================================================================================
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, 1996
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 0-24758
MICRO LINEAR CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 94-2910085
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2092 Concourse Drive 95131
San Jose, California (Zip Code)
(Address of principal executive
offices)
Registrant's telephone number, including area code: (408) 433-5200
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 Par Value
Indicate by check mark whether the Registrant (1) has filed all reports 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 [ ]
The number of shares of the Registrant's Common Stock outstanding as of June
30, 1996 was 12,423,517.
<PAGE>
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Statements of Income for the three and six
months ended June 30, 1996 and 1995, unaudited........... 3
Condensed Balance Sheets at June 30, 1996, unaudited
and at December 31, 1995..................................4
Condensed Statements of Cash Flows for the six months
ended June 30, 1996 and 1995, unaudited.............. 5
Notes to Condensed Financial Statements, unaudited........6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................7
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders......12
Item 6. Exhibits and Reports on Form 8-K.........................12
SIGNATURES...........................................................14
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MICRO LINEAR CORPORATION
CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
------------------------- --------------------------
<S> <C> <C> <C> <C>
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
----------- ----------- ------------ ------------
Net revenues........................................... $13,631 $14,257 $28,958 $27,124
Cost of revenues....................................... 4,684 6,797 9,781 12,878
----------- ----------- ------------ ------------
Gross profit........................................ 8,947 7,460 19,177 14,246
Operating expenses:
Research and development............................ 3,214 2,675 5,871 5,218
Selling, general and administrative................. 2,953 2,399 5,834 4,747
----------- ----------- ------------ ------------
6,167 5,074 11,705 9,965
----------- ----------- ------------ ------------
Income from operations.............................. 2,780 2,386 7,472 4,281
Interest and other income.............................. 358 381 717 705
Interest expense....................................... (78) (111) (158) (235)
----------- ----------- ------------ ------------
Income before provision for taxes on income......... 3,060 2,656 8,031 4,751
Provision for taxes on income.......................... 1,224 478 3,212 855
----------- ----------- ------------ ------------
Net income.......................................... $ 1,836 $ 2,178 $ 4,819 $ 3,896
=========== =========== ============ ============
Net income per share................................... $ 0.14 $ 0.16 $ 0.36 $ 0.29
=========== =========== ============ ============
Shares used in computing net income per share amounts 13,495 13,693 13,518 13,612
=========== =========== ============ ============
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MICRO LINEAR CORPORATION
CONDENSED BALANCE SHEETS
(In thousands, except per share amounts)
<S> <C> <C>
June 30, December 31,
1996 1995
(Unaudited) (See note below)
------------------- -------------------
Assets
Current assets:
Cash and cash equivalents........................................................... $3,705 $4,175
Short-term investments.............................................................. 24,043 26,299
Accounts receivable, net of allowance for doubtful accounts of $270 and $240 at June
30, 1996 and December 31, 1995, respectively...................................... 4,652 6,571
Inventories......................................................................... 12,799 8,986
Deferred tax assets................................................................. 4,544 3,452
Other current assets................................................................ 855 781
--------------------- -------------------
Total current assets.............................................................. 50,598 50,264
Property, plant and equipment.......................................................... 32,968 36,276
Less accumulated depreciation and amortization......................................... (14,648 ) (19,470)
--------------------- -------------------
18,320 16,806
Other assets........................................................................... 846 901
--------------------- -------------------
Total assets.................................................................... $69,764 $67,971
===================== ===================
Liabilities and Stockholders' Equity Current liabilities:
Accounts payable.................................................................... $ 2,525 $ 3,576
Accrued compensation and benefits................................................... 1,606 1,382
Deferred income on shipments to distributors........................................ 1,603 1,517
Income tax payable.................................................................. - 507
Other accrued liabilities........................................................... 1,923 1,494
Current portion of long-term debt................................................... 382 467
--------------------- -------------------
Total current liabilities......................................................... 8,039 8,943
Long-term debt......................................................................... 3,037 3,181
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value
Authorized shares 5,000,000
None issued and outstanding....................................................... - -
Common stock, $.001 par value
Authorized shares 30,000,000
Issued and outstanding shares 12,423,517 and 12,455,519 at June 30, 1996 and
December 31, 1995, respectively................................................. 13 12
Additional paid-in capital.......................................................... 49,816 49,103
Retained earnings................................................................... 11,551 6,732
- --Treasury stock, 308,000 shares at cost............................................... (2,692) -
--------------------- -------------------
--------------------- -------------------
Total stockholders' equity........................................................ 58,688 55,847
--------------------- -------------------
Total liabilities and stockholders' equity...................................... $69,764 $67,971
===================== ===================
<FN>
Note: The balance sheet at December 31, 1995 has been derived from the audited financial statements at
that date.
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MICRO LINEAR CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Six Months Ended
------------------------------------
<S> <C> <C>
June 30, June 30,
1996 1995
-------------- ---------------
Cash provided by operating activities......................................... $ 2,475 $ 3,312
Investing activities:
Capital expenditures....................................................... (2,907 ) (1,805 )
Purchases of short-term investments........................................ (13,938 ) (13,202 )
Sales of short-term investments............................................ 16,194 5,356
-------------- ---------------
Net cash provided by (used in) investing activities...................... (651 ) (9,651 )
Financing activities:
Principal payments under capital lease obligations and debt................ (297 ) (672 )
Proceeds from issuance of common stock..................................... 694 571
Acquisition of treasury stock.............................................. (2,691 ) -
-------------- ---------------
Net cash (used in) financing activities.................................. (2,294 ) (101 )
-------------- ---------------
Net decrease in cash and cash equivalents..................................... (470 ) (6,440 )
Cash and cash equivalents at beginning of period.............................. 4,175 23,216
-------------- ---------------
Cash and cash equivalents at end of period.................................... $3,705 $16,776
============== ===============
<FN>
See accompanying notes.
</FN>
</TABLE>
5
<PAGE>
MICRO LINEAR CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1) Micro Linear Corporation (the "Company") designs, develops and markets high
performance analog and mixed signal integrated circuits for a broad range of
applications within the communications, computer and industrial markets for
sale primarily in North America, Asia and Europe.
2) The Company's fiscal year ends on the Sunday closest to December 31. Fiscal
year 1995 ended on December 31, 1995. The Company's fiscal quarters end on
the Sunday closest to the end of each calendar quarter. The second quarter
of 1996, second quarter of 1995 and fourth quarter of 1995 ended on June 30,
1996 and July 2, 1995, and December 31, 1995, respectively. For ease of
presentation, the accompanying financial statements have shown the second
quarter of 1996 and 1995 as ending June 30. The 1995 fourth quarter and 1995
year are shown as ending on December 31.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3) The accounting policies followed by the Company are set forth in Note 1 of
Notes to Financial Statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1995.
4) Net income per share is computed using the weighted average number of shares
of common stock and from stock options and warrants (using the treasury
stock method). Dual presentation of primary and fully diluted net income per
share is not shown.
5) Inventory is stated at the lower of standard cost (which approximates actual
cost on a first-in, first-out basis) or market (estimated net realizable
value).
<TABLE>
<CAPTION>
Inventories consits of the following (in thousands):
<S> <C> <C>
June 30, December 31,
1996 1995
------------- -----------------
Raw Materials........................ $ 1,996 $1,434
Work-in-process...................... 6,363 3,926
Finished Goods....................... 4,440 3,626
------- -------
$12,799 $8,986
======= ======
</TABLE>
6) The accompanying interim financial statements are unaudited and have been
prepared by the Company in accordance with generally accepted accounting
principles and pursuant to the rules and regulations of the Securities and
Exchange Commission. In the opinion of management, all adjustments
(consisting of normal recurring accruals) have been made to present a fair
statement of results for the interim periods presented. The results of
operations for the interim periods shown in this report are not necessarily
indicative of results to be expected for the fiscal year. All information
reported in this Form 10-Q should be read in conjunction with the Company's
annual financial statements on Form 10-K for the year ended December 31,
1995.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This report on Form 10-Q contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. The forward-looking statements contained herein
are subject to certain factors that could cause actual results to differ
materially from those projected in the forward-looking statements. Such factors
include, but are not limited to, the factors set forth below and elsewhere in
this Form 10-Q.
Results of Operations
Net Revenues
Net revenues were $13.6 million for the second quarter of 1996, a 4%
decrease over net revenues of $14.3 million for the second quarter of 1995 and a
11% decrease over net revenues of $15.3 million for the first quarter of 1996.
Net revenues were $29.0 million for the first six months of 1996, a 7% increase
over net revenues of $27.1 million for the first six month of 1995. Net revenues
for the second quarter of 1996 compared to the second quarter of 1995 increased
27% in the communications market, decreased 30% in the industrial market and
decreased 39% in the computer market. Net revenues for the second quarter of
1996 compared to the first quarter of 1996 decreased 25% in the communications
market, increased 3% in the industrial market and increased 3% in the computer
market. Net revenues for the first six months of 1996 compared to the first six
months of 1995 increased 43% in the communications market, decreased 25% in the
industrial market and decreased 34% in the computer market. The computer market
includes the Winchester hard disk drive ("HDD") sub-market. Net revenues in the
HDD sub-market were $.9 million for the second quarter of 1996, a 65% decrease
over net revenues of $2.5 million in the HDD sub-market for the second quarter
of 1995 and a 15% decrease over net revenues of $1.1 million for the first
quarter of 1996. HDD sub-market revenues decreased to 7% of total net revenues
for the second quarter of 1996 from 17% of total net revenues for the second
quarter of 1995. HDD sub-market revenues were 7% of total net revenues for the
first quarter of 1996. Net revenues in this category for the first six months of
1996 compared to the first six months of 1995 decreased 58%. The Company expects
a decline in total revenues at least through the second half of 1996 due to soft
market conditions, particularly in the communications market. The Company's
markets are characterized by intense competition, relatively short product life
cycles and rapid technological changes. In addition, these markets have
undergone rapid growth and consolidation in the last few years. The Company's
net revenues and results of operations would be materially and adversely
affected in the event of a market slowdown.
International net revenues were $6.1 million, or 45% of net revenues, for
the second quarter of 1996, as compared to $5.1 million, or 36% of net revenues,
for the second quarter of 1995 and $4.9 million, or 32% of net revenues, for the
first quarter of 1996. International revenues were $11.1 million, or 38% of net
revenues, for the first six months of 1996, as compared to $8.9 million, or 32%
of net revenues, for the first six months of 1995. The increase in international
revenues for the first half of 1996 compared to the first half of 1995 was due
to the combination of stronger demand in Asia Pacific revenues and softness in
domestic revenues. International revenues exclude shipments to Amtron
International ("Amtron"), a domestic sales representative. A significant portion
of Amtron's purchases are HDD products which are sold to Samsung Electronics.
Sales to Amtron were 1% of net revenues in the first six months of 1996,
compared to 19% of net revenues in the first six months of 1995. The decline in
sales to Amtron as a percent of net revenues in 1996 compared to 1995 was a
result of the Company's Samsung HDD products reaching the end of their product
lives in the fourth quarter of 1995. Although the Company has received orders
for certain new HDD products, the net revenue from the sale of these products
did not offset the decline in net revenues of the Samsung HDD products.
Domestic distributor revenues were approximately 17% of net revenues for the
second quarter of 1996, 13% of net revenues for the second quarter of 1995 and
16% for the first quarter of 1996. Domestic distributor revenues were
approximately 16% and 14% of net revenues for the first six months of 1996 and
first six months of 1995, respectively. The Company expects sales to domestic
distributors to increase in the future as a percentage of total net revenues due
to anticipated shifts in the sales channel mix. Several of the Company's OEM
(Original End Manufacturer) customers are moving their manufacturing operations
to subcontractors. The subcontractors are in turn placing their orders through
distribution. The Company defers recognition of revenue derived from sales to
domestic distributors until such distributors resell the products to their
customers; however, revenue is recognized by the Company upon shipment to
international representatives who generally have no return privileges.
<PAGE>
Gross Margin
Gross margin is affected by the volume of product sales, price, product mix,
manufacturing utilization, product yields, inventory obsolescence and the mix of
sales to OEM's and to distributors. Gross margin has been and will continue to
be periodically affected by expenses incurred in connection with start-up and
installation of new process technologies at outside manufacturing foundries.
The Company's gross margin improved to 66% in second quarter of 1996 from
52% in the second quarter of 1995 primarily due to the change in shipment mix to
higher margin products and higher manufacturing utilization. The Company's gross
margin improved to 66% for the first six months of 1996 from 53% for the first
six months of 1995. The Company's gross margin decreased slightly to 66% in the
second quarter of 1996 from 67% in the first quarter of 1996. The Company also
expects a decline in gross margin in the second half of 1996 due to higher per
unit manufacturing costs resulting from lower manufacturing utilization. The
Company also anticipates a change in shipment mix to lower margin products due
to soft market conditions in the communications market segment.
The Company's gross margins are adversely impacted by the costs associated
with installing new processes at its foundries. Although the Company has
recently been able to mitigate the adverse impact on gross margin associated
with new wafer manufacturing process costs by relying upon process technologies
existing at its outside wafer foundries, there can be no assurance that the
Company will not be required to incur significant expenses in the future to
develop, or obtain access to, advanced process technologies and to transfer and
install such technologies at one or more of its foundries, which could have a
material adverse affect on the Company's gross margin in the future.
Approximately one-third of the Company's bipolar wafers are purchased from a
wafer foundry in Japan and have pricing contracts that are tied to currency
fluctuations of the yen. Wafer pricing for this foundry is adjusted every 6
months, either up or down, depending on the movement of the yen. The Company
does not expect to be significantly impacted by this pricing agreement, however,
due to the uncertainty of the currency markets and the recent fluctuations of
the yen versus the U.S. dollar, there can be no assurance that significant
swings in currency will not have a material adverse effect on the Company's
gross margin in the future due to the impact of such fluctuations on this
contract or other contracts the Company has with foundries in Japan.
The Company currently purchases its wafers from ten wafer suppliers. A
majority of the Company's wafer supply is obtained from three wafer suppliers.
The Company's products are assembled and packaged by four vendors. Any delays or
interruptions due to such factors as inadequate capacity or unavailable raw
materials in the Company's wafer suppliers or assembly vendors could materially
and adversely affect product shipments and operating results. See "Other Factors
Affecting Operating Results".
Research and Development Expenses
Research and development expenses include costs associated with the
definition, design and development of standard and semi-standard products, tile
arrays and standard cells. The Company expenses prototype wafers and new
production mask sets related to new products as research and development costs
until products based on new designs are fully characterized by the Company and
are demonstrated to support published data sheets and satisfy reliability tests.
The Company believes that the development and introduction of new products is
critical to its future success. Research and development expenses such mask and
silicon costs that are related to the development of new products can fluctuate
from quarter to quarter due to the timing of the product design process.
Research and development expenses were $3.2 million, or 24% of net revenues,
for the second quarter of 1996, compared to $2.7 million, or 19% of net
revenues, for the second quarter of 1995 and $2.7 million, or 17% of net
revenues, for the first quarter of 1996. Research and development expenses were
$5.9 million, or 20% of net revenues, for the first six months of 1996, compared
to $5.2 million, or 19% of net revenues, in the first six months of 1995. The
increase in research and development expenses in absolute dollars in the first
half of 1996 compared to the first half of 1995 is primarily attributable to
increased prototype and mask costs. The Company expects that future research and
development expenses will continue to increase in absolute dollars over the near
term.
<PAGE>
Selling, General and Administrative
Selling, general and administrative expenses were $3.0 million, or 22% of
net revenues, for the second quarter of 1996, compared to $2.4 million, or 17%
of net revenues, for the second quarter of 1995 and $2.9 million, or 19% of net
revenues, for the first quarter of 1996. Selling, general and administrative
expenses were $5.8 million, or 20% of net revenues, for the first six months of
1996 compared to $4.7 million, or 18% of net revenues, for the first six months
of 1995. The increases in absolute dollars in the second quarter of 1996
compared to the second quarter of 1995 is primarily attributable to the addition
of a new executive staff position, higher staffing levels and higher legal fees.
The increase in absolute dollars in the second quarter of 1996 compared to the
first quarter of 1996 is primarily attributable to higher commissions offset by
reductions in advertising, media and sales conference costs. The increases in
absolute dollars in the first half of 1996 compared to the first half of 1995 is
primarily attributable to the addition of new executive staff positions, higher
staff levels, manuals and media costs. The Company expects selling, general and
administrative spending as a percent of net revenues to remain relatively
constant in the second half of 1996.
Interest and Other Income and Interest Expense
Interest and other income was $357,000 for the second quarter of 1996,
$381,000 for the second quarter of 1995 and $360,000 for the first quarter of
1996. Interest income is affected by changes in the Company's cash balance as
well as the prevailing interest rates. Interest expense was $78,000 for the
second quarter of 1996, $111,000 for the second quarter of 1995 and $80,000 for
the first quarter of 1996.
Provision for Income Taxes
The Company's effective tax rate for the first half of 1996 was 40% compared
to 18% for the first half of 1995. The higher effective tax rate projected for
1996 was a result of the full utilization of all remaining net operating loss
and tax credit carryforwards in fiscal year 1995.
Liquidity and Capital Resources
Since 1992, the Company has financed its operations and capital requirements
principally through cash flow from operations and the proceeds from its initial
public offering in October 1994. Operations provided $2.5 million of net cash
during the first half of 1996, a decrease of $.8 million over the first half of
1995. In the first half of 1996, higher net income and accounts receivable were
offset by increased inventory purchases and increased income tax payments
previously accrued for, causing a net decrease in operating cash flow.
Cash used in investing activities for the first half of 1996 is attributable
to capital expenditures of $2.9 million and cash proceeds received from the net
sales of short-term investments of $2.3 million.
Financing activities for the first half of 1996 consisted primarily of
principal payments under capital lease and debt obligations of $.3 million. The
Company also generated $.7 million of proceeds from the sale of common stock
under employee stock option and purchase plans. In January 1996, the Board of
Directors approved a stock repurchase program in which up to $3 million of the
Company's Common Stock may be purchased by the Company on the open market from
time to time, depending upon market conditions, share price and other factors.
In July 1996, the Board of Directors approved an additional $2.7 million to be
used for the stock purchase program. As of July 22, 1996 the Company had
repurchased a total of 343,000 shares of its Common Stock for $2.9 million.
Working capital was $42.6 million as of June 30, 1996, compared to $41.3
million as of December 31, 1995 and includes cash and cash equivalents of $3.7
million and short-term investments of $24.0 million as of June 30, 1996.
The Company's liquidity is affected by many factors, including, among
others, the extent to which the Company pursues additional wafer fabrication
capacity from existing foundry suppliers or new suppliers, and the level of the
Company's product development efforts, and other factors related to the
uncertainties of the industry and global economies. Although the Company's cash
requirements will fluctuate based on the timing and extent of these factors, the
Company anticipates that its existing cash resources and cash generated from
operations will fund necessary purchases of capital equipment and provide
adequate working capital for at least the next twelve months. However, there can
be no assurance that events in the future will not require the Company to seek
additional capital sooner or, if so required, that such capital will be
available on terms acceptable to the Company.
Other Factors Affecting Future Operating Results
The Company's quarterly and annual operating results are affected by a wide
variety of factors that could materially and adversely affect revenues and
profitability, including the Company's access to advanced process technologies,
the timing and extent of process development costs, the Company's ability to
introduce new products on a timely basis, the volume and timing of orders
received, market acceptance of the Company's and its customers' products, the
timing of new product announcements and introductions by the Company or its
competitors, changes in the mix of products sold, the timing and extent of
research and development expenses, the availability and cost of wafers from
outside foundries, fluctuations in manufacturing yields, fluctuations in the
relative exchange rate of the yen and the U.S. dollar, competitive pricing
pressures and cyclical semiconductor industry conditions. A majority of the
Company's net revenues are derived from sales of a limited number of products.
Historically, average selling prices in the semiconductor industry have
decreased over the life of any particular product. Although the Company has not
generally experienced material decreases in its average selling prices over
time, there can be no assurance that the average selling prices of the Company's
products will not be subject to significant pricing pressures in the future. The
Company's business is characterized by short-term orders and shipment schedules,
and customer orders typically can be canceled or rescheduled without significant
penalty to the customer. Due to the absence of substantial non-cancelable
backlog, the Company typically plans its production and inventory levels based
on internal forecasts of customer demand, which are highly unpredictable and can
fluctuate substantially. In addition, the Company is limited in its ability to
reduce costs quickly in response to any revenue shortfalls. As a result of the
foregoing or other factors, there can be no assurance that the Company will not
experience material fluctuations in future operating results on a quarterly or
annual basis which would materially and adversely affect the Company's business.
The markets for the Company's products are characterized by rapid
technological change and frequent new product introductions. To remain
competitive, the Company must develop or obtain access to advanced semiconductor
process technologies in order to reduce die size, increase die performance and
functional complexity, and improve yields. Semiconductor design and process
methodologies are subject to rapid technological change, requiring large
expenditures for research and development. If the Company is unable to develop
or obtain access to advanced wafer processing technologies as they become
needed, or is unable to define, design, develop and introduce competitive new
products on a timely basis, its future operating results will be materially and
adversely affected. In addition, if the Company is unable to transfer and
install such new process technologies to one or more of its foundries in a
timely manner, its business and results of operations could be materially and
adversely affected.
The Company does not own or operate a full wafer fabrication facility, and
all of the Company's wafer requirements are currently supplied by outside
foundries. In particular, a substantial portion of the Company's bipolar wafers
are manufactured by one foundry in Japan and a substantial portion of the
Company's BiCMOS wafers are manufactured by one foundry in Taiwan. There are
certain significant risks associated with the Company's reliance on outside
foundries, including the lack of assured wafer supply and control over delivery
schedules, the unavailability of or delays in obtaining access to key process
technologies and limited control over manufacturing yields and production costs.
Although the Company has undertaken measures to diversify its sources of wafer
supply and works closely with its foundries to minimize the likelihood of
reduced manufacturing yields, the Company's foundries have from time to time
experienced lower than anticipated manufacturing yields, particularly in
connection with the introduction of new products and the installation and
start-up of new process technologies. Such reduced yields have at times
materially and adversely affected the Company's operating results. In addition,
the Company's reliance upon offshore foundries subjects the Company to risks of
exchange rate fluctuations, export and import restrictions, trade sanctions,
tariff increases and political instability.
The Company purchases wafers from its outside foundries pursuant to purchase
orders and does not have a guaranteed level of wafer capacity at any of its
foundries. Therefore, the Company's wafer suppliers could choose to prioritize
capacity for other uses or reduce or eliminate deliveries to the Company on
short notice. Accordingly, there is no assurance that the Company's foundries
will allocate sufficient wafer capacity to satisfy the Company's requirements.
Any sudden demand for an increased amount of wafers or sudden reduction or
elimination of any existing source or sources of wafers could result in a
material delay in the shipment of the Company's products. There can be no
assurance that material disruptions in supply, which have occurred periodically
in the past, will not occur in the future. Any such disruption could materially
and adversely affect the Company's operating results. In the event of any such
disruption, if the Company were unable to qualify alternative manufacturing
sources for existing or new products in a timely manner or if such sources were
unable to produce wafers with acceptable manufacturing yields, the Company's
business and operating results would be materially and adversely affected.
A substantial portion of the Company's net revenues are derived from sales
of products for computer networking applications. Sales of the Company's
products to network equipment manufacturers accounted for approximately 47% of
the Company's net revenues in the first six months of 1996 and fiscal year 1995.
Sales of one of the Company's computer networking products represented 12% of
the Company's net revenues during the first six months of 1996 and fiscal year
1995. The computer networking equipment market is characterized by intense
competition, relatively short product life cycles and rapid technological
change. In addition, the computer network equipment market has undergone a
period of rapid growth and consolidation in recent years. Although the Company
has expanded its product mix and customer base, the Company expects its
dependency on sales to network equipment manufacturers to continue in 1996. The
Company's business and results of operations would be materially and adversely
affected in the event of a significant slowdown in the computer networking
equipment market.
The Company's market diversification and product development activities have
placed, and could continue to place, a significant strain on the Company's
limited personnel and other resources. The Company's ability to manage any
future growth effectively will require it to integrate its new employees into
its overall operations, to continue to improve its operational, financial and
management systems and to attract, train, motivate and manage its employees
successfully. If the Company's management is unable to manage growth
effectively, the Company's business and results of operations could be
materially and adversely affected.
The semiconductor industry is characterized by rapid technological change,
cyclical market patterns, significant price erosion, periods of over-capacity
and production shortages, variations in manufacturing costs and yields and
significant expenditures for capital equipment and product development. The
industry has from time to time experienced depressed business conditions. In
this regard, in early 1996, the industry experienced significant softness in
demand for many types of products. The Company may experience substantial
period-to-period fluctuations in future operating results due to general
semiconductor industry conditions or other factors.
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The following matters were approved at the Company's Annual Meeting of
Stockholders held on May 22, 1996:
<TABLE>
<CAPTION>
(a) The following Directors were elected:
Directors Votes For Votes Withheld
- ------------------------------------------- -------------- -------------------
<S> <C> <C>
Arthur B. Stabenow 10,949,587 298,283
Frederick R. Adler 10,949,587 298,283
Gill Cogan 10,949,587 298,283
Roger A. Smullen 10,949,587 298,283
Jeffrey D. West 10,949,587 298,283
</TABLE>
<TABLE>
<CAPTION>
(b) The shareholders approved the following proposals:
Number of Common Shares Voted
Proposal For Against Abstain No Vote
----------------------------------- ------------- ------------- ----------- -------------
1) Amendment to Company's 1991
<S> <C> <C> <C> <C>
Stock Option Plan 5,404,891 2,496,667 17,734 3,328,578
2) Ratification of Appointment
of Ernst & Young, LLP as
Independent Auditors 11,199,891 21,849 26,130
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1(1) 1991 Stock Option Plan, as amended.
11.1 Statement Regarding Computation of Earnings Per Share.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
(1) Incorporated by reference to the Company's Registration Statement on
Form S-8 filed on August 1, 1996.
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11.1
Micro Linear Corporation
Statement Re Computation of Earnings Per Share
(Unaudited)
(In thousands, except per share data)
Three Months Six Months
Ended Ended
June 30, June 30,
------------------------------ -----------------------------
<S> <C> <C> <C> <C>
1996 1995 1996 1995
------------ -------------- ------------ -------------
Net income...................................... $1,836 $2,178 $4,819 $3,896
============ ============== ============ =============
PRIMARY:
Weighted average common shares outstanding...... 12,343 12,060 12,385 12,017
Common equivalents attributable to:
Convertible preferred shares............... - - - -
Options and warrants....................... 1,152 1,633 1,132 1,595
------------ -------------- ------------ -------------
Total weighted average common and common
equivalent shares outstanding.............. 13,495 13,693 13,518 13,612
============ ============== ============ =============
Net income per share............................ $ 0.14 $ 0.16 $ 0.36 $ 0.29
============ ============== ============ =============
FULLY DILUTED:
Weighted average common shares outstanding...... 12,343 12,060 12,385 12,017
Common equivalents attributable to:
Convertible preferred shares............... - - - -
Options and warrants - using quarter-end
market price.......................... 1,152 1,744 1,133 1,681
------------ -------------- ------------ -------------
Total weighted average common and common
equivalent shares outstanding.............. 13,495 13,804 13,519 13,698
============ ============== ============ =============
Net income per share............................ $ 0.14 $ 0.16 $ 0.36 $ 0.28
============ ============== ============ =============
</TABLE>
<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.
MICRO LINEAR CORPORATION
Date: August 14, 1996 By: /s/ J. PHILIP RUSSELL
---------------------
J. Philip Russell
Chief Financial Officer
(Principal Financial
and Accounting Officer)
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11.1
Micro Linear Corporation
Statement Re Computation of Earnings Per Share
(Unaudited)
(In thousands, except per share data)
Three Months Six Months
Ended Ended
June 30, June 30,
------------------------------ -----------------------------
<S> <C> <C> <C> <C>
1996 1995 1996 1995
------------ -------------- ------------ -------------
Net income...................................... $1,836 $2,178 $4,819 $3,896
============ ============== ============ =============
PRIMARY:
Weighted average common shares outstanding...... 12,343 12,060 12,385 12,017
Common equivalents attributable to:
Convertible preferred shares............... - - - -
Options and warrants....................... 1,152 1,633 1,132 1,595
------------ -------------- ------------ -------------
Total weighted average common and common
equivalent shares outstanding.............. 13,495 13,693 13,518 13,612
============ ============== ============ =============
Net income per share............................ $ 0.14 $ 0.16 $ 0.36 $ 0.29
============ ============== ============ =============
FULLY DILUTED:
Weighted average common shares outstanding...... 12,343 12,060 12,385 12,017
Common equivalents attributable to:
Convertible preferred shares............... - - - -
Options and warrants - using quarter-end
market price.......................... 1,152 1,744 1,133 1,681
------------ -------------- ------------ -------------
Total weighted average common and common
equivalent shares outstanding.............. 13,495 13,804 13,519 13,698
============ ============== ============ =============
Net income per share............................ $ 0.14 $ 0.16 $ 0.36 $ 0.28
============ ============== ============ =============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Micro Linear Corporaton
Financial Data Schedule
This schedule contains summary financial information extracted from
the statements of income and balance sheets on pages 3 and 4 of the
Company's Second Quarter 1996 Form 10-Q and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 875359
<NAME> Micro Linear Corp
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> dec-31-1996
<PERIOD-START> apr-01-1996
<PERIOD-END> jun-30-1996
<CASH> 3705
<SECURITIES> 24043
<RECEIVABLES> 4652
<ALLOWANCES> 270
<INVENTORY> 12799
<CURRENT-ASSETS> 50598
<PP&E> 32968
<DEPRECIATION> 14648
<TOTAL-ASSETS> 69764
<CURRENT-LIABILITIES> 8039
<BONDS> 0
0
0
<COMMON> 13
<OTHER-SE> 58675
<TOTAL-LIABILITY-AND-EQUITY> 69764
<SALES> 13631
<TOTAL-REVENUES> 13631
<CGS> 4684
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 78
<INCOME-PRETAX> 3060
<INCOME-TAX> 1224
<INCOME-CONTINUING> 1836
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1836
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
