<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,
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 AUGUST 1, 2000 REGISTRANT HAD OUTSTANDING 230,504,928 SHARES OF COMMON STOCK.
<PAGE> 2
ATMEL CORPORATION
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at June 30, 2000 and December 31, 1999 1
Condensed Consolidated Statements of Operations for the three and six months ended
June 30, 2000 and June 30, 1999 2
Condensed Consolidated Statements of Cash Flows for the six months ended June 30,
2000 and June 30, 1999 3
Condensed Consolidated Statements of Comprehensive Income for the three and six
months ended June 30, 2000 and June 30, 1999 4
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
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 4. Submission of Matters to a Vote of Securities Holders 15
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
</TABLE>
<PAGE> 3
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ATMEL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
JUNE 30, 2000 December 31, 1999
------------- -----------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 841,503 $ 251,272
Short term investments 252,938 161,190
Accounts receivable 340,053 281,843
Inventories 286,455 274,065
Other current assets 85,674 70,938
----------- -----------
TOTAL CURRENT ASSETS 1,806,623 1,039,308
Fixed assets, net 1,175,027 938,562
Other assets 44,443 37,040
----------- -----------
TOTAL ASSETS $ 3,026,093 $ 2,014,910
=========== ===========
CURRENT LIABILITIES
Current portion of long-term debt $ 133,614 $ 147,166
Trade accounts payable 277,078 278,562
Accrued liabilities and other 147,454 94,584
Deferred income on shipments to distributors 32,543 31,500
----------- -----------
TOTAL CURRENT LIABILITIES 590,689 551,812
Convertible notes 129,330 275,899
Long-term debt less current portion 627,151 378,134
Deferred income taxes 7,586 7,586
----------- -----------
TOTAL LIABILITIES 1,354,756 1,213,431
----------- -----------
STOCKHOLDERS' EQUITY
Common stock 1,178,004 397,167
Accumulated other comprehensive loss (65,316) (51,160)
Retained earnings 558,649 455,472
----------- -----------
Total stockholders' equity 1,671,337 801,479
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,026,093 $ 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 Six Months Ended
June 30, June 30,
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET REVENUES $ 478,758 $ 311,142 $ 907,944 $ 601,179
Expenses
Cost of sales 270,707 194,210 523,429 380,375
Research and development 62,616 43,124 124,529 90,353
Selling, general and administrative 52,433 44,405 97,543 80,325
--------- --------- --------- ---------
TOTAL OPERATING EXPENSES 385,756 281,739 745,501 551,053
--------- --------- --------- ---------
Operating income 93,002 29,403 162,443 50,126
Interest and other (expenses) income, net 2,818 (5,335) (1,230) 32
--------- --------- --------- ---------
Income before taxes 95,820 24,068 161,213 50,158
Income tax provision (34,495) (8,664) (58,036) (18,056)
--------- --------- --------- ---------
Income before cumulative effect of
accounting change 61,325 15,404 103,177 32,102
Cumulative effect of accounting change,
net of tax effect -- -- -- (29,068)
--------- --------- --------- ---------
NET INCOME $ 61,325 $ 15,404 $ 103,177 $ 3,034
========= ========= ========= =========
Basic net income per share:
Income before cumulative effect of accounting change $ 0.27 $ 0.08 $ 0.47 $ 0.16
Cumulative effect of accounting change, net of tax effect -- -- -- (0.14)
--------- --------- --------- ---------
Net income $ 0.27 $ 0.08 $ 0.47 $ 0.02
========= ========= ========= =========
Diluted net income per share:
Income before cumulative effect of accounting change $ 0.26 $ 0.08 $ 0.45 $ 0.16
Cumulative effect of accounting change, net of tax effect -- -- -- (0.14)
--------- --------- --------- ---------
Net income $ 0.26 $ 0.08 $ 0.45 $ 0.02
========= ========= ========= =========
Shares used in basic net income
per share calculations 224,583 200,380 219,792 200,182
========= ========= ========= =========
Shares used in diluted net income
per share calculations 241,445 205,850 236,951 205,316
========= ========= ========= =========
</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>
Six Months Ended June 30,
2000 1999
--------- ---------
<S> <C> <C>
CASH FROM OPERATING ACTIVITIES
Net income (loss) $ 103,177 $ 3,034
Items not requiring the use of cash:
Depreciation and amortization 107,800 101,983
Cumulative effect of accounting change -- 29,068
Loss (Gain) on sales of fixed assets 2,230 (12,383)
Other 4,125 1,984
Changes in operating assets and liabilities
Accounts receivable (50,236) (19,617)
Inventories (1,907) (3,575)
Prepaid taxes and other assets (7,476) 9,584
Trade accounts payable and other accrued liabilities 47,814 (8,387)
Income taxes payable 44,325 (7,509)
Deferred income on shipments to distributors 1,043 (8,008)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 250,895 86,174
--------- ---------
CASH FROM INVESTING ACTIVITIES
Acquisition of fixed assets (399,079) (53,334)
Sales of fixed assets 1,689 17,600
Acquisitions (12,869) (9,400)
Purchase of investments (110,192) (62,780)
Sale or maturity of investments 18,670 62,297
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (501,781) (45,617)
--------- ---------
CASH FROM FINANCING ACTIVITIES
Issuance of notes payable 25,272 --
Proceeds from capital leases and notes 284,634 25,649
Principal payments capital leases and notes (84,034) (59,231)
Payment from settlement of warrants -- (7,619)
Issuance of common stock 619,356 4,033
--------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 845,228 (37,168)
--------- ---------
Effect of foreign currency translation adjustment (4,111) (6,997)
--------- ---------
Net increase (decrease) in cash 584,212 (3,608)
Cash and cash equivalents at beginning of period 251,272 161,721
--------- ---------
Cash and cash equivalents at end of period $ 835,484 $ 158,113
========= =========
Interest paid $ 18,058 $ 17,187
Income taxes paid $ 16,082 $ 9,153
Fixed asset purchases in accounts payable $ 45,735 $ 12,055
</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 Six Months Ended
June 30, June 30,
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income $ 61,325 $ 15,404 $ 103,177 $ 3,034
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments 2,726 (3,441) (13,353) (17,286)
Unrealized (loss) on securities (367) (2,449) (803) (1,583)
--------- --------- --------- ---------
Other comprehensive (loss) income 2,359 (5,890) (14,156) (18,869)
--------- --------- --------- ---------
Comprehensive income $ 63,684 $ 9,514 $ 89,021 $ (15,835)
========= ========= ========= =========
</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
JUNE 30, 2000
(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, 2000, and the results of
operations, comprehensive income and cash flows for the three and six month
periods ended June 30, 2000 and 1999. 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 and accompanying notes 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 the audited
financial statements and does not include all of the disclosures required by
generally accepted accounting principles. The statements of operations for the
periods presented are not necessarily indicative of results to be expected 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>
(In thousands) June 30, 2000 December 31, 1999
------------- -----------------
<S> <C> <C>
Raw materials and purchased parts $ 27,654 $ 19,527
Finished goods 74,425 61,840
Work in progress 184,376 192,698
-------- --------
\Total $286,455 $274,065
======== ========
</TABLE>
3. SHORT TERM INVESTMENTS
Short term investments are stated at cost plus any applicable unamortized
premium or discount.
4. NET INCOME PER SHARE
A reconciliation of the numerator and denominator of basic and diluted net
income 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 Six Months Ended
June 30 June 30
(In thousands, except per share data) 2000 1999 2000 1999
------------------------- -------------------------
<S> <C> <C> <C> <C>
Basic net income (numerator) $ 61,325 $ 15,404 $103,177 $ 3,034
Interest saved on convertible bonds, net of taxes 1,118 -- 3,596 --
Diluted net income (numerator) $ 62,443 $ 15,404 $106,773 $ 3,034
======== ======== ======== ========
Shares used in basic
net income per share calculations (denominator):
Weighted average shares of 224,583 200,380 219,792 200,182
common stock outstanding (basic)
Dilutive effect of stock options 7,344 5,470 7,641 5,134
Dilutive effect of convertible bonds 9,518 -- 9,518 --
Shares used in diluted
net income per share calculations (denominator):
Weighted average shares of common stock
outstanding (diluted) 241,445 205,850 236,951 205,316
======== ======== ======== ========
Basic net income per share $ 0.27 $ 0.08 $ 0.47 $ 0.02
======== ======== ======== ========
Diluted net income per share $ 0.26 $ 0.08 $ 0.45 $ 0.02
======== ======== ======== ========
</TABLE>
5. SEGMENT REPORTING
We have four reportable segments: Application Specific Integrated Circuits
(ASIC), Logic, Nonvolatile Memories (NVM) and Temic. Each segment requires
different design, development and marketing resources to produce and sell
semiconductor integrated circuits.
Information about segments (in thousands):
<TABLE>
<CAPTION>
ASIC Logic NVM Temic Total
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
THREE MONTHS ENDED JUNE 30, 2000
Net revenues from external customers $117,180 $ 35,160 $252,188 $ 74,230 $478,758
Segment operating income 22,217 9,676 75,616 11,847 119,356
THREE MONTHS ENDED JUNE 30, 1999
Net revenues from external customers $ 79,373 $ 26,806 $136,852 $ 68,111 $311,142
Segment operating income 8,398 5,996 14,455 3,158 32,007
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
ASIC Logic NVM Temic Total
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SIX MONTHS ENDED JUNE 30, 2000
Net revenues from external customers $218,696 $ 65,204 $479,872 $144,172 $907,944
Segment operating income 43,354 14,295 125,234 20,511 203,394
SIX MONTHS ENDED JUNE 30, 1999
Net revenues from external customers $158,997 $ 47,066 $260,935 $134,181 $601,179
Segment operating income 26,376 9,182 26,671 4,098 66,327
</TABLE>
Reconciliations of segment information to financial statements (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Total income for reportable segments $ 119,356 $ 32,007 $ 203,394 $ 66,327
Unallocated amounts:
Corporate R&D (19,000) 129 (32,000) (13,346)
Nonrecurring charges (5,167) -- (5,167)
Corporate expenses (2,187) (2,733) (3,784) (2,855)
------------------------------------------------------------------
Consolidated operating income before interest, taxes,
and cumulative effect of accounting change $ 93,002 $ 29,403 $ 162,443 $ 50,126
==================================================================
</TABLE>
6. TCS ACQUISITION
On May 25, 2000 we acquired Thomson-CSF Semiconducteurs Specifique (TCS), which
had been a wholly owned subsidiary of Thomson-CSF. TCS, which has been renamed
Atmel Grenoble, brings leading edge capabilities in security and image sensor
technologies.
7. CONVERTIBLE NOTES
On June 2, 2000 we redeemed our 3.25% Convertible Subordinated Guaranteed
Step-Up Notes due in 2002. The aggregate principal amount outstanding was $150
million. Note holders had the option to convert their Notes into shares of Atmel
Corporation common stock or redeem for cash. $149,998,000 principal amount of
notes was converted into shares of common stock constituting a total of
8,450,578 shares. $2,000 principal amount of notes was presented for cash
redemption, totaling $2,161.
8. SUBSEQUENT EVENTS
On July 14, 2000 our Board of Directors approved a two-for-one stock spilt, to
be effected as a stock dividend. Shareholders of record at the close of business
August 11, 2000 will be issued a certificate representing one additional share
for each share already held. Certificates will be distributed August 25, 2000.
The following table shows net income per share as it would appear after the
proposed stock split:
<TABLE>
<CAPTION>
(In thousands, except per share data) 2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income
Basic $61,325 $15,404 $103,177 $3,034
Diluted $62,443 $15,404 $106,773 $3,034
Number of shares after stock split
Basic 449,166 400,760 439,584 400,364
Diluted 482,890 411,700 473,902 410,632
Net income per share after stock split
Basic $0.14 $0.04 $0.24 $0.01
Diluted $0.13 $0.04 $0.23 $0.01
</TABLE>
7
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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, or disruptions in production or
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, 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 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 Six Months Ended
June 30, June 30,
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
NET REVENUES 100 % 100 % 100 % 100 %
Expenses
Cost of sales 57 62 58 63
Research and Development 13 14 14 15
Selling, general and administrative 11 14 11 13
------ ------ ------ ------
TOTAL EXPENSES 81 91 82 92
------ ------ ------ ------
OPERATING INCOME 19 9 18 8
Interest and other income (expenses), net 1 -2 0 0
------ ------ ------ ------
INCOME BEFORE TAXES 20 8 18 8
Income tax provision (benefit) -7 -3 -7 -3
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 13 5 11 5
Cumulative effect of accounting change -- -- -- -4
------ ------ ------ ------
NET INCOME 13 % 5 % 11 % 1 %
====== ====== ====== ======
</TABLE>
8
<PAGE> 11
NET REVENUES
Revenues for the second quarter of 2000 totaled $478 million, an increase of 54%
from the same quarter in 1999, and were the highest in our history. Contributing
to our revenue growth were continued product sales strength, a favorable pricing
environment, and the continued successful ramp of our manufacturing capacity.
NET REVENUES - BY SEGMENT
The Company's net revenues by segment are summarized as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
Segment 2000 1999 Increase 2000 1999 Increase
---------------------------------------------------- -------- ------------------------- --------
<S> <C> <C> <C> <C> <C> <C>
ASIC $117,180 $ 79,373 $ 37,807 $218,696 $158,997 $ 59,699
Logic 35,160 26,806 8,354 65,204 47,066 18,138
Nonvolatile Memory 252,188 136,852 115,336 479,872 260,935 218,937
Temic 74,230 68,111 6,119 144,172 134,181 9,991
------------------------- -------- ------------------------- --------
Total $478,758 $311,142 $167,616 $907,944 $601,179 $306,765
========================= ======== ========================= ========
</TABLE>
ASIC segment revenues grew by $38 million in the second quarter of 2000 over the
same period in 1999 due to continued growth in unit volumes. Sales of ASICs
designed for use in wireless communications and smartcard circuits were
significant factors in the revenue increase.
Logic segment revenues increased $8 million in the second quarter of 2000
compared to the same quarter of 1999 because of higher unit shipments.
Nonvolatile Memory revenues increased $115 million in the second quarter of 2000
compared to the same period in 1999. This segment continues to experience higher
unit shipments and stronger selling prices than last year. Nonvolatile Memory
revenues continue to be strong in part because of strong demand for parts used
in wireless telecommunications.
Temic segment revenues increased $6 million in the second quarter of 2000
compared to the same period in 1999 due to a significant increase in units
shipped and stronger prices.
NET REVENUES - BY GEOGRAPHIC AREA
The Company's net revenues by geographic areas are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
Region 2000 1999 Increase 2000 1999 Increase
----------------------------------------------- -------- ------------------------- --------
<S> <C> <C> <C> <C> <C> <C>
North America $167,247 $ 98,047 $ 69,200 $308,049 $196,833 $111,216
Europe 145,097 114,399 30,698 275,995 192,381 83,614
Asia 153,699 96,754 56,945 299,930 199,811 100,119
Other 12,715 1,942 10,773 23,970 12,154 11,816
------------------------- -------- ------------------------- --------
Total $478,758 $311,142 $167,616 $907,944 $601,179 $306,765
========================= ======== ========================= ========
</TABLE>
North American sales increased in the second quarter of 2000 compared to 1999
due to more unit shipments at stronger prices. Sales inside North America
increased to 35% of total sales compared to 31% of total sales in the same
quarter in 1999 while sales to Europe declined to 30%
9
<PAGE> 12
of total sales from 37% of total sales in the prior year's quarter. Faster sales
growth in North America drove the change in proportions. Sales to Asia
maintained their relative share of total sales.
In the second quarter of 2000, approximately 22% of sales were denominated in
foreign currencies compared to 26% in the second quarter of 1999. Exchange rate
changes from the corresponding quarter in 1999 did not have a material effect on
revenues.
COST OF REVENUES AND GROSS MARGIN
Our cost of revenues as a percentage of net revenues decreased to 58% percent in
the first half of 2000, from 63% percent in the corresponding period of 1999.
The decrease in cost of revenues as a percentage of net revenues is the result
of manufacturing efficiencies we continue to gain 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 continue to 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
Research and development costs increased to $125 million in the first half of
2000 from $90 million in the first half of 1999. In dollar amounts spent,
research and development expenses increased 39% while remaining at approximately
the same proportion of revenue as the same period 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; advancing CMOS, BiCMOS, and silicon germanium process technologies;
and manufacturing improvements. 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 continue to be committed to high levels of
expenditures for research and development.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A)
Selling, general and administrative expenses increased by $17 million in the
first half of 2000 compared to the same period in 1999, while declining as a
percentage of revenue to 11% from 13%.
INTEREST AND OTHER EXPENSES, NET
We reported ($1) million of net interest and other expenses for the first half
of 2000 compared to $0 million net interest and other expenses for the same
period in 1999. In the first half of 1999 we recorded a $15 million pre-tax gain
related to the sale of certain assets in other income, whereas no such item was
recorded in the first half of 2000. The first half of 2000 reflects the net
result of interest income, interest expense and foreign exchange gains.
10
<PAGE> 13
INCOME TAX PROVISION
The Company's effective tax rate continued to be 36% for the three and six
months ended June 30, 2000.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2000 we had $1,094 million of cash, cash equivalents and short term
investments. This is an increase of $682 million from December 31, 1999 and is
largely attributable to approximately $600 million of net proceeds from a
secondary common stock offering in February 2000.
The Company's accounts receivable increased by 21% to $340 million at June 30,
2000 from $282 million at December 31, 1999. Despite the increase the average
days of accounts receivable outstanding was 65 days in the second quarter of
2000 compared to 67 days in 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
customers' current credit ratings and we expect that average days outstanding
will continue to decrease while business conditions remain strong.
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 six months ended June 30, 2000, net cash
provided by operations increased $165 million to $251 million compared to $86
million in the same period of 1999. The increase was mainly due to the increase
in net income.
From Investing Activities: Net cash used in investing activities was $502
million for the six months ended June 30, 2000 compared to net cash used by
investing activities of $46 million in the first half of 1999. About 1/5 of the
2000 total, approximately $110 million, was used to purchase investments. $399
million was used for the purchase of fixed assets. We will fund our remaining
capital expenditures in 2000 (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 half of 2000, net cash provided by
financing activities was $845 million compared to net cash used in financing
activities of $37 million in the first half of 1999, a change of $882 million.
The majority of the new cash is from the proceeds of a stock offering completed
in February 2000, with the balance coming substantially from lease financing.
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;
11
<PAGE> 14
- 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.
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
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do not have significant operations there with which to counterbalance our
exposure. Sales denominated in yen were 8% of our revenue in the first half of
2000.
Sales denominated in foreign currencies were 22% in the first half of 2000,
compared to 23% in the comparable period 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.
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 $890
million at June 30, 2000. Approximately $612 million of these borrowings have
fixed interest rates. Approximately $278 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
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have a $0.5 million adverse impact on income before taxes on Atmel's
Consolidated Statements of Operations for the remainder of 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.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are 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 June 2, 2000 we redeemed our 3.25% Convertible Subordinated Guaranteed
Step-Up Notes due in 2002. The aggregate principal amount outstanding was $150
million. $149,998,000 principal amount of notes was converted to common shares,
constituting a total of 8,450,578 shares. The issuances of common shares on
conversion of the Notes were exempt from registration under Section 3(a)(9) of
the Securities Act because such shares were securities exchanged by the issuer
with its existing security holders exclusively where no commission or other
remuneration was paid or given directly or indirectly for soliciting such
exchange. $2,000 principal amount of notes was presented for cash redemption,
totaling $2,161.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
At our Annual Meeting of Stockholders held on May 3, 2000, the tabulation of
proxies representing 188,087,578 shares of Common Stock or 85% of the total
outstanding shares resulted in the following votes (in thousands):
PROPOSAL I (ELECTION OF DIRECTORS)
<TABLE>
<CAPTION>
Total Vote
Total Vote Withheld
for Each Each
Director Director
------- ------
<S> <C> <C>
George Perlegos 173,868 14,220
Gust Perlegos 173,865 14,223
Tsung-Ching Wu 173,841 14,247
Norm Hall 173,864 14,224
Peter Thomas 173,868 14,220
</TABLE>
PROPOSAL II (TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
THE INDEPENDENT ACCOUNTANTS OF ATMEL CORPORATION FOR 2000.)
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
------- ------- -------
<S> <C> <C>
187,685 204 199
</TABLE>
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<PAGE> 17
ITEM 5:. OTHER INFORMATION
Stockholder Proposals Due for Our 2001 Annual Meeting
Stockholder proposals intended to be presented at our 2001 annual meeting of
stockholders must be received by our Vice President and General Counsel not
later than November 18, 2000 in order to be included in our proxy statement and
form of proxy relating to the 2001 annual meeting. (Our Address: 2325 Orchard
Parkway; San Jose, CA 95131)
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibit:
27.1 Financial Data Schedule
(B) Reports on Form 8-K:
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ATMEL CORPORATION
------------------------------------
(Registrant)
AUGUST 14, 2000 /S/ GEORGE PERLEGOS
------------------------------------
GEORGE PERLEGOS
President, Chief Executive Officer
(Principal Executive Officer)
AUGUST 14, 2000 /S/ DONALD COLVIN
------------------------------------
DONALD COLVIN
Chief Financial Officer and
Vice President, Finance
(Principal Financial and
Accounting Officer)
16