<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
================================================================================
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____________ TO ______________
COMMISSION FILE NO. 0-27232
BENCHMARQ MICROELECTRONICS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 74-2532442
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17919 WATERVIEW PARKWAY
DALLAS, TEXAS 75252
(Address of principal executive offices) (Zip code)
(972) 437-9195
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by 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
--------- ---------
As of August 4, 1997, there were 6,876,652 shares of the registrant's common
stock outstanding.
<PAGE>
CAUTIONARY STATEMENT
The Company wishes to caution readers that the following important factors,
in addition to others noted throughout this Form 10-Q, in some cases have
affected, and in the future could affect, the Company's actual results and could
cause the Company's actual results for the third quarter of 1997, and beyond, to
differ materially from those expressed in any forward-looking statements made
by, or on behalf of, the Company, including, without limitation, statements made
regarding wafer commitments in Note 4 of the "Notes to Financial Statements",
-----------------------------
future product sales contained in Part I, Item 2, in the section entitled
"Overview", gross margins and improved market opportunities contained in Part I,
--------
Item 2, in the section entitled "Results of Operations-Gross Margin", research
----------------------------------
and development expenses contained in Part I, Item 2, in the section entitled
"Results of Operations-Research and Development", selling, general and
----------------------------------------------
administrative expenses contained in Part I, Item 2, in the section entitled
"Results of Operations-Selling, General and Administrative", capital
---------------------------------------------------------
expenditures and cash requirements contained in Part I, Item 2, in the section
entitled "Liquidity and Capital Resources", and comments regarding litigation
-------------------------------
contained in Part II, Item 1, in the section entitled "Litigation" and Note 5 to
----------
"Notes to Financial Statements":
-----------------------------
- -- an accelerated decline in the average selling prices for the Company's
battery management products, NVSRAM (as defined herein) products and RTC
(as defined herein) products;
- -- insufficient expansion of the Company's production capacity to meet the
sales demand for battery management products;
- -- slower or declining acceptance of battery management products, NVSRAM
products or RTC products;
- -- increases in the prices of materials and components, especially, wafers,
SRAMs (as defined herein) and batteries;
- -- timing or delay of new product introductions by the Company or its
competitors;
- -- loss of key personnel;
- -- excess production capacity;
- -- inability to achieve acceptable margins on the non-proprietary components
included in certain NVSRAM, RTC and battery management products;
- -- timing and size of significant orders;
- -- inability to utilize wafer capacity committed to under the terms of the
Option Agreement with Taiwan Semiconductor Manufacturing Co., Ltd.;
- -- changes in product mix;
- -- advances in technologies;
- -- growth of selling, general and administrative expense at a rate faster than
that of sales and revenues;
- -- adverse rulings in patent infringement and product liability litigation;
- -- labor disputes; and
- -- failure to comply with government regulations.
In addition, the Company refers readers to the discussion of certain risk
factors pertaining to the Company contained in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 and in the Company's
Registration Statement on Form S-1 (Registration No. 33-06896) filed with the
Securities and Exchange Commission on September 13, 1995.
2
<PAGE>
BENCHMARQ MICROELECTRONICS, INC.
INDEX TO FORM 10-Q
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets at June 30, 1997 (unaudited) and
December 31, 1996................................................. 4
Consolidated Statements of Income for the Three and Six Months
Ended June 30, 1997 and 1996 (unaudited).......................... 5
Consolidated Statements of Cash Flows for the Six Months Ended
June 30 1997 and 1996 (unaudited)................................. 6
Notes to Consolidated Financial Statements (unaudited)............ 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..................... 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................. 15
Item 4. Submission of Matters to a Vote of Security Holders............... 15
Item 6. Exhibits and Reports on Form 8-K.................................. 16
Signatures................................................................. 17
3
<PAGE>
BENCHMARQ MICROELECTRONICS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
--------------------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 3,798,047 $ 2,575,350
Short-term investments............................... 12,188,550 12,878,526
Receivables, net of allowance for doubtful accounts
and estimated returns of $97,347 and $388,471 at
June 30, 1997 and December 31, 1996................. 5,502,208 4,410,448
Inventories.......................................... 3,655,870 4,035,175
Deferred income tax assets........................... 466,504 660,095
Prepaid expenses..................................... 1,006,402 354,978
--------------------------
Total current assets.............................. 26,617,581 24,914,572
Property and equipment, at cost:
Furniture and fixtures............................... 1,098,620 810,553
Equipment............................................ 4,202,031 3,976,191
Computer software.................................... 517,134 520,809
--------------------------
5,817,785 5,307,553
Accumulated depreciation............................. 3,228,826 2,806,832
--------------------------
2,588,959 2,500,721
Equipment under capital lease obligations.............. 4,326,115 4,274,173
Accumulated amortization............................. 1,438,692 1,067,143
--------------------------
2,887,423 3,207,030
Prepayment for product purchases....................... 5,040,000 5,880,000
Noncurrent deferred income tax and other assets........ 252,199 306,784
--------------------------
Total assets...................................... $37,386,162 $36,809,107
==========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................... $ 1,664,427 $ 1,852,516
Note payable......................................... 1,380,000 3,380,000
Payroll and related benefits......................... 508,281 618,154
Other accrued liabilities............................ 719,627 837,223
Deferred income on shipments to distributors......... 1,230,769 1,219,800
Current obligations under capital leases............. 1,225,549 1,311,905
--------------------------
Total current liabilities......................... 6,728,653 9,219,598
Obligations under capital leases, less current
obligations........................................... 785,731 1,259,927
Stockholders' equity...................................
Common stock, $ .001 par value, 50,000,000 shares
authorized; 6,918,984 and 6,841,808 shares issued at
June 30, 1997 and December 31, 1996, respectively... 6,919 6,842
Additional paid-in capital........................... 25,106,973 24,932,678
Retained earnings.................................... 4,760,322 1,392,162
Net unrealized gain on short-term investments,....... 10,364 10,700
Treasury stock, 64,000 common shares, at cost........ (12,800) (12,800)
--------------------------
Total stockholders' equity........................ 29,871,778 26,329,582
--------------------------
Total liabilities and stockholders' equity........ $37,386,162 $36,809,107
==========================
</TABLE>
SEE ACCOMPANYING NOTES
4
<PAGE>
BENCHMARQ MICROELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1997 1996 1997 1996
--------------------------- -------------------------
<S> <C> <C> <C> <C>
Net revenues.............................. $11,457,461 $9,067,648 $23,169,609 $17,542,763
Cost of sales............................. 5,189,800 5,079,605 11,003,380 10,133,730
--------------------------- -------------------------
Gross margin.............................. 6,267,661 3,988,043 12,166,229 7,409,033
Operating expenses:
Research and development................ 816,671 699,792 1,632,184 1,290,227
Selling, general, and administrative.... 2,809,284 2,026,631 5,454,921 3,845,952
--------------------------- -------------------------
Total operating expenses................ 3,625,955 2,726,423 7,087,105 5,136,179
--------------------------- -------------------------
Income from operations.................... 2,641,706 1,261,620 5,079,124 2,272,854
Other income (expense):
Interest income......................... 131,232 170,193 318,596 342,054
Interest expense........................ (46,025) (51,207) (98,392) (94,135)
Other................................... (31,641) (22,832) (36,868) (37,999)
--------------------------- -------------------------
Income before provision for income taxes.. 2,695,272 1,357,774 5,262,460 2,482,774
Provision for income taxes................ 970,300 98,800 1,894,300 166,300
--------------------------- -------------------------
Net income................................ $ 1,724,972 $1,258,974 $ 3,368,160 $ 2,316,474
=========================== =========================
Net income per common and
common equivalent share................ $0.22 $0.17 $0.44 $0.32
=========================== =========================
Shares used in computing net income per
common and common equivalent share..... 7,666,912 7,358,842 7,673,318 7,292,154
=========================== =========================
</TABLE>
SEE ACCOMPANYING NOTES.
5
<PAGE>
BENCHMARQ MICROELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1997 1996
---------------------------
<S> <C> <C>
Operating Activities:
Net income....................................................... $ 3,368,160 $ 2,316,474
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.................................. 993,933 740,399
Loss on disposition of fixed assets............................ 36,868 37,999
Deferred income taxes.......................................... 258,121 -
Changes in operating assets and liabilities:
Receivables................................................. (1,091,760) 223,334
Inventories................................................. 379,305 (1,304,761)
Prepaid expenses and other assets........................... 178,631 31,203
Accounts payable............................................ (188,089) (230,840)
Income taxes payable........................................ (104,271) 67,697
Deferred income on shipments to distributors................ 10,969 555,916
Accrued liabilities......................................... (123,198) 24,033
---------------------------
Net cash provided by operating activities........................ 3,718,669 2,461,454
Investing Activities:
Prepayment for product purchases................................. (2,000,000) (2,500,000)
Investment in short-term investments............................. (34,599,085) (20,023,985)
Maturities of short-term investments............................. 35,288,725 10,311,089
Capital expenditures............................................. (641,064) (697,401)
---------------------------
Net cash used by investing activities............................ (1,951,424) (12,910,297)
Financing Activities:
Proceeds from issuance of common stock upon exercise of options.. 174,372 53,076
Proceeds from issuance of common stock, net of offering costs.... - 584,384
Principal payments under capital lease obligations............... (718,920) (641,946)
---------------------------
Net cash used by financing activities............................ (544,548) (4,486)
---------------------------
Net change in cash and cash equivalents.......................... 1,222,697 (10,453,329)
Cash and cash equivalents at beginning of period................. 2,575,350 12,653,260
---------------------------
Cash and cash equivalents at end of period....................... $ 3,798,047 $ 2,199,931
===========================
Supplemental Cash Flows Information:
Cash paid for interest......................................... $ 98,392 $ 94,135
============ ============
Cash paid for income taxes..................................... $ 1,740,450 $ 98,603
============ ============
</TABLE>
SEE ACCOMPANYING NOTES.
6
<PAGE>
BENCHMARQ MICROELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
1. INTERIM FINANCIAL INFORMATION
The accompanying unaudited financial statements have been prepared by
BENCHMARQ Microelectronics, Inc. (the "Company" or "BENCHMARQ") in accordance
with the rules and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting solely of normal
recurring adjustments) necessary for a fair statement of the results for the
interim periods presented have been included. Operating results for the three
and six months ended June 30, 1997, are not necessarily indicative of the
results that may be expected for the year ending December 31, 1997. For further
information, refer to the financial statements and the footnotes thereto
included in the BENCHMARQ Microelectronics, Inc. annual report on Form 10-K for
the year ended December 31, 1996.
2. NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
Net income per share amounts are computed using the weighted average number
of common and common equivalent shares. For the three and six months ended
June 30, 1997, common equivalent shares consisted of stock options (using the
treasury stock method). For the three and six months ended June 30, 1996, common
equivalent shares consisted of stock options and warrants (using the treasury
stock method).
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings Per Share, which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method currently
used to compute earnings per share and to restate all prior periods. Under the
new requirements for calculating primary or "basic" earnings per share, the
dilutive effect of stock options will be excluded. The impact is expected to
result in an increase in primary or "basic" earnings per share for the second
quarter ended June 30, 1997 and 1996 of $0.03 and $0.02 per share, respectively.
The impact is expected to result in an increase in basic earnings per share for
the six months ended June 30, 1997 and 1996 of $0.05 and $0.03 per share,
respectively. The impact of Statement No. 128 on the calculation of fully
diluted or "diluted" earnings per share for these periods is not expected to be
material.
3. INVENTORIES
Inventories are stated at the lower of standard cost, which approximates
actual cost determined on a first-in, first-out basis, or market.
<TABLE>
<CAPTION>
Inventories, net, consist of the following:
JUNE 30, DECEMBER 31,
1997 1996
---------- ------------
<S> <C> <C>
Finished goods.................................. $1,745,438 $1,737,739
Work-in-process................................. 1,003,838 1,145,276
Raw materials................................... 906,594 1,152,160
---------- ----------
$3,655,870 $4,035,175
========== ==========
</TABLE>
7
<PAGE>
BENCHMARQ MICROELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
4. COMMITMENTS
The Company currently obtains substantially all of its semiconductor wafers
for use in its products from Taiwan Semiconductor Manufacturing Company
("TSMC"). The Company expects to remain dependent on TSMC for substantially all
of its wafer capacity for the foreseeable future. In May 1996, the Company
entered into an Option Agreement with TSMC (the "Option Agreement"). Pursuant to
the Option Agreement, the Company has committed to purchase and TSMC has
committed to provide specified quantities of wafers at prevailing market prices
during the years 1997 through 2000. Additionally, the Company has an option to
purchase and TSMC has committed to provide certain additional wafers (the
"Option Wafers") to be purchased during the years 1997 through 2000. The
Company has agreed to pay $5,880,000 as an advance payment for the Option Wafers
TSMC has committed to provide during the term of the Option agreement, of which
$2,500,000 was paid in May 1996. The Company issued a promissory note due March
31, 1997, for the remaining $3,380,000. Effective March 31, 1997, the Company
and TSMC amended the Option Agreement to incorporate the use by the Company of a
proposed new TSMC manufacturing process and to reschedule until December 31,
1997, $1,380,000 of the note payable originally due on March 31, 1997. The
Company paid $2,000,000 as scheduled on March 31, 1997. The advanced payment
will be credited at specified amounts upon purchase of the Option Wafers or will
be forfeited if such wafers are not purchased in a given year. Additionally,
the Company has reclassified to "prepaid expenses" the portion of the advanced
payment for Option Wafers from which it believes it will benefit in 1997.
5. CONTINGENCY
BENCHMARQ filed a declaratory judgment action against Dallas Semiconductor
Corporation ("DSC") in January 1997 to resolve certain allegations of patent
infringement asserted against BENCHMARQ by DSC. BENCHMARQ filed its action
against DSC in the United States District Court for the Eastern District of
Texas, Sherman Division. BENCHMARQ had previously sought declaratory relief in
a similar action filed in December 1995 which was dismissed on June 25, 1996,
based on DSC's assurance to the court that it had not charged BENCHMARQ with
patent infringement. The parties failed to reach agreement in subsequent
negotiations. Since the filing of the suit by BENCHMARQ in January 1997 in
Sherman, Texas, DSC filed a lawsuit against BENCHMARQ in February 1997 in the
United States District Court for the Northern District of Texas, Dallas
Division, alleging infringement of some of the same patents at issue in the
Sherman litigation filed in December 1995 and January 1997 by the Company. In
its lawsuit, DSC is seeking injunction against patent infringement, damages for
lost profit (which may under certain circumstances be trebled), pre and post
judgment interest and attorney's fees. To date DSC has not specified an amount
of monetary damages to which it alleges it is entitled. Subsequently, the
courts determined that the two cases will be combined into one case in the
United States District Court for the Eastern District of Texas. The Company is
confident that it has not violated any of the patents asserted by DSC and
intends to vigorously pursue its case. However, due to the uncertainties
associated with any litigation, the ultimate outcome cannot presently be
determined.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
BENCHMARQ was incorporated in 1989 and is engaged in the design,
development and marketing of mixed-signal integrated circuits ("ICs") and
electronic modules for portable and power-sensitive electronic systems. The
Company introduced its first products in October 1990, and made its first
shipments, principally of nonvolatile static random access memory ("NVSRAM")
modules, in December 1990. In August 1991, the Company shipped its initial
battery management product and in December 1991 shipped its first real-time-
clock ("RTC") product.
BENCHMARQ currently is directing the majority of its research and
development efforts to the development of battery management products, which are
its strategic focus. Currently, the Company's battery management product line
is comprised of: ICs that measure and report the charge capacity of a
rechargeable battery ("Gas Gauge ICs"); ICs that control battery charging
("Charger ICs"); and ICs that protect against excessive charging and discharging
of Lithium Ion batteries. In addition, the Company's battery management product
line includes modules that incorporate certain of the Company's battery
management ICs. The Company's primary objective is to continue to grow sales of
battery management products, which have been the Company's largest revenue
product line for the last seven consecutive quarters, to a more dominant
position within the Company's revenue structure. Ongoing efforts to develop
NVSRAM and RTC products have been selective and relatively modest. The Company
believes that its revenues from RTC products and NVSRAM products will not
increase materially over the long-term and may decline due to competitive
pressure. Accordingly, the Company expects that favorable future operating
results will be substantially dependent upon its ability to expand sales of
battery management products. There can be no assurance that the Company will be
successful in substantially increasing sales of battery management products, or
that sales of RTC products or NVSRAM products will not decline more rapidly than
anticipated.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1997, Compared with Three Months Ended June 30, 1996
and March 31, 1997
Net Revenues. Total net revenues in second quarter 1997 were approximately
$11.5 million, a 26% increase over the same period in 1996. This increase was
due principally to increased unit sales of Gas Gauge ICs into the portable
personal computer ("PC") market, increased unit sales of Charger IC devices,
which are typically sold into mobile communications, consumer, power tool and
portable PC applications, and increased unit sales of high density NVSRAM
modules into the networking and telecommunication markets. Battery management
revenue growth from second quarter 1996 was due primarily to sales of Gas Gauge
ICs and Charger ICs and represented 49% of the Company's total revenue growth
from second quarter 1996. NVSRAM revenue growth was due almost entirely to
sales of high density NVSRAM modules. Revenues from sales of PC RTC poducts
declined in the second quarter of 1997 as compared with the same period in 1996
due to increased competitive factors for clocks in the PC market.
9
<PAGE>
The Company's total net revenues for the second quarter of 1997 declined 2%
from the first quarter of 1997 primarily due to lower unit sales of RTC modules
into the PC market. However, unit sales of Gas Gauge ICs grew 27% from the
first quarter of 1997 and in large part drove a 12% increase in battery
management revenues as compared to the first quarter of 1997. Much of the
sequential growth in battery management revenues resulted from demand for the
Company's newest Gas Gauge IC, which is targeted at SMBus PC applications.
Shipments of NVSRAM modules decreased slightly from the first quarter of 1997,
but remained a solid revenue contributor.
Revenues from sales of battery management products comprised 46% of the
Company's total net revenues in the second quarter of 1997, up from 40% in the
first quarter of 1997. This change reflects the impact of both the increased
demand for Gas Gauge ICs in the portable PC market and the decrease in sales of
PC RTC modules. Within the battery management product line, Gas Gauge IC
revenues continued to represent the largest source of battery management
revenues.
Average selling prices for all three product lines were relatively flat
compared with first quarter 1997. However, RTC average selling prices were
helped by the Company's decision not to pursue volume opportunities for RTC
modules at the lowest market prices.
Revenue generated from RTC royalties and other miscellaneous sources was
0.3% of total revenue in second quarter 1997, compared with 0.9% in second
quarter 1996.
The following table sets forth (for the periods indicated) the amount (in
thousands) and percentage of total net revenues by type of product:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
-------------------------------
1997 1996
-------------- --------------
<S> <C> <C> <C> <C>
Battery Management Products $ 5,302 46.3% $4,125 45.5%
NVSRAM Products 4,041 35.3 2,678 29.5
RTC Products 2,072 18.1 2,181 24.1
RTC Royalties/Other 42 0.3 84 0.9
------------------------------
Total Net Revenue $11,457 100.0% $9,068 100.0%
==============================
</TABLE>
The Company's revenues from international customers accounted for
approximately $7.2 million, or 63% of total net revenues, for the quarter ended
June 30, 1997, compared to $5.8 million, or 64% of total net revenues, for the
comparable period in 1996. During the second quarter of 1997, approximately 54%
of the Company's total net revenues was derived from customers in the Asia-
Pacific region. The Company's distributor in Taiwan accounted for approximately
$1.7 million, or 15%, of the Company's total net revenues in the second quarter
of 1997. The Company's distributor in South Korea accounted for approximately
$1.4 million, or 12%, of the Company's total net revenues in the second quarter
of 1997. No other customer directly accounted for greater than 10% of the total
net revenues.
Export sales are subject to a variety of risks, including those arising
from fluctuations in currency exchange rates, tariffs, import restrictions and
other trade barriers, unexpected changes in regulatory requirements, longer
accounts receivable payment cycles, potentially adverse tax consequences and
export license requirements. Because the Company's international sales have to
date been denominated in U.S. dollars, increases in the value of the U.S. dollar
could increase the price in local currencies of the Company's products in
foreign markets and make the
10
<PAGE>
Company's products relatively more expensive than competitors' products that are
denominated in local currencies.
Gross Margin. The Company's gross margin represented 55% of total net
revenues for the three months ended June 30, 1997 and 44% for the comparable
period in 1996. Gross margin increased by approximately $2,280,000, or 57%, to
approximately $6.3 million for the second quarter of 1997, compared to $4.0
million in the second quarter of 1996. The improvement in gross margin as a
percentage of revenues as compared to the second quarter of 1996 was due to a
strong mix of battery management product sales, reductions in certain product
costs and lower unit sales of low margin RTC modules.
The Company expects that average selling prices, primarily with respect to
its RTC and NVSRAM products will continue to decline. The Company believes that
its ability to increase gross margins and maintain or increase its gross margins
as a percentage of revenues over the long-term will primarily require it to
increase its sales of battery management products. There can be no assurance,
however, that the Company will be able to achieve these objectives.
Research and Development. The Company's research and development expense
increased approximately 17% to $817,000 in the second quarter of 1997, compared
to $700,000 in the second quarter of 1996. This increase was due primarily to
increased expenses relating to development tooling. As a percentage of total
net revenues, research and development expense decreased to approximately 7.1%
in the second quarter of 1997 from 7.7% in the second quarter of 1996.
The Company intends to continue to make a significant investment in
research and development, particularly with respect to battery management
product opportunities, and believes that research and development expense will
therefore increase in absolute dollars.
Selling, General and Administrative. Selling, general and administrative
expense increased approximately $783,000 to $2.8 million in the second quarter
of 1997 as compared to the same period in 1996 in large part due to increases in
compensation and miscellaneous other expenses. Selling, general and
administrative expense represented approximately 24.5% and 22.4% of total net
revenues in the second quarter of 1997 and 1996, respectively. Selling, general
and administrative expense in absolute dollars is expected to continue to
increase as the Company expands its business.
Other Income (Expense). Other income (expense), consists primarily of
interest earned on short-term investments, net of interest expense on capital
lease obligations. In the second quarter of 1997, the Company realized net
other income of approximately $54,000, compared to $96,000 in the second quarter
of 1996. This decrease primarily reflects a larger mix of tax free investments.
Provision for Income Taxes. The Company generated pre-tax income during
the second quarter of 1997 and 1996. The Company employed an effective tax rate
of 36% and recorded a provision for income tax of $970,300 in the second quarter
of 1997. The pre-tax income generated during the second quarter of 1996 was
substantially offset by net operating loss carryforwards from prior operating
periods. A provision for income tax of $98,800 was recorded in the second
quarter of 1996, consisting of alternative minimum tax and state income tax.
11
<PAGE>
Six Months Ended June 30, 1997, Compared with Six Months Ended June 30, 1996
Net Revenues. Total net revenues for the six months ended June 30, 1997
were approximately $23.2 million, a 32% increase over the same period in 1996.
This increase was due principally to increased unit sales of Gas Gauge ICs into
the portable PC market, increased unit sales of Charger IC devices, which are
typically sold into mobile communications, consumer, power tool and portable PC
applications, and increased unit sales of higher density NVSRAM modules, which
are sold into telecommunications and networking markets. Revenue generated from
RTC royalties and other miscellaneous sources was 0.7% of total revenue for the
six months ended June 30, 1997, compared with 1.3% for the six months ended June
30, 1996.
The following table sets forth for the periods indicated the amount (in
thousands) and percentage of total net revenues by type of product:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
--------------------------------
1997 1996
-------------- ---------------
<S> <C> <C> <C> <C>
Battery Management Products $10,034 43.3% $ 7,188 41.0%
NVSRAM Products 8,212 35.4 5,297 30.2
RTC Products 4,771 20.6 4,825 27.5
RTC Royalties/Other 153 0.7 233 1.3
-------------------------------
Total Net Revenue $23,170 100.0% $17,543 100.0%
===============================
</TABLE>
The Company's revenues from international customers accounted for
approximately $14.6 million, or 63% of total net revenues, for the six months
ended June 30, 1997, compared to $11.0 million, or 63% of total net revenues,
for the comparable period in 1996. During the six months ended June 30, 1997,
approximately 52% of the Company's total net revenues was derived from customers
in the Asia-Pacific region. The Company's distributor in Taiwan accounted for
approximately $3.6 million, or 16%, of total net revenues for the six months
ended June 30, 1997. The Company's distributor in South Korea accounted for
approximately $2.4 million, or 11%, of total net revenues for the six months
ended June 30, 1997. No other customer directly accounted for greater than 10%
of the total net revenues.
Gross Margin. The Company's gross margin represented 53% and 42% of total
net revenues for the six months ended June 30, 1997 and 1996, respectively.
Gross Margin increased by approximately $4.8 million, or 64%, to approximately
$12.2 million for the six months ended June 30, 1997, compared to $7.4 million
for the six months ended June 30, 1996. The improvement in gross margin as a
percentage of revenues for the six months ended June 30, 1997 as compared to the
same period in 1996 was due to a strong mix of battery management product sales,
reductions in certain product costs and lower unit sales of low margin RTC
modules.
Research and Development. The Company's research and development expense
increased approximately 27% to $1.6 million for the six months ended June 30,
1997 as compared to approximately $1.3 million for the six months ended June 30,
1996. This increase was due primarily to increased compensation and payroll
related expenses and development tooling. As a percentage of total revenues,
research and development expense decreased to approximately 7.0% for the six
months ended June 30, 1997 from 7.4% for the comparable period in 1996.
12
<PAGE>
Selling, General and Administrative. Selling, general and administrative
expense increased by approximately $1.6 million to $5.5 million for the six
months ended June 30, 1997 as compared to the same period in 1996. This
increase was due primarily to increases in compensation, external sales
commissions, depreciation, and other general expenses. Selling, general and
administrative expense represented approximately 23.5% and 21.9% of total net
revenues for the six months ended June 30, 1997 and 1996, respectively.
Other Income (Expense). Other income (expense), consists primarily of
interest earned on short-term investments, net of interest expense on capital
lease obligations. For the six months ended June 30, 1997, the Company realized
net other income of approximately $183,000, compared to $210,000 for the same
period in 1996. This decrease primarily reflects a larger mix of tax free
investments.
Provision for Income Taxes. The Company generated pre-tax income during
the six months ended June 30, 1997 and 1996. The Company employed an effective
tax rate of 36% and recorded a provision for income tax of $1,894,300 for the
six months ended June 30, 1997. The pre-tax income generated during the six
months ended June 30, 1996 was substantially offset by net operating loss
carryforwards from prior operating periods. A provision for income tax of
$166,300 was recorded for the six months ended June 30, 1996, consisting of
alternative minimum tax and state income tax.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital needs are to finance accounts receivable,
inventories and additions of capital assets. Approximately $3.7 million of cash
was generated by operating activities during the six months ended June 30, 1997
as compared to $2.5 million in the comparable period in 1996.
Net cash used in investing activities of approximately $2.0 million during
the six months ended June 30, 1997 was attributable to the $2.0 million
prepayment for certain quantities of wafers pursuant to the Option Agreement
under which TSMC is committed to supply and the Company is committed to purchase
wafers. In addition, approximately $641,000 was used for capital expenditures
consisting in large part of assembly and engineering equipment and office
expansion. Finally, approximately $690,000 was provided by net maturities of
marketable securities. Comparatively, net cash used in investing activities
during the six months ended June 30, 1996 amounted to approximately $12.9
million and consisted primarily of the investment of much of the Company's cash
equivalents into short-term investments to improve interest income and, to a
lesser extent, a $2.5 million prepayment pursuant to the Option Agreement with
TSMC and capital expenditures for assembly and test expansion.
Financing activities have consisted primarily of the issuance of equity and
payments made pursuant to capital lease obligations. Financing activities used
cash during the six months ended June 30, 1997 of approximately $545,000, which
consisted of proceeds of approximately $174,000 from issuances of stock and
payments of approximately $719,000 under capital lease obligations. During the
comparable six months ended June 30, 1996, financing activities used net cash of
approximately $4,000, consisting of issuances of stock to the underwriters of
the Company's IPO to cover over-allotments and substantially offset by payments
under capital lease obligations.
13
<PAGE>
The Company's principal sources of liquidity are cash generated from
operations as well as cash and cash equivalents and short-term investments of
approximately $16.0 million at June 30, 1997. The Company's short-term
investments are primarily in municipal and tax free bonds.
The Company anticipates capital asset additions to range between $1.5
million and $3.0 million for the remainder of 1997, a large part of which will
be used to expand product test capacity for certain of its battery management
products, a portion of which may be financed by equipment leases.
The Company believes that existing cash balances and other capital
resources will be sufficient to meet the Company's cash requirements at least
through 1997. However, the Company may also seek to establish additional lines
of credit to augment its funding of operating activities. There can be no
assurance that such additional financing, if required, will be available on
terms acceptable to the Company, if at all.
In addition, the Company may, from time to time, as market and business
conditions warrant, invest in or acquire complementary businesses, products,
technologies and additional sources of wafer supply. The Company also may seek
additional equity or debt financing. The sale of additional equity or
convertible debt securities could result in dilution to the Company's
stockholders. There can be no assurance that such additional financing, if
required, will be available on terms acceptable to the Company, if at all.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
BENCHMARQ filed a declaratory judgment action against Dallas
Semiconductor Corporation ("DSC") in January 1997 to resolve certain allegations
of patent infringement asserted against BENCHMARQ by DSC. BENCHMARQ filed its
action against DSC in the United States District Court for the Eastern District
of Texas, Sherman Division. BENCHMARQ had previously sought declaratory relief
in a similar action filed in December 1995 which was dismissed on June 25, 1996,
based on DSC's assurance to the court that it had not charged BENCHMARQ with
patent infringement. The parties failed to reach agreement in subsequent
negotiations. Since the filing of the suit by BENCHMARQ in January 1997 in
Sherman, Texas, DSC filed a lawsuit against BENCHMARQ in February 1997 in the
United States District Court for the Northern District of Texas, Dallas
Division, alleging infringement of some of the same patents at issue in the
Sherman litigation filed in December 1995 and January 1997 by the Company. In
its lawsuit, DSC is seeking injunction against patent infringement, damages for
lost profit (which may under certain circumstances be trebled), pre and post
judgment interest and attorney's fees. To date DSC has not specified an amount
of monetary damages to which it alleges it is entitled. Subsequently, the
courts determined that the two cases will be combined into one case in the
United States District Court for the Eastern District of Texas. The Company is
confident that it has not violated any of the patents asserted by DSC and
intends to vigorously pursue its case. However, due to the uncertainties
associated with any litigation, the ultimate outcome cannot presently be
determined.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of stockholders of BENCHMARQ was held in Richardson,
Texas, at 9:30 a.m., local time, on April 16, 1997.
(b) Proxies were solicited by the Board of Directors of BENCHMARQ pursuant to
Regulation 14A under the Securities Exchange Act of 1934. There was no
solicitation in opposition to the Board of Directors' nominees and all
nominees were duly elected and, the proposal to approve certain amendments
to the BENCHMARQ Microelectronics, Inc. 1995 Flexible Stock Option Plan was
duly approved.
(c) As of March 3, 1997, the date of record, a total of 6,797,954 shares of
BENCHMARQ common stock were outstanding and entitled to vote, of which
6,175,104 shares present in person or by proxy, representing approximately
91 percent, voted on the election of the Board of Directors' nominees. The
results of the voting on the election of the Board of Directors' nominees
were as follows:
<TABLE>
<CAPTION>
Number of Shares
Number of Shares WITHHOLDING AUTHORITY
Voting FOR Election to Vote for Election
Nominee for Director as Director as Director
- ------------------------------------------------------------------------------
<S> <C> <C>
Derrell C. Coker 6,163,284 11,820
L.J. Sevin 6,163,284 11,820
Harvey B. Cash 6,163,284 11,820
Dietrich Erdmann 4,981,244 1,193,860
Jack Kilby 6,162,884 12,220
Charles H. Phipps 6,159,676 15,428
</TABLE>
15
<PAGE>
As of March 3, 1997, the date of record, a total of 6,797,954 shares of
BENCHMARQ common stock were outstanding and entitled to vote, of which
5,417,201 shares present in person or by proxy, representing approximately
80 percent, voted on the proposal to approve certain amendments to the
BENCHMARQ Microelectronics, Inc. 1995 Flexible Stock Option Plan. The
results of the voting on the proposal to approve certain amendments to the
BENCHMARQ Microelectronics, Inc. 1995 Flexible Stock Option Plan were as
follows:
Shares voted FOR 2,989,214
Shares voted AGAINST 2,412,086
Shares ABSTAINED 15,901
BROKER NON-VOTES 757,903
(d) Inapplicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
The exhibits filed as a part of this report are listed below.
Exhibit No. Description
----------- -----------------------------------------------
10.1 By-Laws of BENCHMARQ Microelectronics, Inc. (As
Amended Through June 25, 1997)
11 Statement Regarding Computation of Per Share
Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed by the Company during the quarter ended
June 30, 1997
16
<PAGE>
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.
BENCHMARQ MICROELECTRONICS, INC.
AUGUST 5, 1997 /S/ ALAN R. SCHUELE
----------------------------------
ALAN R. SCHUELE
PRESIDENT AND
CHIEF EXECUTIVE OFFICER (PRINCIPAL
EXECUTIVE OFFICER)
AUGUST 5, 1997 /S/ REGINALD B. MCHONE
----------------------------------
REGINALD B. MCHONE
VICE PRESIDENT, FINANCE AND
ADMINISTRATION, CHIEF FINANCIAL
OFFICER (PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER) AND SECRETARY
17
<PAGE>
EXHIBIT 10.1
AS AMENDED THROUGH JUNE 25, 1997
BY-LAWS
OF
BENCHMARQ MICROELECTRONICS, INC.
ARTICLE I
Stockholders
------------
SECTION 1. Annual Meeting. The annual meeting of the stockholders of the
--------------
Corporation shall be held on such date, at such time and at such place within or
without the State of Delaware as may be designated by the Board of Directors,
for the purpose of electing Directors and for the transaction of such other
business as may be properly brought before the meeting.
SECTION 2. Special Meetings. Except as otherwise provided in the
----------------
Certificate of Incorporation, a special meeting of the stockholders of the
Corporation may be called at any time by the Board of Directors, the Chairman of
the Board or the President and shall be called by the Chairman of the Board, the
President or the Secretary at the request in writing of stockholders holding
together at least twenty-five percent of the number of shares of stock
outstanding and entitled to vote at such meeting. Any special meeting of the
stockholders shall be held on such date, at such time and at such place within
or without the State of Delaware as the Board of Directors or the officer
calling the meeting may designate. At a special meeting of the stockholders, no
business shall be transacted and no corporate action shall be taken other than
that stated in the notice of the meeting unless all of the stockholders are
present in person or by
<PAGE>
proxy, in which case any and all business may be transacted at the meeting even
though the meeting is held without notice.
SECTION 3. Notice of Meetings. Except as otherwise provided in these By-
------------------
Laws or by law, a written notice of each meeting of the stockholders shall be
given not less than ten (10) nor more than sixty (60) days before the date of
the meeting to each stockholder of the Corporation entitled to vote at such
meeting at his address as it appears on the records of the Corporation. The
notice shall state the place, date and hour of the meeting and, in the case of a
special meeting, the purpose or purposes for which the meeting is called.
SECTION 4. Quorum. At any meeting of the stockholders, the holders of a
------
majority in number of the total outstanding shares of stock of the Corporation
entitled to vote at such meeting, present in person or represented by proxy,
shall constitute a quorum of the stockholders for all purposes, unless the
representation of a larger number of shares shall be required by law, by the
Certificate of Incorporation or by these By-Laws, in which case the
representation of the number of shares so required shall constitute a quorum;
provided that at any meeting of the stockholders at which the holders of any
class of stock of the Corporation shall be entitled to vote separately as a
class, the holders of a majority in number of the total outstanding shares of
such class, present in person or represented by proxy, shall constitute a quorum
for purposes of such class vote unless the representation of a larger number of
shares of such class shall be required by law, by the Certificate of
Incorporation or by these By-Laws.
SECTION 5. Adjourned Meetings. Whether or not a quorum shall be present
------------------
in person or represented at any meeting of the stockholders, the holders of a
majority in number of the shares of stock of the Corporation present in person
or represented by proxy and entitled to vote
-2-
<PAGE>
at such meeting may adjourn from time to time; provided, however, that if the
holders of any class of stock of the Corporation are entitled to vote separately
as a class upon any matter at such meeting, any adjournment of the meeting in
respect of action by such class upon such matter shall be determined by the
holders of a majority of the shares of such class present in person or
represented by proxy and entitled to vote at such meeting. When a meeting is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting the stockholders, or the holders
of any class of stock entitled to vote separately as a class, as the case may
be, may transact any business which might have been transacted by them at the
original meeting. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the adjourned meeting.
SECTION 6. Organization. The Chairman of the Board or, in his absence,
------------
the President shall call all meetings of the stockholders to order, and shall
act as Chairman of such meetings. In the absence of the Chairman of the Board
and the President, the holders of a majority in number of the shares of stock of
the Corporation present in person or represented by proxy and entitled to vote
at such meeting shall elect a Chairman.
The Secretary of the Corporation shall act as Secretary of all meetings of
the stockholders; but in the absence of the Secretary, the Chairman may appoint
any person to act as Secretary of the meeting. It shall be the duty of the
Secretary to prepare and make, at least ten days before every meeting of
stockholders, a complete list of stockholders entitled to vote at such meeting,
arranged in alphabetical order and showing the address of each stockholder and
the number of
-3-
<PAGE>
shares registered in the name of each stockholder. Such list shall be open,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting or, if not so specified, at the
place where the meeting is to be held, for the ten days next preceding the
meeting, to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, and shall be produced and kept at the
time and place of the meeting during the whole time thereof and subject to the
inspection of any stockholder who may be present.
SECTION 7. Voting.
------
(a) Except as otherwise provided in the Certificate of Incorporation or by
law, each stockholder shall be entitled to one vote for each share of the
capital stock of the Corporation registered in the name of such stockholder upon
the books of the Corporation.
(b) Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by proxy, but no such proxy
shall be voted or acted upon after three years from its date, unless the proxy
provides for a longer period. Each proxy shall be filed with the Secretary of
the Corporation prior to or at the time of the meeting.
(c) Without limiting the manner in which a stockholder may authorize
another person or persons to act for him as proxy pursuant to subsection (b) of
this section, the following shall constitute a valid means by which a
stockholder may grant such authority:
(1) A stockholder may execute a writing authorizing another person or
persons to act for him as proxy. Execution may be accomplished by the
stockholder or by an authorized officer, director, employee or agent of the
stockholder signing such writing or
-4-
<PAGE>
causing such stockholder's signature to be affixed to such writing by any
reasonable means including, but not limited to, by facsimile signature.
(2) A stockholder may authorize another person or persons to act for
him as proxy by transmitting or authorizing the transmission of a telegram,
cablegram, or other means of electronic transmission to the person who will
be the holder of the proxy or to a proxy solicitation firm, proxy support
service organization or like agent duly authorized by the person who will
be the holder of the proxy to receive such transmission, provided that any
such telegram, cablegram or other means of electronic transmission must
either set forth or be submitted with information from which it can be
determined that the telegram, cablegram or other electronic transmission
was authorized by the stockholder. If it is determined that such
telegrams, cablegrams or other electronic transmissions are valid, the
inspectors or, if there are no inspectors, such other persons making that
determination shall specify the information upon which they relied.
(d) Any copy, facsimile telecommunication or other reliable reproduction of
the writing or transmission created pursuant to subsection (c) of this section
may be substituted or used in lieu of the original writing or transmission for
any and all purposes for which the original writing or transmission could be
used, provided that such copy, facsimile telecommunication or other reproduction
shall be a complete reproduction of the entire original writing or transmission.
(e) A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power.
-5-
<PAGE>
When directed by the presiding officer or upon the demand of any
stockholder, the vote upon any matter before a meeting of stockholders shall be
by ballot. Except as otherwise provided by law or by the Certificate of
Incorporation, Directors shall be elected by a plurality of the votes cast at a
meeting of stockholders by the stockholders entitled to vote in the election
and, whenever any corporate action, other than the election of Directors is to
be taken, it shall be authorized by a majority of the votes cast at a meeting of
stockholders by the stockholders entitled to vote thereon.
Shares of the capital stock of the Corporation belonging to the Corporation
or to another corporation, if a majority of the shares entitled to vote in the
election of Directors of such other corporation is held, directly or indirectly,
by the Corporation, shall neither be entitled to vote nor be counted for quorum
purposes.
SECTION 8. Inspectors. When required by law or directed by the Presiding
----------
officer or upon the demand of any stockholder entitled to vote, but not
otherwise, the polls shall be opened and closed, the proxies and ballots shall
be received and taken in charge, and all questions touching the qualification of
voters, the validity of proxies and the acceptance or rejection of votes shall
be decided at any meeting of the stockholders by two or more Inspectors who may
be appointed by the Board of Directors before the meeting, or if not so
appointed, shall be appointed by the presiding officer at the meeting. If any
person so appointed fails to appear or act, the vacancy may be filled by
appointment in like manner. Each Inspector, before entering upon the discharge
of his duties, shall take and sign an oath faithfully to execute the duties of
Inspector at such meeting with strict impartiality and according to the best of
his ability. The Inspectors shall determine the number of shares of capital
stock of the Corporation outstanding
-6-
<PAGE>
and the voting power of each, the number of shares represented at the meeting,
the existence of a quorum, and the validity and effect of proxies and shall
receive votes, ballots, or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots, or consents, determine the results, and do such acts as are
proper to conduct the election or vote with fairness to all stockholders. On
request of the Chairman of the Meeting, the Inspectors shall make a report in
writing of any challenge, request or matter determined by them and shall execute
a certificate of any fact found by them. No Director or candidate for the office
of Director shall act as an Inspector of an election of Directors. Inspectors
need not be stockholders.
SECTION 9. Consent of Stockholders in Lieu of Meeting. Unless otherwise
------------------------------------------
provided in the Certificate of Incorporation, any action required to be taken or
which may be taken at any annual or special meeting of the stockholders of the
Corporation, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of any such corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE II
Board of Directors
------------------
SECTION 1. Number and Term of Office. The business and affairs of the
-------------------------
Corporation shall be managed by or under the direction of a Board of Directors
consisting of such number
-7-
<PAGE>
of Directors, but not less than three (3) nor more than nine (9), as may be
fixed from time to time by resolution adopted by the Board of Directors.
Directors need not be stockholders of the Corporation. The Directors shall,
except as hereinafter otherwise provided for filling vacancies, be elected at
the annual meeting of stockholders, and shall hold office until their respective
successors are elected and qualified or until their earlier resignation or
removal.
SECTION 2. Removal, Vacancies and Additional Directors. The stockholders
-------------------------------------------
may, at any special meeting the notice of which shall state that it is called
for that purpose, remove, with or without cause, any Director and fill the
vacancy; provided that whenever any Director shall have been elected by the
holders of any class of stock of the Corporation voting separately as a class
under the provisions of the Certificate of Incorporation, such Director may be
removed and the vacancy filled only by the holders of that class of stock voting
separately as a class. Vacancies caused by any such removal and not filled by
the stockholders at the meeting at which such removal shall have been made, or
any vacancy caused by the death or resignation of any Director or for any other
reason, and any newly created directorship resulting from any increase in the
authorized number of Directors, may be filled by the affirmative vote of a
majority of the Directors then in office, although less than a quorum, and any
Director so elected to fill any such vacancy or newly created directorship shall
hold office until his successor is elected and qualified or until his earlier
resignation or removal.
When one or more Directors shall resign effective at a future date, a
majority of the Directors then in office, including those who have so resigned,
shall have power to fill such vacancy or vacancies, the vote thereon to take
effect when such resignation or resignations shall
-8-
<PAGE>
become effective and each Director so chosen shall hold office as herein
provided in connection with the filling of the vacancies.
SECTION 3. Place of Meeting. The Board of Directors may hold its meetings
----------------
in such place or places in the State of Delaware or outside the State of
Delaware as the Board from time to time shall determine.
SECTION 4. Regular Meetings. Regular meetings of the Board of Directors
----------------
shall be held at such times and places as the Board from time to time by
resolution shall determine. No notice shall be required for any regular meeting
of the Board of Directors; but a copy of every resolution fixing or changing the
time or place of regular meetings shall be mailed to every Director at least
five days before the first meeting held in pursuance thereof.
SECTION 5. Special Meetings. Special meetings of the Board of Directors
----------------
shall be held whenever called by direction of the Chairman of the Board, the
President or by any two of the Directors then in office.
Notice of the day, hour and place of holding of each special meeting shall
be given by mailing the same at least two days before the meeting or by causing
the same to be transmitted by telegraph, cable or wireless at least one day
before the meeting to each Director. Unless otherwise indicated in the notice
thereof, any and all business other than an amendment of these By-Laws may be
transacted at any special meeting, and an amendment of these By-Laws may be
acted upon if the notice of the meeting shall have stated that the amendment of
these By-Laws is one of the purposes of the meeting. At any meeting at which
every Director shall be present, even though without any notice, any business
may be transacted, including the amendment of these By-Laws.
-9-
<PAGE>
SECTION 6. Quorum. Subject to the provisions of Section 2 of this Article
------
II, a majority of the members of the Board of Directors in office (but in no
case less than one-third of the total number of Directors nor less than two
Directors) shall constitute a quorum for the transaction of business and the
vote of the majority of the Directors present at any meeting of the Board of
Directors at which a quorum is present shall be the act of the Board of
Directors. If at any meeting of the Board there is less than a quorum present,
a majority of those present may adjourn the meeting from time to time.
SECTION 7. Organization. The Chairman of the Board or, in his absence,
------------
the President shall preside at all meetings of the Board of Directors. In the
absence of the Chairman of the Board and the President, a Chairman shall be
elected from the Directors present. The Secretary of the Corporation shall act
as Secretary of all meetings of the Directors; but in the absence of the
Secretary, the Chairman may appoint any person to act as Secretary of the
meeting.
SECTION 8. Committees. The Board of Directors may, by resolution passed
----------
by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the Directors of the Corporation. The
Board may designate one or more Directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided by resolution passed by a majority of the whole Board, shall have and
may exercise all the powers and authority of the Board of Directors
-10-
<PAGE>
in the management of the business and the affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of a
dissolution, or amending these By-Laws; and unless such resolution, these By-
Laws, or the Certificate of Incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock.
SECTION 9. Conference Telephone Meetings. Unless otherwise restricted by
-----------------------------
the Certificate of Incorporation or by these By-Laws, the members of the Board
of Directors or any committee designated by the Board, may participate in a
meeting of the Board or such committee, as the case may be, by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and such participation
shall constitute presence in person at such meeting.
SECTION 10. Consent of Directors or Committee in Lieu of Meeting. Unless
----------------------------------------------------
otherwise restricted by the Certificate of Incorporation or by these By-Laws,
any action required or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereof, may be taken without a meeting if all
members of the Board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the Board or committee, as the case may be.
-11-
<PAGE>
ARTICLE III
Officers
--------
SECTION 1. Officers. The officers of the Corporation shall be a Chairman
--------
of the Board, a President, one or more Vice Presidents, a Secretary and a
Treasurer, and such additional officers, if any, as shall be elected by the
Board of Directors pursuant to the provisions of Section 7 of this Article III.
The Chairman of the Board, the President, one or more Vice Presidents, the
Secretary and the Treasurer shall be elected by the Board of Directors at its
first meeting after each annual meeting of the stockholders. The failure to
hold such election shall not of itself terminate the term of office of any
officer. All officers shall hold office at the pleasure of the Board of
Directors. Any officer may resign at any time upon written notice to the
Corporation. Officers may, but need not, be Directors. Any number of offices
may be held by the same person.
All officers, agents and employees shall be subject to removal, with or
without cause, at any time by the Board of Directors. The removal of an officer
without cause shall be without prejudice to his contract rights, if any. The
election or appointment of an officer shall not of itself create contract
rights. All agents and employees other than officers elected by the Board of
Directors shall also be subject to removal, with or without cause, at any time
by the officers appointing them.
Any vacancy caused by the death of any officer, his resignation, his
removal, or otherwise, may be filled by the Board of Directors, and any officer
so elected shall hold office at the pleasure of the Board of Directors.
-12-
<PAGE>
In addition to the powers and duties of the officers of the Corporation as
set forth in these By-Laws, the officers shall have such authority and shall
perform such duties as from time to time may be determined by the Board of
Directors.
SECTION 2. Powers and Duties of the Chairman of the Board. The Chairman
----------------------------------------------
of the Board shall be the chief executive officer of the Corporation and,
subject to the control of the Board of Directors, shall have general charge and
control of all its business and affairs and shall perform all duties incident to
the office of the Chairman of the Board. He shall preside at all meetings of
the stockholders and at all meetings of the Board of Directors and shall have
such other powers and perform such other duties as may from time to time be
assigned to him by these By-Laws or by the Board of Directors.
SECTION 3. Powers and Duties of the President. The President shall be the
----------------------------------
chief operating officer of the Corporation and, subject to the control of the
Board of Directors and the Chairman of the Board, shall have general charge and
control of all its operations and shall perform all duties incident to the
office of President. In the absence of the Chairman of the Board, he shall
preside at all meetings of the stockholders and at all meetings of the Board of
Directors and shall have such other powers and perform such other duties as may
from time to time be assigned to him by these By-Laws or by the Board of
Directors or the Chairman of the Board.
SECTION 4. Powers and Duties of the Vice Presidents. Each Vice President
----------------------------------------
shall perform all duties incident to the office of Vice President and shall have
such other powers and perform such other duties as may from time to time be
assigned to him by these By-Laws or by the Board of Directors, the Chairman of
the Board or the President.
-13-
<PAGE>
SECTION 5. Powers and Duties of the Secretary. The Secretary shall keep
----------------------------------
the minutes of all meetings of the Board of Directors and the minutes of all
meetings of the stockholders in books provided for that purpose; he shall attend
to the giving or serving of all notices of the Corporation; he shall have
custody of the corporate seal of the Corporation and shall affix the same to
such documents and other papers as the Board of Directors or the President shall
authorize and direct; he shall have charge of the stock certificate books,
transfer books and stock ledgers and such other books and papers as the Board of
Directors or the President shall direct, all of which shall at all reasonable
times be open to the examination of any Director, upon application, at the
office of the Corporation during business hours; and he shall perform all duties
incident to the office of Secretary and shall also have such other powers and
shall perform such other duties as may from time to time be assigned to him by
these By-Laws or the Board of Directors, the Chairman of the Board or the
President.
SECTION 6. Powers and Duties of the Treasurer. The Treasurer shall have
----------------------------------
custody of, and when proper shall pay out, disburse or otherwise dispose of, all
funds and securities of the Corporation which may have come into his hands; he
may endorse on behalf of the Corporation for collection checks, notes and other
obligations and shall deposit the same to the credit of the Corporation in such
bank or banks or depositary or depositories as the Board of Directors may
designate; he shall sign all receipts and vouchers for payments made to the
Corporation; he shall enter or cause to be entered regularly in the books of the
Corporation kept for the purpose full and accurate accounts of all moneys
received or paid or otherwise disposed of by him and whenever required by the
Board of Directors or the President shall render statements of such accounts; he
shall, at all reasonable times, exhibit his books and accounts to any Director
of the
-14-
<PAGE>
Corporation upon application at the office of the Corporation during business
hours; and he shall perform all duties incident to the office of Treasurer and
shall also have such other powers and shall perform such other duties as may
from time to time be assigned to him by these By-Laws or by the Board of
Directors, the Chairman of the Board or the President.
SECTION 7. Additional Officers. The Board of Directors may from time to
-------------------
time elect such other officers (who may but need not be Directors), including a
Controller, Assistant Treasurers, Assistant Secretaries and Assistant
Controllers, as the Board may deem advisable and such officers shall have such
authority and shall perform such duties as may from time to time be assigned to
them by the Board of Directors, the Chairman of the Board or the President.
The Board of Directors may from time to time by resolution delegate to any
Assistant Treasurer or Assistant Treasurers any of the powers or duties herein
assigned to the Treasurer; and may similarly delegate to any Assistant Secretary
or Assistant Secretaries any of the powers or duties herein assigned to the
Secretary.
SECTION 8. Giving of Bond by Officers. All officers of the Corporation,
--------------------------
if required to do so by the Board of Directors, shall furnish bonds to the
Corporation for the faithful performance of their duties, in such penalties and
with such conditions and security as the Board shall require.
SECTION 9. Voting Upon Stocks. Unless otherwise ordered by the Board of
------------------
Directors, the Chairman of the Board, the President or any Vice President shall
have full power and authority on behalf of the Corporation to attend and to act
and to vote, or in the name of the Corporation to execute proxies to vote, at
any meetings of stockholders of any corporation in which the Corporation may
hold stock, and at any such meetings shall possess and may exercise,
-15-
<PAGE>
in person or by proxy, any and all rights, powers and privileges incident to the
ownership of such stock. The Board of Directors may from time to time, by
resolution, confer like powers upon any other person or persons.
SECTION 10. Compensation of Officers. The officers of the Corporation
------------------------
shall be entitled to receive such compensation for their services as shall from
time to time be determined by the Board of Directors.
ARTICLE IV
Stock-Seal-Fiscal Year
----------------------
SECTION 1. Certificates For Shares of Stock. The certificates for shares
--------------------------------
of stock of the Corporation shall be in such form, not inconsistent with the
Certificate of Incorporation, as shall be approved by the Board of Directors.
All certificates shall be signed by the Chairman of the Board, the President or
a Vice President and by the Secretary or an Assistant Secretary or the Treasurer
or an Assistant Treasurer, and shall not be valid unless so signed.
In case any officer or officers who shall have signed any such certificate
or certificates shall cease to be such officer or officers of the Corporation,
whether because of death, resignation or otherwise, before such certificate or
certificates shall have been delivered by the Corporation, such certificate or
certificates may nevertheless be issued and delivered as though the person or
persons who signed such certificate or certificates had not ceased to be such
officer or officers of the Corporation.
All certificates for shares of stock shall be consecutively numbered as the
same are issued. The name of the person owning the shares represented thereby
with the number of such shares and the date of issue thereof shall be entered on
the books of the Corporation.
-16-
<PAGE>
Except as hereinafter provided, all certificates surrendered to the
Corporation for transfer shall be cancelled, and no new certificates shall be
issued until former certificates for the same number of shares have been
surrendered and cancelled.
SECTION 2. Lost, Stolen or Destroyed Certificates. Whenever a person
--------------------------------------
owning a certificate for shares of stock of the Corporation alleges that it has
been lost, stolen or destroyed, he shall file in the office of the Corporation
an affidavit setting forth, to the best of his knowledge and belief, the time,
place and circumstances of the loss, theft or destruction, and, if required by
the Board of Directors, a bond of indemnity or other indemnification sufficient
in the opinion of the Board of Directors to indemnify the Corporation and its
agents against any claim that may be made against it or them on account of the
alleged loss, theft or destruction of any such certificate or the issuance of a
new certificate in replacement therefor. Thereupon the Corporation may cause to
be issued to such person a new certificate in replacement for the certificate
alleged to have been lost, stolen or destroyed. Upon the stub of every new
certificate so issued shall be noted the fact of such issue and the number, date
and the name of the registered owner of the lost, stolen or destroyed
certificate in lieu of which the new certificate is issued.
SECTION 3. Transfer of Shares. Shares of stock of the Corporation shall
------------------
be transferred on the books of the Corporation by the holder thereof, in person
or by his attorney duly authorized in writing, upon surrender and cancellation
of certificates for the number of shares of stock to be transferred, except as
provided in the preceding section.
-17-
<PAGE>
SECTION 4. Regulations. The Board of Directors shall have power and
-----------
authority to make such rules and regulations as it may deem expedient concerning
the issue, transfer and registration of certificates for shares of stock of the
Corporation.
SECTION 5. Record Date. In order that the Corporation may determine the
-----------
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, as the case may be, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting, nor more than sixty (60) days
prior to any other action.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held; the record date for determining stockholders
entitled to express consent to corporate action in writing without a meeting,
when no prior action by the Board of Directors is necessary, shall be the day on
which the first written consent is expressed; and the record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
-18-
<PAGE>
SECTION 6. Dividends. Subject to the provisions of the Certificate of
---------
Incorporation, the Board of Directors shall have power to declare and pay
dividends upon shares of stock of the Corporation, but only out of funds
available for the payment of dividends as provided by law.
Subject to the provisions of the Certificate of Incorporation, any
dividends declared upon the stock of the Corporation shall be payable on such
date or dates as the Board of Directors shall determine. If the date fixed for
the payment of any dividend shall in any year fall upon a legal holiday, then
the dividend payable on such date shall be paid on the next day not a legal
holiday.
SECTION 7. Corporate Seal. The Board of Directors shall provide a
--------------
suitable seal, containing the name of the Corporation, which seal shall be kept
in the custody of the Secretary. A duplicate of the seal may be kept and be
used by any officer of the Corporation designated by the Board or the President.
SECTION 8. Fiscal Year. The fiscal year of the Corporation shall be such
-----------
fiscal year as the Board of Directors from time to time by resolution shall
determine.
ARTICLE V
Miscellaneous Provisions
------------------------
SECTION 1. Checks, Notes, Etc. All checks, drafts, bills of exchange,
-------------------
acceptances, notes or other obligations or orders for the payment of money shall
be signed and, if so required by the Board of Directors, countersigned by such
officers of the Corporation and/or other persons as the Board of Directors from
time to time shall designate.
Checks, drafts, bills of exchange, acceptances, notes, obligations and
orders for the payment of money made payable to the Corporation may be endorsed
for deposit to the credit
-19-
<PAGE>
of the Corporation with a duly authorized depositary by the Treasurer, or
otherwise as the Board of Directors may from time to time, by resolution,
determine.
SECTION 2. Loans. No loans and no renewals of any loans shall be
-----
contracted on behalf of the Corporation except as authorized by the Board of
Directors. When authorized so to do, any officer or agent of the Corporation
may effect loans and advances for the Corporation from any bank, trust company
or other institution or from any firm, corporation or individual, and for such
loans and advances may make, execute and deliver promissory notes, bonds or
other evidences of indebtedness of the Corporation. When authorized so to do,
any officer or agent of the Corporation may pledge, hypothecate or transfer, as
security for the payment of any and all loans, advances, indebtedness and
liabilities of the Corporation, any and all stocks, securities and other
personal property at any time held by the Corporation, and to that end may
endorse, assign and deliver the same. Such authority may be general or confined
to specific instances.
SECTION 3. Waivers of Notice. Whenever any notice whatever is required to
-----------------
be given by law, by the Certificate of Incorporation or by these By-Laws to any
person or persons, a waiver thereof in writing, signed by the person or persons
entitled to the notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
SECTION 4. Offices Outside of Delaware. Except as otherwise required by
---------------------------
the laws of the State of Delaware, the Corporation may have an office or offices
and keep its books, documents and papers outside of the State of Delaware at
such place or places as from time to time may be determined by the Board of
Directors or the President.
SECTION 5. Indemnification of Directors, Officers and Employees. The
----------------------------------------------------
Corporation shall indemnify to the full extent authorized by law any person made
or threatened to be made
-20-
<PAGE>
a party to an action, suit or proceeding, whether criminal, civil,
administrative or investigative, by reason of the fact that he, his testator or
intestate is or was a Director, officer, employee or agent of the Corporation or
is or was serving, at the request of the Corporation, as a Director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise.
ARTICLE VI
Amendments
----------
These By-Laws and any amendment thereof may be altered, amended or
repealed, or new By-Laws may be adopted, by the Board of Directors at any
regular or special meeting by the affirmative vote of a majority of all of the
members of the Board, provided in the case of any special meeting at which all
of the members of the Board are not present, that the notice of such meeting
shall have stated that the amendment of these By-Laws was one of the purposes of
the meeting; but these By-Laws and any amendment thereof, including the By-Laws
adopted by the Board of Directors, may be altered, amended or repealed and other
By-Laws may be adopted by the holders of a majority of the total outstanding
stock of the Corporation entitled to vote at any annual meeting or at any
special meeting, provided, in the case of any special meeting, that notice of
such proposed alteration, amendment, repeal or adoption is included in the
notice of the meeting.
-21-
<PAGE>
EXHIBIT 11
BENCHMARQ MICROELECTRONICS, INC.
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
1997 1996 1997 1996
-------------------------- --------------------------
<S> <C> <C> <C> <C>
Earnings:
Net income........................................ $1,725 $1,259 $3,368 $2,316
========================== =========================
Shares:
Weighted average common shares outstanding........ 6,841 6,606 6,815 6,581
Weighted average common equivalent shares:
Add: Common shares issued on assumed
exercise of stock options and warrants.. 1,444 1,065 1,335 958
Less: Shares assumed repurchased............... 618 312 477 247
-------------------------- --------------------------
Weighted average common and common equivalent
shares............................................ 7,667 7,359 7,673 7,292
========================== =========================
Earnings per common and common equivalent share..... $ 0.22 $ 0.17 $ 0.44 $ 0.32
========================== =========================
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30,
1997 CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME FOR THE
SIX MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,798,047
<SECURITIES> 12,188,550
<RECEIVABLES> 5,599,555
<ALLOWANCES> 97,347
<INVENTORY> 3,655,870
<CURRENT-ASSETS> 26,617,581
<PP&E> 10,143,900
<DEPRECIATION> 4,667,518
<TOTAL-ASSETS> 37,386,162
<CURRENT-LIABILITIES> 6,728,653
<BONDS> 0
6,919
0
<COMMON> 0
<OTHER-SE> 29,864,859
<TOTAL-LIABILITY-AND-EQUITY> 37,386,162
<SALES> 23,169,609
<TOTAL-REVENUES> 23,169,609
<CGS> 11,003,380
<TOTAL-COSTS> 18,090,485
<OTHER-EXPENSES> 36,868
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 98,392
<INCOME-PRETAX> 5,262,460
<INCOME-TAX> 1,894,300
<INCOME-CONTINUING> 3,368,160
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,368,160
<EPS-PRIMARY> 0.44
<EPS-DILUTED> 0.44
</TABLE>
