<PAGE>
================================================================================
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 March 31, 1996
[ ] 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 0-21422
OPTi Inc.
(Exact name of registrant as specified in this charter)
CALIFORNIA 77-0220697
(State or other jurisdiction of (I.R.S. Employer
incorporated or organization) Identification No.)
888 TASMAN DRIVE MILPITAS, CALIFORNIA 95035
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (408) 980-8178
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 outstanding of the registrant's common stock as of March
31, 1996 was 12,423,528
================================================================================
<PAGE>
OPTi, Inc.
.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
INDEX
PART I. FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements
a) Condensed Consolidated Statements of Operations 3
for the three months ended March 31, 1996 and 1995
b) Condensed Consolidated Balance Sheets 4
as of March 31, 1996 and December 31, 1995
c) Condensed Consolidated Statements of Cash Flows 5
for the three months ended March 31, 1996 and 1995
d) Notes to Condensed Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults on Senior Securities 9
Item 4. Submission of Matters to a Vote of Shareholders 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
2
<PAGE>
OPTi Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
1996 1995
--------- ----------
(000's omitted, except per share data)
<S> <C> <C>
Net Sales $36,315 $42,708
Costs and expenses:
Cost of sales 34,087 29,507
Research and development 3,189 2,476
Selling, general, and
administrative 4,437 3,975
-------- -------
Total costs and expenses 41,713 35,958
-------- -------
Operating income (loss) (5,398) 6,750
Interest and other, net 663 575
-------- ------
Income (loss) before provision
for income taxes (4,735) 7,325
Provision (benefit) for income taxes (1,610) 2,622
-------- -------
Net income (loss) ($3,125) $4,703
======== =======
Net income (loss)
per share ($0.26) $0.37
======== =======
Shares used in per
shares calculation 12,168 12,876
======== =======
</TABLE>
See accompanying notes.
3
<PAGE>
OPTi Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
----------- ------------
(Unaudited) (See Note 1)
(000's omitted)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 47,148 $ 61,362
Accounts receivable, net 20,136 26,479
Inventories 33,241 25,259
Other current assets 11,530 10,988
-------- --------
Total current assets 112,055 124,088
Property and equipment, net 16,032 15,126
Other assets 10,055 3,402
-------- --------
Total assets $138,142 $142,616
======== ========
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 21,799 $ 21,453
Other current liabilities 6,207 7,084
-------- --------
Total current liabilities 28,006 28,537
Long term liabilities
Long-term obligations under capital lease 3,701 3,994
Other long-term liabilities 4 1,329
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value:
Authorized shares -- 5,000
No shares issued or outstanding -- --
Common stock, no par value:
Authorized shares -- 50,000
Issued and outstanding shares --
12,424 in 1996 11,877 in 1995 56,010 55,210
Retained earnings 50,421 53,546
-------- --------
Total shareholders' equity 106,431 108,756
-------- --------
Total liabilities and shareholders'
equity $138,142 $142,616
======== ========
</TABLE>
Note 1 - The consolidated balance sheet at December 31, 1995 has been derived
from the audited financial statements.
See accompanying notes.
4
<PAGE>
OPTi Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months Ended March 31,
1996 1995
----------------------------
(000's omitted)
<S> <C> <C>
Operating Activities:
Net income (loss) ($3,125) $ 4,703
Adjustments:
Depreciation and amortization 1,082 711
Changes in assets and liabilities:
Accounts receivable 6,343 (3,922)
Inventories (7,982) 4,726
Other current assets/other assets (7,195) (246)
Accounts payable 346 (3,353)
Other liabilities (2,206) 567
------- ------
Net cash provided by (used in)
operating activities (12,737) 3,186
Investing Activites:
Purchase of furniture and fixtures (1,988) (1,577)
Financing Activities:
Net proceeds from sale of common stock 800 2,174
Payment of long-term liabilities (289) (266)
--------- -------
Net cash provided by
financing activities 511 1,908
--------- -------
Net increase (decrease) in
cash and cash equivalents (14,214) 3,517
Cash and cash equivalents,
beginning of period 61,362 50,302
--------- -------
Cash and cash equivalents,
end of period $ 47,148 $53,819
======== =======
Supplemental Cash Flow Information
Income tax benefit from stock option
exercises --- $3,380
</TABLE>
See accompanying notes.
5
<PAGE>
OPTi Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
1. BASIS OF PRESENTATION
- - -------------------------
The information at March 31, 1996 and 1995 and for the periods then ended, is
unaudited, but includes all adjustments (consisting of normal recurring
accruals) which the Company's management believes to be necessary for the fair
presentation of the financial position, results of operations and cash flows for
the periods presented. Interim results are not necessarily indicative of
results for a full year. The accompanying financial statements should be read
in conjunction with the Company's audited financial statements for the year
ended December 31, 1995.
2. NET INCOME (LOSS) PER SHARE
- - -------------------------------
Net income per share is based upon the weighted average number of shares of
common stock outstanding and dilutive common equivalent shares from stock
options (using the modified treasury stock method). Net loss per share is
based upon the weighted average number of common stock outstanding during the
period. The computation of earnings per share is as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31
-------------------
1996 1995
--------- -------
(in thousands, except per share data)
<S> <C> <C>
Net income (loss) ($3,125) $ 4,703
======== =======
Computation of shares used in per share
calculation:
Common stock 12,168 10,264
Options - 2,612
-------- -------
Shares used in per share calculation 12,168 12,876
======== =======
Net income (loss) per share $ (0.26) $ 0.37
======== =======
</TABLE>
3. INVESTMENT IN DEBT AND EQUITY SECURITIES
- - -------------------------------------------
The Company considers highly liquid investments with maturities of three
months or less from the acquisition date of the instrument to be cash
equivalents. At March 31, 1996, the Company has no investments in debt or
equity securities.
6
<PAGE>
4. INVENTORIES
- - ---------------
Inventories consist of finished goods and work in process.
<TABLE>
<CAPTION>
(in thousands) March 31, 1996 December 31, 1995
-------------- -----------------
<S> <C> <C>
Finished Goods $15,002 $9,731
Work in process 18,239 15,528
------- -------
$33,241 $25,259
------- -------
</TABLE>
5. LITIGATION
- - -------------
In September and October 1995, the Company was served with multiple shareholder
class action lawsuits filed in the United States District Court for the Northern
California District of California. The lawsuits, which name the Company and
several of its officers and directors as defendants, allege violations of the
federal securities laws in connection with the announcement by OPTi Inc. of its
financial results for the quarter ended September 30, 1995. The Company
believes that the allegations of the complaints are without merit, and the
Company intends to vigorously defend itself. The Company believes that the
ultimate resolution of this matter will not have a material adverse effect on
its financial position, results of operations, or cash flow.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Information set forth herein constitutes and includes forward looking
information. The accuracy of such information is subject to a variety of risks
and uncertainties, including product mix, the Company's ability to obtain or
maintain design wins, market conditions in the personal computer and
semiconductor industries, product development schedules and other matters.
For the quarter ended March 31, 1996, the Company reported net sales of
$36,315,000, as compared to net sales of $42,708,000 for the quarter ended
March 31, 1995 and $41,917,000 for the quarter ended December 31, 1995. This
decrease in net sales from the quarter ended March 31, 1996 as compared to the
quarter ended December 31, 1995 is due primarily to a softening in demand for
the Company's Pentium-class desktop core logic products and a general slowdown
in the personal computer marketplace. The decrease in net sales from the
quarter ended March 31, 1996 as compared to the quarter ended March 31, 1995 is
primarily due to a shift in demand from the Company's 486-based desktop core
logic products, partially offset by net sales of the Company's Pentium-based
desktop and notebook core logic products.
Cost of sales increased to $34,087,000 which resulted in a gross margin of
6.1%, from $29,507,000, which resulted in a gross margin of 30.9% for the
quarter ended March 31, 1995. Gross margin percent was 21.1% for the quarter
ended December 31, 1995. This reduction in gross margin from both the quarter
ended December 31, 1995 and the quarter ended March 31, 1995 is primarily due to
product mix, revaluations of certain inventories, higher than forecasted
overhead in relation to revenue and reductions in the selling prices for the
Company's products.
Research and development costs increased to $3,189,000 for the quarter ended
March 31, 1996 as compared with $2,476,000 for the quarter ended March 31, 1995.
These increases are primarily attributable to the additional hiring of
development engineers and non-employee related expenses for new product
development.
Selling, general, and administrative costs were $4,437,000 in the quarter ended
March 31, 1996 as compared with $3,975,000 in the quarter ended March 31, 1995.
These increases are primarily attributable to additional headcount and non-
employee related marketing expenses.
Interest and other income, net was $663,000 and $575,000 for the quarters ended
March 31, 1996 and 1995, respectively. This increase is primarily attributable
to interest income from higher average interest rates during the comparable
periods of 1996 versus 1995.
The Company's effective tax rate for the quarter was 34% in 1996 and 36% in
1995.
The Company announced on March 19, 1996 that it anticipates a net loss for
1996. Sales are projected to be flat to down for 1996 as compared with 1995.
The anticipated revenue decline is primarily due to softening in demand for the
Company's current desktop Pentium-based chipsets.
In the first quarter the Company announced a number of management and board of
director changes. Stephen Dukker was named President of the Company in January
1996, assuming the post previously held by Raj Jaswa. Mr. Dukker has been a
member of the Company's board since January 1993 and had served since May of
1994 as President of VideoLogic, Inc. a supplier of video and graphics add-on
boards. Raj Jaswa, who had served as President of the Company from February of
1995 to January of 1996 was replaced by Mr. Dukker. Mr. Jaswa, a co-founder,
has also recently resigned as a member of the Company's board.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased by $14,214,000 to $47,148,000 at March 31,
1996 from $61,362,000 at December 31, 1995. Working capital decreased to
$84,049,000 from $95,551,000 at December 31, 1995. These decreases are
primarily attributable to increases in inventories, increases in other assets
and by a net loss partially offset by a reduction in accounts receivable. The
increase in inventories and decrease in accounts receivable are largely a
function of the Company's sales which fell below forecasted levels for the
period. The increase in other assets is primarily due the Company's investment
in a joint foundry agreement with United Microlelectronics Inc. (UMC) of Taiwan.
This payment to UMC represented the first twenty-five percent of the Company's
total commitment to the foundry venture. The second installment, representing
fifty percent of the commitment is projected for late 1996 or early 1997. The
final twenty-five percent is projected for the second half of 1997.
At March 31, 1996 the Company's principal sources of liquidity included cash and
cash equivalents of approximately $47.1 million and working capital of
approximately $84.0 million. The Company believes that the existing sources of
liquidity as well as its $10 million line of credit will satisfy the Company's
projected working capital and other cash requirements through at least the end
of 1996.
8
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
In September and October 1995, the Company was served with multiple
shareholder lawsuits filed in the United States District Court for the Northern
California District of California. The lawsuits, which name the Company and
several of its officers and directors as defendants, allege violations of the
federal securities laws in connection with the announcement by OPTi Inc. of its
financial results for the quarter ended September 30, 1995. The Company
believes that the ultimate resolution of this matter will not have a material
adverse effect on its financial position, results of operations, or cash flow.
ITEM 2. CHANGES IN SECURITIES.
Not applicable and has been omitted.
ITEM 3. DEFAULTS ON SENIOR SECURITIES.
Not applicable and has been omitted.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS.
Not applicable and has been omitted.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
--------
27 Financial Data Schedule
(b) Reports on Form 8-K:
-------------------
The Company did not file any reports on Form 8-K during the three months
ended March 31, 1996.
9
<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.
OPTi Inc.
Date: 5/14/96 By: \s\ David Zacarias
-------------------
David Zacarias
Signing on behalf of the Registrant and as
Chief Financial Officer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 47,148
<SECURITIES> 0
<RECEIVABLES> 21,186
<ALLOWANCES> (1,050)
<INVENTORY> 33,241
<CURRENT-ASSETS> 112,055
<PP&E> 23,051
<DEPRECIATION> (7,019)
<TOTAL-ASSETS> 138,142
<CURRENT-LIABILITIES> 28,006
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 50,421
<TOTAL-LIABILITY-AND-EQUITY> 138,142
<SALES> 36,315
<TOTAL-REVENUES> 36,315
<CGS> 34,087
<TOTAL-COSTS> 4,437
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 663
<INCOME-PRETAX> (4,735)
<INCOME-TAX> (1,610)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,125)
<EPS-PRIMARY> (.26)
<EPS-DILUTED> (.26)
</TABLE>
