<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 April 30, 2000
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _________ to _________
Commission file number 1-6395
SEMTECH CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-2119684
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) identification No.)
652 Mitchell Road, Newbury Park, California, 91320
(Address of principal executive offices, Zip Code)
Registrant's telephone number, including area code: (805) 498-2111
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 has required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days
Yes X No ______
-----
Number of shares of Common Stock, $0.01 par value, outstanding at April 30,
2000: 32,601,901.
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PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
--------------------
The consolidated condensed financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these condensed financial
statements be read in conjunction with the consolidated financial statements and
the notes thereto included in the Company's latest annual report on Form 10-K.
In the opinion of the Company, these unaudited statements contain all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial position of Semtech Corporation and subsidiaries as
of April 30, 2000, and the results of their operations and their cash flows for
the three months then ended.
2
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SEMTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------
<S> <C> <C>
April 30, May 2,
2000 1999
----------------------------------------------------------------------------------------
Net sales $57,412 $33,044
Cost of sales 26,220 16,445
------- -------
Gross profit 31,192 16,599
------- -------
Operating costs and expenses -
Selling, general and administrative 8,220 5,642
Product development and engineering 7,045 4,117
------- -------
Total operating costs and expenses 15,265 9,759
------- -------
Operating income 15,927 6,840
Interest and other income, net 1,329 254
------- -------
Income before taxes 17,256 7,094
Provision for taxes 5,177 2,341
------- -------
Net income $12,079 $ 4,753
======= =======
Earnings per share:
Basic $0.37 $0.16
Diluted $0.32 $0.14
Weighted average number of shares:
Basic 32,341 30,058
Diluted 37,382 33,102
</TABLE>
3
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SEMTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<S> <C> <C>
April 30, January 30,
2000 2000
(Unaudited) (Audited)
----------------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $238,470 $ 45,225
Temporary investments 171,352 18,066
Receivables, less allowances 30,968 25,223
Income taxes refundable 478 -
Inventories 29,898 26,581
Other current assets 1,891 1,223
Deferred income taxes 8,361 4,106
-------- --------
Total current assets 481,418 120,424
Property, plant and equipment, net 24,785 24,397
Long-term investments 55,156 -
Other assets 12,584 1,482
Deferred income taxes 3,114 3,047
-------- --------
TOTAL ASSETS $577,057 $149,350
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 11,213 $ 10,723
Accrued liabilities 11,829 8,869
Income taxes payable - 1,389
Other current liabilities 785 2,756
-------- --------
Total current liabilities 23,827 23,737
Other long-term liabilities 168 131
Convertible Subordinated Debentures 400,000 -
Commitments and contingencies
Stockholders' equity:
Common stock, $0.01 par value, 40,000,000 authorized
Issued and outstanding 326 320
Additional paid-in capital 69,328 53,885
Retained earnings 83,577 71,498
Accumulated other comprehensive loss (169) (221)
-------- --------
Total stockholders' equity 153,062 125,482
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $577,057 $149,350
======== ========
</TABLE>
4
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SEMTECH CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------
<S> <C> <C>
April 30, May 2,
2000 1999
------------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 12,079 $ 4,753
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 1,164 1,075
Deferred income taxes (4,322) 21
Changes in assets and liabilities, net of acquisition:
Receivables (5,745) (2,423)
Income taxes refundable - 258
Inventories (3,317) (2,071)
Other assets (668) (497)
Accounts payable and accrued liabilities 3,450 (541)
Income taxes payable 9,683 1,799
Other current liabilities (1,971) (344)
--------- -------
Net cash provided by operating activities 10,353 2,030
--------- -------
Cash flows from investing activities:
Temporary investments, net (153,286) 255
Purchase of long-term investments (55,156) -
Additions to property, plant and equipment (1,552) (1,229)
--------- -------
Net cash used in investing activities (209,994) (974)
--------- -------
Cash flows from financing activities:
Exercise of stock options 3,899 855
Proceeds from issuance of debentures 388,898 -
Stock repurchase - (6,642)
Other 37 42
--------- -------
Net cash provided by (used in) financing activities 392,834 (5,745)
--------- -------
Effect of exchange rate changes on cash 52 (70)
Net increase (decrease) in cash and cash equivalents 193,245 (4,759)
Cash and cash equivalents at beginning of period 45,225 41,035
--------- -------
Cash and cash equivalents at end of period $ 238,470 $36,276
========= =======
</TABLE>
5
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SEMTECH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. Earnings Per Share
Basic earnings per common share are computed using the weighted average
number of common shares outstanding during the period. Diluted earnings per
common share include the incremental shares issuable upon the assumed exercise
of stock options and assumed conversion of the $400.0 million subordinated
debenture for the first quarter of fiscal year 2001.
<TABLE>
<CAPTION>
(in thousands) Three Months Ended
April 30, May 2,
2000 1999
-------------------------------------------------------
<S> <C> <C>
Basic 32,341 30,058
====== ======
Diluted 37,382 33,102
====== ======
</TABLE>
Options to purchase 31,000 shares were not included in the computation of
diluted net income per share for the first quarter of fiscal year 2000, because
such options were anti-dilutive.
2. Business Segments and Concentrations of Risk
The Company operates in three reportable segments: Standard Semiconductor
Products, Rectifier and Assembly Products, and Other Products. Included in the
Standard Semiconductor Products segment are the power management, protection,
high-performance, advanced communications and system management product lines.
The Rectifier and Assembly Products segment includes the Company's line of
assembly and rectifier products. The Other Products segment is made up of other
custom IC and foundry sales.
The accounting policies of the segments are the same as those described
above in the summary of significant accounting policies. The Company evaluates
segment performance based on net sales and operating income of each segment.
Management does not track segment data or evaluate segment performance on
additional financial information. As such, there are no separately identifiable
segment assets nor is there any separately identifiable statements of income
data (below operating income).
The Company does not track or assign assets to individual reportable
segments. Likewise, depreciation expense and capital additions are also not
tracked by reportable segments.
<TABLE>
<CAPTION>
Three Months Ended
April 30, May 2,
Net Sales 2000 1999
--------- -----------------------
<S> <C> <C>
Standard Semiconductor Products.......... $51,436 $27,630
Rectifier and Assembly Products.......... 3,879 3,266
Other Products........................... 2,097 2,148
------- -------
Total Net Sales........................ $57,412 $33,044
======= =======
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
April 30, May 2,
Operating Income 2000 1999
---------------- ------------------------
<S> <C> <C>
Standard Semiconductor Products.......... $14,718 $6,386
Rectifier and Assembly Products.......... 693 144
Other Products........................... 516 310
------- ------
</TABLE>
6
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<TABLE>
<S> <C> <C>
Total Operating Income................. $15,927 $6,840
======= ======
</TABLE>
For the first quarters ended April 30, 2000 and May 2, 1999, the Company
had no customer that accounted for more than 10 percent of net sales. As of
April 30, 2000 and May 2, 1999, no one customer accounted for more than 10
percent of total accounts receivable. A summary of net external sales by region
follows. The Company does not track customer sales by region for each individual
reporting segment.
<TABLE>
<CAPTION>
Three Months Ended
April 30, May 2,
Net Sales 2000 1999
--------- -----------------------
<S> <C> <C>
Domestic......................... $25,261 $12,722
Asia-Pacific..................... 25,835 16,125
European......................... 6,316 4,197
------- -------
Total Net Sales................ $57,412 $33,044
======= =======
</TABLE>
Long lived assets located outside the United States as of the end of the
first quarter of fiscal years 2001 and 2000 were approximately $1.5 million and
$3.5 million, respectively.
3. Temporary and Long-Term Investments
Temporary and long-term investments consist of bank and corporate
obligations. Temporary investments have original maturities in excess of three
months, but no greater than twelve months at the time of purchase. Long-term
investments have original maturities in excess of one year. All investments are
classified as "hold to maturity", thus no unrealized holding gains or losses
were reported in the accompanying balance sheets.
4. Inventories
The commercial semiconductor industry and the markets in which the
Company's products are used are characterized by rapid changes and short product
life cycles. Consistent with the industry, the Company has experienced declines
in average selling prices over the life of its product lines. The Company has
generally reserved inventory which is considered obsolete or estimated to be in
excess of 18 months demand, and has provided reserves for declines in selling
price below cost. Inventories consisted of the following:
<TABLE>
<CAPTION>
Raw Materials Work in Process Finished Goods Total
(In thousands)
--------------------------------------------------------------------------------------------------------
April 30, 2000
<S> <C> <C> <C> <C>
Gross inventories $1,472 $20,845 $12,578 $34,895
Total reserves (301) (2,116) (2,580) (4,997)
------ ------- ------- -------
Net inventories $1,171 $18,729 $ 9,998 $29,898
====== ======= ======= =======
January 30, 2000
Gross inventories $1,471 $17,276 $12,588 $31,335
Total reserves (288) (2,030) (2,436) (4,754)
------ ------- ------- -------
Net inventories $1,183 $15,246 $10,152 $26,581
====== ======= ======= =======
</TABLE>
5. Convertible Subordinated Debentures
On February 14, 2000, the Company completed a private offering of $400.0
million principal amount of convertible subordinated debentures that pay an
interest rate of 4 1/2 percent and are convertible into common stock at
7
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a conversion price of $84.46 per share. The notes are due in seven years and
callable by the Company after three years. The Company intends to use the net
proceeds of the offering for general corporate purposes, including working
capital, expansion of sales, marketing and customer service capabilities, and
product development. In addition, the Company may use a portion of the net
proceeds to acquire or invest in complementary businesses, technologies,
services or products.
6. Lines of Credit
The Company has a credit arrangement with a financial institution for
borrowings up to $20.0 million at an interest rate of 30 day commercial paper
plus 2.2 percent that is available through August 2000. The line of credit
consists of two parts, the first facility is a $10.0 million line of credit for
working capital needs and the second facility is a reducing revolver loan for
equipment acquisitions. The available amount under the reducing revolver loan
declines in equal increments over 84 months. As of April 30, 2000, the Company
had approximately $7.8 million available under the reducing revolver portion.
The arrangement is collateralized by the Company's domestic assets and provides
for financial and non-financial covenants. Through its foreign subsidiary, the
Company also maintains an overdraft credit line in the amount of 300,000 pounds
sterling. As of April 30, 2000, the Company had no borrowings outstanding under
these credit facilities.
7. Commitments and Contingencies
On February 7, 2000, the Company was notified by the United States
Environmental Protection Agency with respect to the Casmalia Disposal Site in
Santa Barbara, California. The Company has been included in the Superfund
program to clean up this disposal site for its involvement in utilizing this
site for waste disposal. As of April 30, 2000, the Company provided
approximately $245,000 for potential settlement under this program, however, the
ultimate resolution and timing of the resolution is unknown at this time. The
Company believes the amount provided is sufficient to cover any liability
existing based on the currently available information.
8. Stock Split
On September 14, 1999, the Company effected a two-for-one stock split in
the form of a 100% stock dividend which was payable to shareholders of record as
of August 30, 1999. All shares, per share data, common stock, and stock option
amounts herein have been restated to reflect the effect of this split.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
----------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
You should read the following discussion of our financial condition and
results of operations together with the condensed financial statements and the
notes to condensed financial statements included elsewhere in this Form 10-Q.
This discussion contains forward-looking statements based on our current
expectations, assumptions, estimates and projections about us and our industry.
These forward-looking statements involve risks and uncertainties. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, as more fully described in the
"Forward Looking Statements" section of this Form 10-Q and the "Risk Factors"
section of the Company's annual report on Form 10-K for the year ended January
30, 2000. We undertake no obligation to update any forward-looking statements
for any reason, even if new information becomes available or other events occur
in the future.
8
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Overview
We design, develop, manufacture and market a wide range of analog and
mixed-signal semiconductors for commercial and military applications. Our
products are sold principally to customers in the computer, communications and
industrial markets. Computer market applications include desktop computers,
servers, workstations, laptop computers, personal digital assistants (PDAs) and
computer add-on cards. Products within the communications market include local
area networks, wide area networks, cellular phones and base-stations. Industrial
applications include automated test equipment (ATE), medical devices and factory
automation systems. Our focus on these commercial applications over the past
several years represents a substantial transition from our historical business,
which was predominantly military and aerospace applications.
Sales to customers are made on the basis of individual customer purchase
orders. Many large commercial customers, particularly in the personal computer
industry, include terms in their purchase orders, which provide liberal
cancellation provisions. Recent trends within the industry toward shorter lead-
times and "just-in-time" deliveries have resulted in our reduced ability to
predict future shipments. As a result, we expect the percentage of turns-fill
business (orders received and shipped within the same quarter) to increase as a
percentage of net sales.
With a portion of our sales emanating from retail computer and computer
related applications, our past results have reflected some seasonality, with
demand levels being higher in computer segments during the third and fourth
quarters of the year in comparison to the first and second quarters.
One of our strategies is to expand our business through strategic
acquisitions. Over the past three years, we have made several small acquisitions
in order to increase our pool of skilled technical personnel and penetrate new
market segments such as high performance, advanced communications and system
management devices. These acquisitions include: USAR Systems Incorporated;
Practical Sciences, Inc.; Acapella Limited and Edge Semiconductor. The
acquisitions of USAR, Acapella and Edge were accounted for as poolings of
interests.
Results of Operations
The following table sets forth certain operating data as a percentage of
total net sales for the periods indicated.
<TABLE>
<CAPTION>
Quarter Ended
April 30, May 2,
2000 1999
----------------------
<S> <C> <C>
As a Percentage of Net Sales:
Net sales 100.0% 100.0%
Cost of sales 45.7 49.8
----- -----
Gross profit 54.3 50.2
Operating costs and expenses:
Selling, general & administrative 14.3 17.1
Product development and
Engineering 12.3 12.5
----- -----
Total operating costs and Expenses 26.6 29.5
----- -----
Operating income 27.7 20.7
Interest and other income, net 2.3 0.8
----- -----
Income before taxes 30.1 21.5
Provision for taxes 9.0 7.1
----- -----
Net income 21.0% 14.4%
===== =====
</TABLE>
Comparison of the Three Months Ended April 30, 2000 and May 2, 1999
Net Sales. We generally recognize revenue upon shipment of our products.
We defer revenue recognition on shipment of certain products to distributors
where return privileges exist until the products are sold through to end
9
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users. Net sales for the first quarter of fiscal year 2001 were $57.4 million,
compared to $33.0 million for the first quarter of fiscal year 2000, a 74
percent increase. This increase was due in part to favorable market conditions
in the overall semiconductor industry and the growth in sales into the Company's
main strategic end markets: communications, computer and industrial.
Gross Profit. Gross profit is equal to our net sales less our cost of
sales. Our cost of sales includes materials, direct labor and overhead. Cost of
inventory is determined by the first-in, first-out method. Gross profit for the
first three months of fiscal year 2001 was $31.2 million, compared to $16.6
million for the comparable period in the prior year, an 88 percent increase. Our
gross margins (defined as gross profit as a percentage of net sales) are
generally affected by price changes over the life of the products and the
overall mix of products sold. Higher gross margins are generally expected from
new products and improved production efficiencies as a result of increased
utilization. Conversely, prices for existing products generally will continue to
decrease over their respective life cycles. Our gross margin was 54.3 percent
for the first quarter of fiscal year 2001. This compared to a gross margin of
50.2 percent for the first quarter of fiscal year 2000. The improvement is
attributed to increased operating efficiencies associated with higher shipment
levels, higher revenue contribution from new products and a favorable shift in
product mix toward higher margin product lines.
Operating Costs and Expenses. Operating costs and expenses generally
consist of selling, general and administrative (SG&A), product development and
engineering costs (R&D), costs associated with acquisitions, and other operating
related charges. Operating costs and expenses were $15.3 million, or 26.6
percent of net sales, for the first quarter ended April 30, 2000. Operating
costs and expenses for the prior year first quarter were $9.8 million, or 29.5
percent of net sales. Current year operating costs and expenses, as a percentage
of net sales, are lower than previous levels due to higher shipment rates and
greater efficiencies.
SG&A expenses for the first quarter of fiscal year 2001 were $8.2 million,
or 14.3 percent of net sales, compared to $5.6 million, or 17.1 percent of net
sales for the prior year first quarter. The increase in expenditures was due
primarily to the overall growth of our business, while the decrease in
percentage of net sales reflects higher revenue contributions from newer
products. R&D expenses as a percentage of net sales were relatively consistent
at $7.0 million, or 12.3 percent of net sales, for the first three months of
fiscal year 2001, compared to $4.1 million, or 12.5 percent of net sales, for
the first three months of fiscal year 2000. We continue to invest heavily in
areas deemed critical for developing and marketing new products, which are
generally targeted at broadening our customer base, product lines and end-
product applications.
Interest and Other Income. Net interest and other income of $1.3 million
was realized in the first quarter of fiscal year 2001. For the first quarter of
fiscal year 2000, interest and other income was $254,000. Other income and
expenses for the first quarter of fiscal year 2001 is primarily interest income,
net of $4.1 million of interest expense associated with the outstanding
subordinated debentures. For the prior year first quarter, interest and other
income is primarily interest income. The significant increase in interest and
other income is attributable to cash provided by the February 2000 issuance of
convertible subordinated debentures.
Provision for Taxes. Expense for income taxes was $5.2 million in the
first quarter fiscal year 2001, compared to $2.3 million in the first quarter of
fiscal year 2000. The effective tax rate for the first quarter of fiscal year
2001 was 30 percent and for the comparable quarter of fiscal year 2000 was 33
percent. The decline is due to increased sales through foreign-based
subsidiaries that are in lower tax jurisdictions.
Liquidity and Capital Resources
On February 14, 2000, we completed a private offering of $400.0 million
principal amount of convertible subordinated debentures that pay an interest
rate of 4 1/2 percent and are convertible into our common stock at a conversion
price of $84.46 per share. The notes are due in seven years. We intend to use
the net proceeds of the offering for general corporate purposes, including
working capital, expansion of sales, marketing and customer service
capabilities, and product development. In addition, we may use a portion of the
net proceeds to acquire or invest in complementary businesses, technologies,
services or products.
10
<PAGE>
On April 30, 2000, we had working capital of $457.6 million, compared with
$96.7 million at January 30, 2000. The ratio of current assets to current
liabilities at April 30, 2000 was 20.2 to 1, compared to 5.1 to 1 at January 30,
2000. The increase was primarily due to cash generated by the issuance of
convertible subordinated debentures.
Cash provided by operating activities was $10.4 million for the first
quarter of fiscal year 2001, compared to $2.0 million for the first quarter of
fiscal year 2000. Net income for the first three months of fiscal year 2001 was
reduced by non-cash charges for depreciation and amortization of $1.2 million.
Net operating cash flows were favorably impacted by net income of $12.1 million
compared to $4.8 million in the prior year period. Net cash provided by
operating activities for the first three months of fiscal year 2001 was
positively impacted by an increase in accounts payable, accrued liabilities and
income tax liability. These items were partially offset by increases in deferred
income taxes, receivables, and inventories.
Cash provided by operating activities for the first three months of fiscal
year 2000 was favorably impacted by net income, non-cash charges for
depreciation and amortization of $1.1 million and increases in income taxes
payable. These items were partially offset by increases in receivables,
inventories and other assets, and declines in accounts payable and accrued
liabilities, and other liabilities.
Investing activities used $210.0 million for the first quarter of fiscal
year 2001 compared to $974,000 in the first quarter of fiscal year 2000.
Investing activities for the first quarter of fiscal year 2001 consists of
increases in temporary investments, purchases of long-term investments, and
capital expenditures of $153.3 million, $55.2 million and $1.6 million,
respectively. Cash used in investing activities for the comparable prior year
period reflects primarily additions to property and equipment.
Our financing activities provided $392.8 million during the first three
months of fiscal year 2001 and used $5.7 million in the prior year first
quarter. Financing activities for the first three months of fiscal year 2001
reflect the proceeds, net of related fees, from the issuance of $400.0 million
of convertible subordinated debentures and cash provided by stock option
exercises. Financing activities for the comparable prior period represent
primarily cash from stock option exercises and cash used to repurchase our
stock.
The Company has a credit arrangement with a financial institution for
borrowings up to $20.0 million at an interest rate of 30 day commercial paper
plus 2.2 percent that is available through August 2000. The line of credit
consists of two parts, the first facility is a $10.0 million line of credit for
working capital needs and the second facility is a reducing revolver loan for
equipment acquisitions. The available amount under the reducing revolver loan
declines in equal increments over 84 months. As of April 30, 2000, the Company
had approximately $7.8 million available under the reducing revolver portion.
The arrangement is collateralized by the Company's domestic assets and provides
for financial and non-financial covenants. Through its foreign subsidiary, the
Company also maintains an overdraft credit line in the amount of 300,000 pounds
sterling. As of April 30, 2000, the Company had no borrowings outstanding under
these credit facilities.
In order to develop, design and manufacture new products, we had to make
significant expenditures during the past five years. These investments aimed at
developing new products, including the hiring of many design and applications
engineers and related purchase of equipment, will continue. We fully intend to
continue to invest in those areas that have shown potential for viable and
profitable market opportunities. Certain of these expenditures, particularly the
addition of design engineers, do not generate significant payback in the short-
term. We plan to finance these expenditures with cash generated by operations
and cash on-hand.
Purchases of new capital equipment were made primarily to expand
manufacturing capacity and improve efficiency. Funding for these purchases was
made from our operating cash flows and cash reserves. We have made significant
investments in product and process technology. We believe that sales generating
cash flows, together with the proceeds of the debt offering, cash reserves and
existing credit facilities, are sufficient to fund operations and capital
expenditures for the foreseeable future.
Inflation
11
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Inflationary factors have not had a significant effect on our performance
over the past several years. A significant increase in inflation would affect
our future performance.
Recently Issued Accounting Standards
In June 1998 and June 1999, the FASB issued SFAS No. 133, "Accounting for
Derivative Investments and Hedging Activities," and SFAS No. 137, which delayed
the effective date of SFAS No. 133. We will adopt the statement in February 2001
and do not expect the adoption of this statement to have a material impact on
our financial position or results of operations.
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition." SAB No. 101 provides
additional guidance on the recognition, presentation and disclosure of revenue
in financial statements. The Company has reviewed this bulletin and believes
that its current revenue recognition policy is consistent with the guidance of
SAB No. 101.
Year 2000 Compliance
As of the date of this Form 10-Q, we have not experienced any significant
disruptions or computer processing errors or failures related to any Year 2000
issues. A significant percentage of the software that runs most of the computers
in the United States relies on two-digit date codes to perform a number of
computation and decision making functions. Commencing on January 1, 2000 these
computer programs had the potential to fail from an inability to interpret date
codes properly, misreading ''00'' for the year 1900 instead of the year 2000. No
adverse effects were encountered and no future expense is expected as a result
of Year 2000.
FORWARD LOOKING STATEMENTS
In addition to historical information, this Form 10-Q contains statements
relating to our future results. These statements include certain projections and
business trends, which are ''forward-looking'' within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements are
made only as of the date of this Form 10-Q. We do not undertake to update or
revise the forward-looking statements, whether as a result of new information,
future events or otherwise.
Actual results may differ materially from projected results as a result of
certain risks and uncertainties. These risks and uncertainties include, without
limitation, those described under the "Risk Factors" section of the Company's
annual report on Form 10-K for the year ended January 30, 2000, including those
set forth below:
. successful development and timing of new products;
. ability to attract or retain specialized technical personnel;
. cyclical nature of the semiconductor industry due to global and market
conditions;
. availability of manufacturing capacity;
. fluctuation of quarterly operating results;
. loss of a significant customer or customer order;
. our ability to manage and integrate our expanding and more diverse
operations;
. our ability to integrate strategic acquisitions;
12
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. our ability to compete against larger, more established entities;
. fluctuations in manufacturing yields;
. our ability to protect our intellectual property rights;
. uncertainties of litigation; and
. other risks and uncertainties.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
-----------------------------------------------------------
Foreign Currency Risk
As a global enterprise, the Company faces exposure to adverse movements in
foreign currency exchange rates. The Company's foreign currency exposures may
change over time as the level of activity in foreign markets grows and could
have a adverse impact upon the Company's financial results.
Certain of the Company's assets, including certain bank accounts and
accounts receivable, exist in nondollar-denominated currencies, which are
sensitive to foreign currency exchange rate fluctuations. The nondollar-
denominated currencies are principally German Deutschmarks, British Pounds
Sterling and French Francs. Additionally, certain of the Company's current and
long-term liabilities are denominated principally in British Pounds Sterling
currencies, which are also sensitive to foreign currency exchange rate
fluctuations.
Because of the relatively small size of each individual currency exposure,
the Company does not employ hedging techniques designed to mitigate foreign
currency exposures. Likewise, the Company could experience unanticipated
currency gains or losses.
Interest Rate Risk
The Company has a line of credit with a financial institution at an
interest rate of 30-day commercial paper plus 2.2 percent. At any time, a sharp
rise in interest rates could have a material adverse impact upon the Company's
cost of working capital and interest expense. The Company does not currently
hedge this potential interest rate exposure. As of April 30, 2000 the Company
had $400.0 million in long-term debt outstanding at a fixed interest rate of 4
1/2 percent.
13
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PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS
-----------------
The Company has periodically become subject to legal proceedings in the
ordinary course of our business. Other than the action detailed below, the
Company is not currently involved in any proceedings, which are believed to
have a material and adverse affect.
On February 7, 2000, the Company was notified by the United States
Environmental Protection Agency with respect to the Casmalia Disposal Site
in Santa Barbara, California. The Company has been included in the
Superfund program to clean up this disposal site for its involvement in
utilizing this site for waste disposal. As of April 30, 2000, the Company
has provided approximately $245 thousand for potential settlement under
this program, however, the ultimate resolution and timing of the resolution
is unknown at this time. The Company believes the amount provided is
sufficient to cover any liability existing based on the currently available
information.
ITEM 2. CHANGES IN SECURITIES
---------------------
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
(a) The Fiscal Year 2000 Annual Meeting of Shareholders of the Company was duly
held on June 8, 2000.
(b) Inapplicable, as (i) proxies for the meeting were solicited pursuant to
Regulation 14 under the Act; (ii) there was no solicitation in opposition
to the management's nominees as listed in the Proxy Statement; and (iii)
all of such nominees were duly elected.
(c) Not applicable.
(d) Not applicable.
ITEM 5. OTHER INFORMATION
-----------------
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
11.1 -Computation of per share earnings - See Note 1 of Notes to Unaudited
Consolidated Condensed Financial Statements.
27 -Financial Data Schedule, Article 5
(b) Reports on Form 8-K
The Company filed a Report on Form 8-K on February 3, 2000 and February 15,
2000 relating to its private placement of $400.0 million of 4 1/2 percent
Convertible Subordinated Notes due 2007.
14
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SEMTECH CORPORATION
-------------------
Registrant
Date: June 15, 2000 /S/ John D. Poe
--------------------------------
John D. Poe
Chairman of the Board
and Chief Executive Officer
Date: June 15, 2000 /S/ David G. Franz, Jr.
--------------------------------
David G. Franz, Jr.
Vice President Finance, Chief
Financial Officer, and
Secretary
15
