<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
December 31, 1999
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 0-19654
- -------------------------------------------------------------------------------
VITESSE SEMICONDUCTOR CORPORATION
(Exact name of registrant as specified in its charter)
- -------------------------------------------------------------------------------
Delaware 77-0138960
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
741 Calle Plano
Camarillo, CA 93012
(Address of principal executive offices)
(805) 388-3700
(Registrant's telephone number, including area code)
------------------------------------
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 and (2) has been subject to such filing
requirements for the past 90 days: Yes [X] No [_].
As of December 31, 1999, there were 157,418,224 shares of $0.01 par value
common stock outstanding.
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VITESSE SEMICONDUCTOR CORPORATION
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page Number
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements:
Condensed Consolidated Balance Sheets as of December 31, 1999 2
and September 30, 1999
Condensed Consolidated Statements of Operations for the Three 3
Months ended December 31, 1999 and December 31, 1998
Condensed Consolidated Statements of Cash Flows for the Three 4
Months ended December 31, 1999 and December 31, 1998
Notes to Condensed Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of 7
Financial Condition and Results of Operations
Item 3 Quantitative and Qualitative Disclosure About Market Risk 14
PART II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 15
1
</TABLE>
<PAGE>
PART I
FINANCIAL INFORMATION
VITESSE SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION> Dec. 31, 1999 Sept. 30, 1999
------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 62,737 $ 81,912
Short-term investments 138,540 107,245
Accounts receivable, net 75,621 69,034
Inventories, net 29,402 26,931
Prepaid expenses 4,345 5,462
Deferred tax assets, net 28,857 26,918
-------- --------
Total current assets 339,502 317,502
-------- --------
Long-term investments 37,980 38,063
Property and equipment, net 85,983 78,723
Restricted long-term deposits 76,115 67,334
Intangible assets, net 14,249 14,609
Deferred tax assets, net 6,237 6,237
Other assets 225 425
-------- --------
$560,291 $522,893
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 11,977 $ 15,118
Accrued expenses and other current liabilities 11,571 12,832
Income taxes payable 5,441 5,517
Current portion of long-term debt 730 2,013
-------- --------
Total current liabilities 29,719 35,480
-------- --------
Long-term debt 725
Shareholders' equity:
Common stock, $.01 par value. Authorized 250,000,000
shares; issued and outstanding 157,418,224 shares on
Dec. 31, 1999, and 156,176,636 shares on Sept. 30, 1999 1,574 1,561
Additional paid-in capital 400,270 380,035
Retained earnings 128,728 105,092
-------- --------
Total shareholders' equity 530,572 486,688
-------- --------
$560,291 $522,893
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
VITESSE SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------
Dec. 31, 1999 Dec. 31, 1998
------------- ---------------
<S> <C> <C>
Revenues $ 89,223 $ 60,708
Costs and expenses:
Cost of revenues 31,624 23,225
Engineering, research and development 14,920 10,952
Selling, general and administrative 10,195 7,848
-------- --------
Total costs and expenses 56,739 42,025
-------- --------
Income from operations 32,484 18,683
Other income, net 2,794 2,481
-------- --------
Income before income taxes 35,278 21,164
Income taxes 11,642 6,560
-------- --------
Net income $ 23,636 $ 14,604
======== ========
Net income per share
Basic $0.15 $0.10
======== ========
Diluted $0.14 $0.09
======== ========
Shares used in per share computations:
Basic 156,753 150,540
======== ========
Diluted 169,845 164,444
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
VITESSE SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------
Dec. 31, 1999 Dec. 31, 1998
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 23,636 $ 14,604
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,518 4,964
Change in assets and liabilities:
(Increase) decrease in, net of effects of acquisition:
Accounts receivable, net (6,587) (5,217)
Inventories (2,471) (1,198)
Prepaid expenses 1,117 (277)
Other assets 200 1
Increase (decrease) in, net of effects of acquisition:
Accounts payable (3,141) (1,340)
Accrued expenses and other current liabilities (1,261) 2,688
Income taxes payable 11,567 6,773
-------- --------
Net cash provided by operating activities 29,578 20,998
-------- --------
Cash flows from investing activities:
Investments, net (31,212) 8,830
Capital expenditures (13,418) (9,259)
Restricted long-term deposits (8,781) 233
Payment for purchase of company --- (12,816)
-------- --------
Net cash used in investing activities (53,411) (13,012)
-------- --------
Cash flows from financing activities:
Principal payments under long-term debt (2,008) (38)
Elimination of duplicate period of pooled companies --- 834
Proceeds from issuance of common stock, net 6,666 2,947
-------- --------
Net cash provided by financing activities 4,658 3,743
-------- --------
Net (decrease) increase in cash and cash equivalents (19,175) 11,729
Cash and cash equivalents at beginning of period 81,912 76,963
-------- --------
Cash and cash equivalents at end of period $ 62,737 $ 88,692
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ -- $ 4
======== ========
Income taxes $ 75 $ 832
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
VITESSE SEMICONDUCTOR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------
Dec. 31, 1999 Dec. 31, 1998
------------- -------------
<S> <C>
Supplemental disclosures of non-cash transactions:
Issuance of stock options in purchase transaction $ -- $ 300
============ ===========
Issuance of notes payable in purchase transaction $ -- $ 2,725
============ ===========
Increase in equity associated with tax benefit from
exercise of stock options $ 13,582 $ --
============ ===========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
VITESSE SEMICONDUCTOR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation and Significant Accounting Policies
The accompanying condensed consolidated financial statements are unaudited
and include the accounts of Vitesse Semiconductor Corporation and its
subsidiaries (the "Company"). All intercompany accounts and transactions have
been eliminated. In management's opinion, all adjustments (consisting only of
normal recurring accruals) which are necessary for a fair presentation of
financial condition and results of operations are reflected in the attached
interim financial statements. This report should be read in conjunction with
the audited financial statements presented in the 1999 Annual Report. Footnotes
and other disclosures which would substantially duplicate the disclosures in the
Company's audited financial statements for fiscal year 1999 contained in the
Annual Report have been omitted. The interim financial information herein is
not necessarily representative of the results to be expected for any subsequent
period.
Computation of Net Income per Share
The reconciliation of shares used to calculate basic and diluted income per
share consists of the following (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
- ------------------------------------------------------------------------------------------
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
Shares used in basic per share computations -
weighted average shares outstanding 156,753 150,540
Net effect of dilutive common share equivalents
based on treasury stock method 13,092 13,904
------- -------
Shares used in diluted per share computations 169,845 164,444
======= =======
</TABLE>
Options to purchase 20,174 shares and 7,413 that were outstanding at December
31, 1999 and 1998, respectively, were not included in the computation of diluted
net income per share because the exercise price of these options was greater
than the average market price of the common shares, and therefore the effect
would be antidilutive.
Comprehensive Income
On October 1, 1998 the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income." This statement establishes
standards for reporting and display of comprehensive income and its components
in a full set of general-purpose financial statements. The Company has no
components of other comprehensive income. Therefore comprehensive income is the
same as reported net income.
6
<PAGE>
Segment Reporting
On October 1, 1998 the Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information." This statement establishes standards for reporting operating
segment information in annual financial statements and interim reports issued to
shareholders. The Company operates in only one segment, as defined by SFAS No.
133. Substantially all long-lived assets are located in the United States.
Reclassifications and Restatements
Where necessary, prior periods' information has been reclassified to conform
to the current period condensed consolidated financial statement presentation.
On September 13, 1999, the Board of Directors approved a 2 for 1 stock split
of the Company's Common Stock that was effected on October 20, 1999. All
references to the number of common shares, weighted average number of common
shares and per share data for all periods presented have been adjusted to
reflect the stock split.
Note 2. Inventories, net
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31, 1999 September 30, 1999
<S> <C> <C>
Raw Materials $ 5,880 $ 5,168
Work in process and finished goods 23,522 21,763
------- -------
$29,402 $26,931
======= =======
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information set forth in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" below includes "forward looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), in particular, in "Results of Operations--Income
Taxes," and in "Liquidity and Capital Resources--Investing and Financing
Activities," and is subject to the safe harbor created by that section. Factors
that management believes could cause results to differ materially from those
projected in the forward looking statements are set forth below in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Risk Factors."
7
<PAGE>
Results of Operations
Revenues
Total revenues in the first quarter of fiscal 2000 were $89.2 million, a 47%
increase over the $60.7 million recorded in the first quarter of fiscal 1999 and
a 11% increase over the $80.6 million recorded in the prior quarter. The
increase in total revenues was due to unit growth in shipments of existing
products, as well as the introduction of new products to customers in the
communications market.
Cost of Revenues
Cost of revenues as a percentage of total revenues in the first quarter of
fiscal 2000 was 35.4% compared to 38.3% in the first quarter of fiscal 1999 and
35.9% in the prior quarter. The decrease in cost of revenues as a percentage of
total revenues resulted primarily from a reduction in per unit costs associated
with increased utilization of the Company's Colorado Springs wafer fabrication
facility, as well as improved manufacturing yields during the first quarter of
fiscal 2000.
Engineering, Research and Development Costs
Engineering, research and development expenses were $14.9 million in the
first quarter of fiscal 2000 compared to $11.0 million in the first quarter of
fiscal 1999 and $13.0 million in the prior quarter. The increases were
principally due to increased headcount and higher costs to support the Company's
continuing efforts to develop new products. As a percentage of total revenues,
engineering, research and development costs were 16.7% in the first quarter of
fiscal 2000, 18.0% in the first quarter of fiscal 1999, and 16.2% in the prior
quarter. The Company's engineering, research and development costs are expensed
as incurred.
Selling, General and Administrative Expenses
Selling, general and administrative expenses (SG&A) were $10.2 million in the
first quarter of 2000, compared to $7.8 million in the first quarter of 1999 and
$9.0 million in the prior quarter. The increase was due principally to increased
headcount, higher commissions earned by sales representatives resulting from
increased sales, and increased advertising costs. As a percentage of total
revenues, SG&A expenses were 11.4% in the first quarter of 2000, compared to
12.9% in the first quarter of 1999 and 11.2% in the prior quarter.
Other Income, Net
Other income consists of interest income, net of interest and other expenses.
Other income increased to $2.8 million in the first quarter of fiscal 2000 from
$2.5 million in the first quarter of 1999 and from $2.6 million in the prior
quarter, due to higher average cash, short-term investments, long-term
investments and long-term deposit balances resulting from increased
profitability.
8
<PAGE>
Income Taxes
The Company recorded a provision for income taxes in the amount of $11.6
million in the first quarter of fiscal 2000 and $6.6 million in the first
quarter of fiscal 1999, representing an effective rate of 33% and 31%
respectively. The increase in the effective tax rate is due to the full
utilization in previous years of available net operating loss carryforwards.
The Company expects the effective tax rate to approximate 33% in fiscal 2000.
Liquidity and Capital Resources
Operating Activities
The Company generated $29.6 million and $21.0 million from operating
activities in the first quarters of 2000 and 1999, respectively. The increase
in cash flow from operations was principally due to an improvement in
profitability.
Investing Activities
The Company used $53.4 million and $13.0 million in investing activities
during the first quarter of fiscal 2000 and 1999, respectively. Capital
expenditures, principally for manufacturing and test equipment, were $13.4
million in the first quarter of fiscal 2000 compared to $9.3 million in the
first quarter of fiscal 1999. The Company intends to continue investing in
manufacturing, test and engineering equipment. In addition, the Company paid
$12.8 million in cash for the purchase of Vermont Scientific Technologies, Inc.,
during the first quarter of fiscal 1999.
The Company entered into an operating lease transaction providing for the
financing of $11.1 million for the acquisition of certain test equipment.
Payments under this lease commenced in November 1999. If at the end of the
lease term the Company does not purchase the property, the Company would
guarantee the residual value to the lessor equal to a specified percentage of
the lessor's cost of the equipment. As of December 31, 1999, the lessor
advanced a total of $11.1 million under this lease and had held $8.8 million as
cash collateral, which amount is included in restricted long-term deposits.
Financing Activities
In the first quarter of fiscal 2000, the Company generated $4.7 million of
cash from financing activities primarily from the proceeds from the issuance and
sale of common stock and proceeds from the issuance of common stock pursuant to
the Company's stock option and stock purchase plans, partially offset by
payments made for capital lease obligations and term loans.
Management believes that the Company's cash and cash equivalents, short-tem
investments, and cash flow from operations are adequate to finance its planned
growth and operating needs for the next 12 months.
9
<PAGE>
Impact of Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
will require recognition of all derivatives as either assets or liabilities on
the balance sheet at fair value. The Company will adopt SFAS No. 133, as
amended by SFAS No. 137, in the first quarter of its fiscal year ending
September 30, 2001. Management has not completed an evaluation of the effects
this standard will have on the Company's consolidated financial statements.
Year 2000 Readiness Disclosure
We formed an internal task force to evaluate Year 2000 issues associated with
both our IT and non-IT systems. Many of these systems were already compliant. We
replaced or upgraded other systems that were identified as noncompliant. We have
completely evaluated all the manufacturing equipment for Year 2000 compliance,
and have completed our remediation and testing procedures.
To date, none of our IT and non-IT systems and manufacturing equipment have
experienced any material difficulties related to the date change from December
31, 1999 to January 1, 2000, nor have we been notified that any of our suppliers
have experienced any such difficulties. We did not incur incremental material
costs associated with our efforts to become Year 2000 compliant.
To the extent that we experience Year 2000 related issues in the future, our
business and results of operations may be materially adversely affected.
Factors That May Affect Future Operating Results
We are Dependent on a Small Number of Customers in a Few Industries
We intend to continue focusing our sales effort on a small number of
customers in the communications and test equipment markets that require high-
performance integrated circuits. Some of these customers are also our
competitors. In the first quarter of fiscal 2000, our largest customer
accounted for 17% of our total revenues and no other customer accounted
for more than 10% of our total revenues. If any of our major customers delays
orders of our products or stops buying our products, our business and financial
condition would be severely affected.
Our Operating Results May Fluctuate
Our quarterly revenues and expenses may fluctuate in the future. These
variations may be due to a number of factors, many of which are outside our
control. Factors that could affect our future operating results include the
following:
. The loss of major customers
. Variations, delays or cancellations of orders and shipments of our
products
10
<PAGE>
. Reduction in the selling prices of our products
. Significant changes in the type and mix of products being sold
. Delays in introducing new products
. Design changes made by our customers
. Our failure to manufacture and ship products on time
. Changes in manufacturing capacity, the utilization of this capacity and
manufacturing yields
. Variations in product and process development costs; and
. Changes in inventory levels
In the past, we have recorded significant new product and process development
costs because our policy is to expense these costs at the time that they are
incurred. We may incur these types of expenses in the future. The occurrence of
any of the above factors could have a material adverse effect on our business
and on our financial results.
We Have Limited Manufacturing Capacity and We Depend on a New Production
Facility
During 1998, we started producing high-performance integrated circuits at our
new six-inch wafer fabrication factory in Colorado Springs, Colorado. This
facility includes a 10,000-square-foot Class I clean room with capacity for
future expansion to 15,000 square feet. We are faced with several risks in the
successful operation of this facility as well as in our overall production
operations. We had only produced finished four-inch wafers until 1998 and
therefore we have limited experience with the equipment and processes involved
in producing finished six-inch wafers. We do not have excess production capacity
at our Camarillo plant to offset failure of the new Colorado facility to meet
production goals. Further, some of our products have been qualified for
manufacture at only one of the two facilities. Consequently, our failure to
successfully operate the new facility could severely damage financial results.
We also must now effectively coordinate and manage two facilities. We have
limited experience in managing production facilities located at two different
sites, and our failure to successfully do so could have a material adverse
effect on our business and operating results.
There Are Risks Associated with Recent and Future Acquisitions
In fiscal 1999, we made three strategic acquisitions. These acquisitions may
result in the diversion of management's attention from the day-to-day operations
of the Company's business. Risks of making these acquisitions include
difficulties in the integration of acquired operations, products and
personnel. If we fail in our efforts to integrate recent and future
acquisitions, our business and operating results could be materially and
adversely affected. In addition, acquisitions we will make could result in
dilutive issuances of equity securities, substantial debt, and amortization
expenses related to goodwill and other intangible assets. We do not have any
binding obligations with respect to any particular acquisition; however, our
management frequently evaluates strategic opportunities available. In the future
we may pursue additional acquisitions of complementary products, technologies or
businesses.
11
<PAGE>
Our Industry Is Highly Competitive
The high-performance semiconductor market is extremely competitive and is
characterized by rapid technological change, price erosion and increased
international competition. The communications and test equipment industries,
which are our primary target markets, are also becoming intensely competitive
because of deregulation and international competition. We compete directly or
indirectly with the following categories of companies:
. Gallium Arsenide fabrication operations of systems companies such as
Conexant and Fujitsu
. High-performance silicon integrated circuit manufacturers who use Emitter
Coupled Logic ("ECL"), Bipolar Complementary Metal-Oxide-Semiconductor
("BiCMOS") or Complementary Metal-Oxide-Semiconductor ("CMOS")
technologies such as Hewlett Packard, Fujitsu, Motorola, Lucent
Technologies, Texas Instruments and Applied Micro Circuits Corporation
. Internal integrated circuit manufacturing units of systems companies such
as Lucent Technologies, Siemens and Fujitsu
Our current and prospective competitors include many large companies that
have substantially greater marketing, financial, technical and manufacturing
resources than we do.
Competition in the markets that we serve is primarily based on
price/performance, product quality and the ability to deliver products in a
timely fashion. Product qualification is typically a lengthy process and some
prospective customers may be unwilling to invest the time or expense necessary
to qualify suppliers such as Vitesse. Prospective customers may also have
concerns about the relative advantages of our products compared to more familiar
silicon-based semiconductors. Further, customers may also be concerned about
relying on a relatively small company for a critical sole-sourced component. To
the extent we fail to overcome these challenges, there could be material and
adverse effects on our business and financial results.
There is Risk Associated with Doing Business in Foreign Countries
In fiscal 1999, international sales accounted for 33% of our total revenues,
and we expect international sales to constitute a substantial portion of our
total revenues for the foreseeable future. International sales involve a
variety risks and uncertainties, including risks related to:
. Reliance on strategic alliance partners
. Compliance with foreign regulatory requirements
. Variability of foreign economic conditions
. Changing restrictions imposed by U.S. export laws, and
. Competition from U.S. based companies which have firmly established
significant international operations
12
<PAGE>
Failure to successfully address these risks and uncertainties could adversely
affect our international sales, which could in turn have a material and adverse
effect on our results of operations and financial condition.
We Must Keep Pace with Product and Process Development and Technological
Change
The market for our products is characterized by rapid changes in both product
and process technologies. We believe that our success to a large extent depends
on our ability to continue to improve our product and process technologies and
to develop new products and technologies in order to maintain our competitive
position. Further, we must adapt our products and processes to technological
changes and adopt emerging industry standards. Our failure to accomplish any of
the above could have a negative impact on our business and financial results.
We Are Dependent on Key Suppliers
We manufacture our products using a variety of components procured from
third-party suppliers. Most of our high-performance integrated circuits are
packaged by third parties. Other components and materials used in our
manufacturing process are available from only a limited number of sources. Any
difficulty in obtaining sole- or limited-sourced parts or services from third
parties could affect our ability to meet scheduled product deliveries to
customers. This in turn could have a material adverse effect on our customer
relationships, business and financial results.
Our Manufacturing Yields Are Subject to Fluctuation
The Company's manufacturing yields vary significantly among products,
depending on a particular IC's complexity and the Company's experience in
manufacturing it. The Company's overall yields are lower than yields
experienced in a silicon process because of the large number of different
products manufactured in limited volume and because the Company's H-GaAs process
technology is significantly less developed.
Regardless of the process technology used, the fabrication of semiconductors
is a highly complex and precise process. Defects in masks, impurities in the
materials used, contamination of the manufacturing environment, equipment
failure and other difficulties in the fabrication process can cause a
substantial percentage of wafers to be rejected or numerous die on each wafer to
be nonfunctional. The Company has experienced such yield losses in the past.
Because the majority of the Company's costs of manufacturing are relatively
fixed, decreases in volume and yields adversely impact the Company's margins.
Further, any yield decreases may result in shipment delays and, consequently,
loss of revenue. The Company may in the future suffer periodic yield problems
which could cause the Company's business, operating results and financial
condition to be materially adversely affected.
Our Business Is Subject to Environmental Regulations
We are subject to various governmental regulations related to toxic, volatile
and other hazardous chemicals used in our manufacturing process. Our failure to
comply with these regulations could result in the imposition of fines or in the
suspension or cessation of our
13
<PAGE>
operations. Additionally, we may be restricted in our ability to expand
operations at our present locations or we may be required to incur significant
expenses to comply with these regulations.
Our Failure to Manage Growth May Adversely Affect Us
The management of our growth requires qualified personnel, systems and other
resources. In particular, the continued operation of the new facility in
Colorado Springs and its integration with the Camarillo facility will require
significant management, technical and administrative resources. Additionally, we
have recently established several product design centers worldwide. Finally, we
acquired Vermont Scientific Technologies, Inc. ("VTEK") in November 1998, Serano
Systems Corporation ("Serano") in January 1999 and XaQti Corporation ("XaQti")
in July 1999, and have only limited experience in integrating the operations of
acquired businesses. Failure to manage our growth or to successfully integrate
new and future facilities or newly acquired businesses could have a material
adverse effect on our business and financial results.
We Are Dependent on Key Personnel
Due to the specialized nature of our business, our success depends in part
upon attracting and retaining the services of qualified managerial and technical
personnel. The competition for qualified personnel is intense. The loss of any
of our key employees or the failure to hire additional skilled technical
personnel could have a material adverse effect on our business and financial
results.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
None.
14
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits & Reports on Form 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule.
(b) Reports on Form 8-K
None.
15
<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.
VITESSE SEMICONDUCTOR CORPORATION
February 11, 2000 By: /s/ Eugene F. Hovanec
---------------------------------
Eugene F. Hovanec
Vice President, Finance and
Chief Financial Officer
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> SEP-30-2000 SEP-30-1999
<PERIOD-START> OCT-01-1999 OCT-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 62,737 81,912
<SECURITIES> 176,520 145,308
<RECEIVABLES> 79,326 70,034
<ALLOWANCES> 3,705 1,000
<INVENTORY> 29,402 26,931
<CURRENT-ASSETS> 339,502 317,502
<PP&E> 140,882 129,506
<DEPRECIATION> 54,899 50,783
<TOTAL-ASSETS> 560,291 522,893
<CURRENT-LIABILITIES> 29,719 35,480
<BONDS> 0 0
0 0
0 0
<COMMON> 1,574 1,561
<OTHER-SE> 400,270 380,035
<TOTAL-LIABILITY-AND-EQUITY> 560,291 522,893
<SALES> 89,223 60,708
<TOTAL-REVENUES> 89,223 60,708
<CGS> 31,624 23,225
<TOTAL-COSTS> 56,739 42,025
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 35,278 21,164
<INCOME-TAX> 11,642 6,560
<INCOME-CONTINUING> 23,636 14,604
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 23,636 14,604
<EPS-BASIC> .15 .10
<EPS-DILUTED> .14 .09
</TABLE>
