



MAY 11, 2000                              /S/  DONALD COLVIN
                                  -----------------------------------
                                             DONALD COLVIN
                                    Chief Financial Officer and Vice
                                    President, Finance
                                    (Principal Financial and Accounting Officer)



                                       16
<PAGE>   19

                               INDEX TO EXHIBITS


27.1    Financial Data Schedule



<TABLE> <S> <C>

<ARTICLE> 5

<S>                             <C>
<PERIOD-TYPE>                   3-MOS
<FISCAL-YEAR-END>                          DEC-31-2000
<PERIOD-START>                              JAN-1-2000
<PERIOD-END>                               MAR-31-2000
<CASH>                                         802,684
<SECURITIES>                                   159,036
<RECEIVABLES>                                  305,232
<ALLOWANCES>                                    18,260
<INVENTORY>                                    270,048
<CURRENT-ASSETS>                             1,612,489
<PP&E>                                       1,039,864
<DEPRECIATION>                                  51,547
<TOTAL-ASSETS>                               2,689,110
<CURRENT-LIABILITIES>                          572,905
<BONDS>                                              0
                                0
                                          0
<COMMON>                                       950,420
<OTHER-SE>                                     497,324
<TOTAL-LIABILITY-AND-EQUITY>                 2,689,110
<SALES>                                        429,186
<TOTAL-REVENUES>                               429,186
<CGS>                                          252,722
<TOTAL-COSTS>                                  359,745
<OTHER-EXPENSES>                               107,023
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                               4,048
<INCOME-PRETAX>                                 65,393
<INCOME-TAX>                                    23,541
<INCOME-CONTINUING>                                  0
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    41,852
<EPS-BASIC>                                     0.20
<EPS-DILUTED>                                     0.19


</TABLE>


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