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 September 29, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-21970
---------------------------
ACTEL CORPORATION
(Exact name of Registrant as specified in its charter)
California 77-0097724
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
955 East Arques Avenue
Sunnyvale, California 94086-4533
(Address of principal executive (Zip Code)
offices)
(408) 739-1010
(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 (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
Number of shares of Common Stock outstanding as of
November 11, 1996: 17,963,548
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
ACTEL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited, in thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------------------- ----------------------------
Sept. 29, June 30, Oct. 1, Sept. 29, Oct. 1,
1996 1996 1995 1996 1995
------------- ------------ ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Net revenues.............................. $ 38,014 $ 36,694 $ 29,834 $ 109,751 $ 75,963
Costs and expenses:
Cost of revenues....................... 16,164 16,105 14,416 48,040 37,283
Research and development............... 6,417 5,650 5,430 18,078 14,758
Selling, general, and administrative... 9,854 9,582 7,244 27,743 19,515
In-process research and development.... -- -- -- -- 16,600
------------- ------------ ------------ -------------- ------------
Total costs and expenses......... 32,435 31,337 27,090 93,861 88,156
------------- ------------ ------------ -------------- ------------
Income (loss) from operations............. 5,579 5,357 2,744 15,890 (12,193)
Interest income and other, net............ 338 413 191 1,040 543
------------- ------------ ------------ -------------- ------------
Income (loss) before tax provision........ 5,917 5,770 2,935 16,930 (11,650)
Tax provision (benefit)................... 2,012 2,164 -- 6,142 (6,640)
------------- ------------ ------------ -------------- ------------
Net income (loss)......................... $ 3,905 $ 3,606 $ 2,935 $ 10,788 $ (5,010)
============= ============ ============ ============== ============
Net income (loss) per share............... $ 0.18 $ 0.17 $ 0.14 $ 0.51 $ (0.29)
============= ============ ============ ============== ============
Shares used in computing net income (loss)
per share.............................. 21,475 21,467 21,082 21,351 17,329
============= ============ ============ ============== ============
</TABLE>
SEE ACCOMPANYING NOTES
2
<PAGE>
ACTEL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited, in thousands)
<TABLE>
<CAPTION>
Sept. 29, Dec. 31,
1996 1995
------------ ------------
ASSETS
<S> <C> <C>
Current assets:
Cash, cash equivalents, and short-term investments............................... $ 24,913 $ 19,987
Accounts receivable, net......................................................... 23,416 17,805
Inventories...................................................................... 26,909 27,726
Other current assets............................................................. 15,321 12,401
------------ ------------
Total current assets....................................................... 90,559 77,919
Property and equipment, net......................................................... 15,906 15,674
Other assets........................................................................ 16,072 13,526
------------ ------------
$ 122,537 $ 107,119
============ ============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable, accrued liabilities, and deferred income....................... $ 40,087 $ 37,986
Current portion of capital lease obligations..................................... -- 66
------------ ------------
Total current liabilities.................................................. 40,087 38,052
Redeemable convertible preferred stock.............................................. 18,147 18,147
Shareholders' equity................................................................ 64,303 50,920
------------ ------------
$ 122,537 $ 107,119
============ ============
</TABLE>
SEE ACCOMPANYING NOTES
3
<PAGE>
ACTEL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited, in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------
Sept. 29, Oct. 1,
1996 1995
-------------- -------------
<S> <C> <C>
Operating activities:
Net income (loss)............................................................... $ 10,788 $ (5,010)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation and amortization................................................. 4,518 3,076
In-process research and development........................................... -- 16,600
Changes in operating assets and liabilities:
Accounts receivable......................................................... (5,611) (2,641)
Inventories................................................................. 817 (5,342)
Other current assets........................................................ (2,920) (2,682)
Accounts payable and accrued liabilities.................................... (2,432) 3,629
Deferred income............................................................. 4,533 6,494
-------------- -------------
Net cash provided by operating activities....................................... 9,693 14,124
-------------- -------------
Investing activities:
Purchase of TI FPGA business.................................................... -- (10,000)
Purchases of property and equipment............................................. (4,093) (7,722)
Sales and maturities of short-term investments.................................. (2,729) 12,216
Investment in foundry........................................................... (3,611) (3,033)
Other assets.................................................................... 407 (6,205)
-------------- -------------
Net cash used in investing activities........................................... (10,026) (14,744)
-------------- -------------
Financing activities:
Sale of common stock, net of repurchases........................................ 2,600 1,496
Proceeds from line of credit.................................................... -- 4,500
Payments on line of credit...................................................... -- (4,500)
Principal payments under capital lease obligations.............................. (66) (426)
-------------- -------------
Net cash provided by financing activities....................................... 2,534 1,070
-------------- -------------
Net increase in cash and cash equivalents.......................................... 2,201 450
Cash and cash equivalents, beginning of period..................................... 17,691 7,314
-------------- -------------
Cash and cash equivalents, end of period........................................... $ 19,892 $ 7,764
============== =============
Supplemental disclosures of cash flows information and non-cash investing and
financing activities:
Cash paid for interest.......................................................... $ 3 $ 58
Cash paid for taxes............................................................. 10,687 3,947
Preferred stock issued as partial consideration for the TI FPGA business, net of
estimated future issuance costs................................................. -- 18,147
</TABLE>
SEE ACCOMPANYING NOTES
4
<PAGE>
ACTEL CORPORATION
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation and Summary of Significant Accounting Policies
The accompanying unaudited consolidated financial statements of Actel
Corporation (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these
financial statements do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included.
The Company uses a thirteen week quarter for quarterly financial
reporting. The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation. Certain
reclassifications have been made to prior year amounts in order to conform to
the current presentation.
The financial statements should be read in conjunction with the audited
financial statements included in the Company's Annual Report to Shareholders for
the year ended December 31, 1995. The results of operations for the nine months
ended September 29, 1996, are not necessarily indicative of results that may be
expected for the entire year ending December 29, 1996.
2. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
Sept. 29, Dec. 31,
1996 1995
------------ ------------
<S> <C> <C>
Inventories:
Purchased parts and raw materials................................. $ 1,870 $ 1,357
Work-in-process................................................... 17,741 18,326
Finished goods.................................................... 7,298 8,043
------------ ------------
$ 26,909 $ 27,726
============ ============
</TABLE>
Inventories are stated at the lower of cost (first-in, first-out) or
market (net realizable value). Given the volatility of the market for the
Company's products, the Company makes inventory provisions for potentially
excess and obsolete inventory based on backlog and forecast demand. However,
such backlog demand is subject to revisions, cancellations, and rescheduling.
Actual demand will inevitably differ from such backlog and forecast demand, and
such differences may be material to the financial statements. Excess inventory
increases handling costs and the risk of obsolescence, is a non-productive use
of capital resources, and delays realization of the price and performance
benefits associated with more advanced manufacturing processes.
5
<PAGE>
ACTEL CORPORATION
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
3. Provision for Taxes
The Company's effective tax rate for the nine months ended September
29, 1996, was 36.3%. This rate was based on the estimated annual tax rate of
35.7% in compliance with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." The estimated annual tax rate differs from the
federal statutory rate due primarily to state income taxes (net of federal
benefit) and recognition of certain deferred tax assets subject to valuation
allowances as of December 31, 1995.
4. Earnings Per Share
Earnings per common and common equivalent share as presented on the
face of the statement of operations represent primary earnings per share. Dual
presentation of primary and fully diluted earnings per share has not been made
because the differences are insignificant.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. Results of Operations Net Revenues
The Company's net revenues for the third quarter of fiscal 1996 were
$38.0 million, which represents an increase of 4% compared with the Company's
net revenues for the second quarter of 1996 and an increase of 27% compared with
the Company's net revenues for the third quarter of 1995. Net revenues for the
first nine months of fiscal 1996 were $109.8 million, which represents an
increase of 44% compared with the Company's net revenues for the first nine
months of 1995.
The sequential growth in quarterly net revenues resulted primarily from
a 12% increase in the overall average selling price of field programmable gate
arrays ("FPGAs") that was partially offset by a decline of 10% in unit sales of
FPGAs. The overall average selling price of FPGAs increased sequentially
principally because of initial shipments of the Company's radiation-hardened
RH1280 product, which has higher than average selling prices. Unit sales of
FPGAs declined because of softness in the Company's commercial business. Unit
sales of the Company's older ACT 1 and ACT 2 product families declined
sequentially, while unit sales of all other product families increased
sequentially.
The year-over-year growth in quarterly net revenues resulted primarily
from a 20% increase in FPGA unit sales coupled with an 8% increase in the
overall average selling price of FPGAs. The year-over-year growth in nine-month
net revenues resulted primarily from a 20% increase in FPGA unit sales coupled
with an 8% increase in the overall average selling price of FPGAs. Unit sales
increased principally because of new product sales and the Company's acquisition
during the second quarter of 1995 of the antifuse FPGA business of Texas
Instruments Incorporated ("TI"). The acquisition of TI's FPGA business had a
negative influence on net revenues for the second quarter of 1995 and a positive
effect on net revenues for subsequent quarters. Accordingly, the year-over-year
growth rates in net revenues are not indicative of future results.
As is typical in the semiconductor industry, the average selling prices
of the Company's products generally decline over the lives of such products. To
increase revenues, the Company seeks to increase unit sales of existing
products, principally by reducing prices, and to introduce and sell new
products. No assurance can be given that these efforts will be successful.
Gross Margin
Gross margin for the third quarter of 1996 was 58% of net revenues,
compared with 56% of net revenues for the second quarter of 1996 and 52% of net
revenues for the third quarter of 1995. Gross margin for the first nine months
of 1996 was 56% of net revenues, compared with 51% of net revenues for the first
nine months of 1995.
The sequential improvement in gross margin resulted primarily from
improved manufacturing yields and the generation of an increased percentage of
net revenues from sales of the Company's new product families, which command
higher margins. The Company's gross margin for the third quarter of 1996 also
benefited from appreciation in the value of the United States dollar versus the
Japanese yen, in which some of the Company's wafer purchases are denominated.
7
<PAGE>
The year-over-year improvement in gross margin resulted primarily from
the Company's acquisition of TI's FPGA business, which has positively influenced
the Company's net revenues and overall average selling price. The Company's
gross margin for 1996 also benefited from the generation of an increased
percentage of net revenues from sales of the Company's newer ACT 3, XL, DX, and
RH product families, which command higher margins than the Company's older ACT 1
and ACT 2 product families.
As is typical in the semiconductor industry, margins on the Company's
products generally decline as the average selling prices of such products
decline. The Company seeks to offset margin erosion by selling a higher
percentage of new products, which tend to have higher margins than more mature
products, and by reducing costs. The Company seeks to reduce costs by improving
wafer yields, negotiating price reductions with suppliers, increasing the level
and efficiency of its testing and packaging operations, achieving economies of
scale by means of higher production levels, and increasing the number of die
produced per wafer by shrinking the die size of its products. No assurance can
be given that these efforts will be successful. The capability of the Company to
shrink the die size of its FPGAs is dependent on the availability of more
advanced manufacturing processes. Due to the custom steps involved in
manufacturing antifuse FPGAs, the Company typically obtains access to new
manufacturing processes later than its competitors using standard manufacturing
processes.
Research and Development
Research and development expenditures for the third quarter of 1996
were $6.4 million, or 17% of net revenues, compared with $5.7 million, or 15% of
net revenues, for the second quarter of 1996 and $5.4 million, or 18% of net
revenues, for the third quarter of 1995. The sequential increase in research and
development spending resulted primarily from the timing of certain expenditures.
Research and development expenditures for the first nine months of 1996
were $18.1 million, or 16% of net revenues, compared with $14.8 million, or 19%
of net revenues, for the first nine months of 1995. While research and
development expenditures for the first nine months of 1996 increased by 22%
compared with the first nine months of 1995, research and development
expenditures declined as a percentage of net revenues due to the expanded scope
of the Company's operations. The Company currently intends to boost the level of
its research and development expenditures over the next several quarters to
accelerate the introduction of new products. Research and development
expenditures may increase as a percentage of net revenues for any or all of such
quarters.
The Company's research and development consists of circuit design,
software development, and process technology activities. The Company believes
that continued substantial investment in research and development is critical to
maintaining a strong technological position in the industry and, therefore,
expects to continue increasing its research and development expenditures. Since
the Company's antifuse FPGAs are manufactured using a customized process, the
Company's research and development expenditures will probably always be higher
as a percentage of net revenues than that of its major competitors.
Selling, General, and Administrative
Selling, general, and administrative expenses for the third quarter of
1996 were $9.9 million, or 26% of net revenues, compared with $9.6 million, or
26% of net revenues, for the second quarter of 1996 and $7.2 million, or 24% of
net revenues, for the third quarter of 1995. The sequential increase in selling,
8
<PAGE>
general, and administrative spending resulted primarily from an increased level
of sales and marketing activities in support of new products.
Selling, general, and administrative expenditures for the first nine
months of 1996 were $27.7 million, or 25% of net revenues, compared with $19.5
million, or 26% of net revenues, for the first nine months of 1995. This
year-over-year decline in the rate of selling, general, and administrative
spending resulted primarily from economies of scale. The Company currently
intends to continue its heightened level of sales and marketing activity in
support of new products over the next several quarters. Selling, general, and
administrative expenditures may increase as a percentage of net revenues for any
or all of such quarters.
Tax Provision
The Company's effective tax rates for the three and nine months ended
September 29, 1996, were 34.0% and 36.3%, respectively. These rates were based
on the estimated annual tax rate of 35.7% in compliance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." The
estimated annual tax rate differs from the federal statutory rate due primarily
to state income taxes (net of federal benefit) and the recognition of certain
deferred tax assets subject to valuation allowances as of December 31, 1995.
For the nine months ended October 1, 1995, the Company recorded a
credit for income taxes related to the realization of deferred tax assets
previously subject to valuation allowances.
Liquidity and Capital Resources
At the end of the first nine months of 1996, the Company's cash, cash
equivalents, and short-term investments were $24.9 million, compared with $20.0
million at the beginning of 1996. The amount of cash, cash equivalents, and
short-term investments increased principally because of cash provided by
operations, including net income.
The Company believes that existing cash, cash equivalents, and short
term investments, together with cash from operations, are sufficient to meet its
current cash requirements. A portion of available cash may be used for
investment in or acquisition of complementary businesses, products, or
technologies.
The Company believes that the availability of financial resources is a
substantial competitive factor. To take advantage of opportunities as they
arise, or to withstand adverse business conditions should they occur, it may
become prudent or necessary for the Company to raise additional capital. The
Company intends to monitor the availability and cost of potential capital
resources, including equity, debt, and off-balance sheet financing arrangements,
with a view toward raising additional capital on terms that are acceptable to
the Company. No assurance can be given that additional capital will become
available on acceptable terms.
Additional Quarterly Information
The following table presents certain unaudited quarterly results for
each of the eight quarters in the period ended September 29, 1996:
9
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------------------------------------------
Sept. 29, June 30, Mar. 31, Dec. 31, Oct. 1, July 2, Apr. 2, Jan. 1,
1996 1996 1996 1995 1995 1995 1995 1995
--------- --------- --------- --------- --------- --------- --------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net revenues ............................. $ 38,014 $ 36,694 $ 35,043 $ 32,553 $ 29,834 $ 26,611 $ 19,518 $ 20,732
Cost of revenues ......................... 16,164 16,105 15,769 15,234 14,416 13,243 9,624 9,308
--------- --------- --------- --------- --------- --------- --------- --------
Gross profit ............................. 21,850 20,589 19,274 17,319 15,418 13,368 9,894 11,424
Research and development ................. 6,417 5,650 6,011 5,802 5,430 4,885 4,443 3,752
Selling, general, and administrative ..... 9,854 9,582 8,308 7,849 7,244 6,904 5,367 5,180
In-process research and development (1) .. -- -- -- -- -- -- 16,600 --
--------- --------- --------- --------- --------- --------- --------- --------
Income (loss) from operations ............ 5,579 5,357 4,955 3,688 2,744 1,579 (16,516) 2,492
Net income (loss) ........................ $ 3,905 $ 3,606 $ 3,277 $ 3,878 $ 2,935 $ 1,683 $ (9,628) $ 2,306
Net income (loss) per share .............. $ 0.18 $ 0.17 $ 0.16 $ 0.19 $ 0.14 $ 0.08 $ (0.56) $ 0.13
========= ========= ========= ========= ========= ========= ========= ========
Shares used in computing net income (loss)
per share ................................ 21,475 21,467 21,068 20,808 21,082 20,581 17,200 17,562
--------- --------- --------- --------- --------- --------- --------- --------
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------------------------------------------
Sept. 29, June 30, Mar. 31, Dec. 31, Oct. 1, July 2, Apr. 2, Jan. 1,
1996 1996 1996 1995 1995 1995 1995 1995
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
As a Percentage of Net Revenues:
Net revenues ............................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues ......................... 42.5 43.9 45.0 46.8 48.3 49.8 49.3 44.9
--------- --------- --------- --------- --------- --------- --------- ---------
Gross margin ............................. 57.5 56.1 55.0 53.2 51.7 50.2 50.7 55.1
Research and development ................. 16.9 15.4 17.2 17.8 18.2 18.4 22.8 18.1
Selling, general, and administrative ..... 25.9 26.1 23.7 24.1 24.3 25.9 27.5 25.0
In-process research and development (1) .. -- -- -- -- -- -- 85.0 --
--------- --------- --------- --------- --------- --------- --------- ---------
Income (loss) from operations ............ 14.7 14.6 14.1 11.3 9.2 5.9 (84.6) 12.0
Net income (loss) ........................ 10.3 9.8 9.4 11.9 9.8 6.3 (49.3) 11.1
- ---------------------------------------------
<FN>
(1) Represents a charge incurred in connection with the Company's acquisition of
TI's FPGA business.
</FN>
</TABLE>
10
<PAGE>
In the opinion of management, all necessary adjustments (consisting only of
normal recurring accruals) have been included in the amounts stated above to
present fairly the unaudited quarterly results when read in conjunction with the
audited consolidated financial statements of the Company and notes thereto
included in the Company's Annual Report to Shareholders for the year ended
December 31, 1995. These quarterly operating results are not necessarily
indicative of the results for any future period.
Factors Affecting Future Operating Results
Shareholders and prospective shareholders of the Company should
carefully consider, in addition to the other information in this Quarterly
Report on Form 10-Q and in other filings of the Company with the Securities and
Exchange Commission, the following risk factors:
Fluctuations In Operating Results
The Company's quarterly and annual operating results are subject to
general economic conditions and a variety of risks characteristic of the
semiconductor industry, including booking and shipment uncertainties, supply
problems, and price erosion.
Booking and Shipment Uncertainties
The Company typically generates a large percentage of its quarterly
revenues from orders received during the quarter and shipped in the final weeks
of the quarter, making it difficult to accurately estimate quarterly revenues.
The Company's backlog (which may be cancelled or deferred by customers on short
notice without significant penalty) at the beginning of a quarter typically
accounts for only a fraction of the Company's revenues during the quarter. This
means that the Company typically generates the rest of its quarterly revenues
from orders received during the quarter and "turned" for shipment within the
quarter, and that any shortfall in "turns" orders has an immediate and adverse
impact on quarterly revenues. There are many factors that could cause a
shortfall in "turns" orders, including but not limited to a decline in general
economic conditions or the businesses of end users, excess inventories,
conversion to conventional (or non-programmable) grate arrays, or the loss of
business to other competitors for price or other reasons.
Historically, the Company has shipped a disproportionately large
percentage of its quarterly revenues in the final weeks of the quarter. Any
failure by the Company to effect scheduled shipments by the end of the quarter,
therefore, could have a materially adverse effect on revenues for such quarter.
Since the Company generally does not recognize revenue on the sale of a product
to a distributor until the distributor resells the product, the Company's
quarterly revenues are also dependent on, and subject to fluctuations in,
shipments by the Company's distributors. When there is a shortfall in revenues,
operating results are likely to be adversely affected because most of the
Company's expenses do not vary with revenues.
Supply Problems
In a typical semiconductor manufacturing process, silicon wafers
produced by a foundry are sorted and cut into individual die, which are then
assembled into individual packages and tested for performance. The manufacture,
assembly, and testing of semiconductor products is highly complex and subject to
a wide variety of risks, including defects in masks, impurities in the materials
used, contaminants in the environment, and performance failures by personnel and
11
<PAGE>
equipment. Semiconductor products intended for military and aerospace
applications are particularly susceptible to these conditions, any of which
could have a materially adverse effect on the Company's business, financial
condition, or results of operations.
As is common in the semiconductor industry, the Company's independent
wafer suppliers from time to time experience lower than anticipated yields of
usable die. For example, the Company experienced a yield problem at one of its
foundries in the fourth quarter of 1993 that was severe enough to have a
materially adverse effect on the Company's results of operations. To the extent
yields of usable die decrease, the average cost to the Company of each usable
die increases, which reduces gross margin. Wafer yields can decline without
warning and may take substantial time to analyze and correct, particularly for a
company such as the Company that does not operate its own manufacturing
facility, but instead utilizes independent facilities, most of which are
offshore. Yield problems may also increase the time to market for the Company's
products and create inventory shortages and dissatisfied customers. In addition,
the Company typically experiences difficulties or delays in achieving
satisfactory, sustainable yields on new processes or at new foundries. Although
the Company has been able eventually to overcome these difficulties in the past,
no assurance can be given that it will be able to do so with respect to its
current or future new processes and/or new foundries. No assurance can be given
that the Company will not experience wafer supply problems in the future, or
that any such problem would not have a materially adverse effect on the
Company's business, financial condition, or results of operations.
Price Erosion
The semiconductor industry is characterized by intense competition.
Historically, average selling prices in the semiconductor industry generally,
and for the Company's products in particular, have declined significantly over
the life of each product. While the Company expects to reduce the average
selling prices of its products over time as the Company achieves manufacturing
cost reductions, the Company is sometimes required by competitive pressures to
reduce the prices of its products more quickly than such cost reductions can be
achieved. In addition, the Company sometimes approves price reductions on
specific sales to meet competition. If not offset by reductions in manufacturing
costs or by a shift in the mix of products sold toward higher-margin products,
declines in the average selling prices of the Company's products will reduce
gross margins and could have a materially adverse effect on the Company's
business, financial condition, or results of operations.
Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements.
Actual results could differ materially from those estimates.
Dependence on Independent Wafer Manufacturers
The Company does not manufacture any of the wafers used in the
production of its FPGAs. Currently, such wafers are manufactured by Chartered
Semiconductor Manufacturing Pte Ltd ("Chartered Semiconductor") in Singapore,
Lockheed-Martin Federal Systems Company ("Lockheed-Martin FSC") in the United
States, Matsushita Electronics Company and Matsushita Electrical Industry
Company Ltd. (collectively, "Matsushita") in Japan, TI in the United States, and
Winbond Electronics Corp. ("Winbond") in Taiwan. The Company's reliance on
independent wafer manufacturers to fabricate its wafers involves significant
risks, including the risk of events limiting production and reducing yields,
such as technical difficulties or damage to production facilities, lack of
12
<PAGE>
control over capacity allocation and delivery schedules, and potential lack of
adequate capacity. These risks are particularly pronounced with respect to
wafers intended for use in military and aerospace applications.
The Company has from time to time experienced delays in obtaining
wafers from its foundries, and there can be no assurance that the Company will
not experience similar or more severe delays in the future. In addition,
although the Company has supply agreements with most of its wafer manufacturers,
a shortage of raw materials or production capacity could lead any of the
Company's wafer suppliers to allocate available capacity to customers other than
the Company, or to internal uses, which could interrupt the Company's capability
to meet its product delivery obligations. These risks are particularly
pronounced with respect to wafers intended for use in military and aerospace
applications. Any inability or unwillingness of the Company's wafer suppliers to
provide adequate quantities of finished wafers to satisfy the Company's needs in
a timely manner would delay production and product shipments and could have a
materially adverse effect on the Company's business, financial condition, or
results of operations.
If the Company's current independent wafer manufacturers were unable or
unwilling to manufacture the Company's products as required, the Company would
have to identify and qualify additional foundries. The qualification process
typically takes one year or longer. No assurance can be given that any
additional wafer foundries would become available or be able to satisfy the
Company's requirements on a timely basis or that qualification would be
successful. In addition, the semiconductor industry has from time to time
experienced shortages of manufacturing capacity. To secure an adequate supply of
wafers, the Company has considered, and continues to consider, various possible
transactions, including the use of substantial nonrefundable deposits to secure
commitments from foundries for specified levels of manufacturing capacity over
extended periods, equity investments (such as the Company's investment in
Chartered Semiconductor) in exchange for guaranteed production, and the
formation of joint ventures to own foundries. No assurance can be given as to
the effect of any such transaction on the Company's business, financial
condition, or results of operations.
Dependence on Customized Manufacturing Process
The Company's FPGAs are manufactured using customized steps that are
added to otherwise standard manufacturing processes of its independent wafer
suppliers. There is considerably less operating history for the Company's
customized process steps than for the foundries' standard manufacturing
processes. The dependence of the Company on customized processing steps means
that, in contrast with competitors using standard manufacturing processes, the
Company has more difficulty establishing relationships with independent wafer
manufacturers, takes longer to qualify a new wafer manufacturer, takes longer to
achieve satisfactory, sustainable wafer yields on new processes, may experience
a higher incidence of production yield problems, must pay more for wafers, and
generally will not obtain early access to the most advanced processes. These
risks are particularly pronounced with respect to wafers intended for use in
military and aerospace applications. Any of the above factors could be a
material disadvantage against the competing non-antifuse products of the
Company's competitors, which use standard manufacturing processes. As a result
of these factors, the Company's products typically have been fabricated using
processes one or two generations behind the processes used on competing
products. The Company is attempting to accelerate the rate at which its products
are reduced to finer geometries and is working with its wafer suppliers to
obtain earlier access to advanced processes, but no assurance can be given that
such efforts with be successful.
13
<PAGE>
New Product Development and Technological Change
The market for the Company's products is characterized by rapidly
changing technology, frequent new product introductions, and declining average
selling prices over product life cycles, each of which makes the timely
introduction of new products a critical objective of the Company. The Company's
future success is highly dependent upon the timely completion and introduction
of new products at competitive price and performance levels. In evaluating new
product decisions, the Company must anticipate well in advance both the future
demand and the technology that will be available to supply such demand. Failure
to anticipate customer demand, delays in developing new products with
anticipated technological advances, and failure to coordinate the design and
development of silicon and associated software products each could have a
materially adverse effect on the Company's business, financial condition, or
results of operation.
In addition, there are greater technological and operational risks
associated with new products. The inability of the Company's wafer suppliers to
produce advanced products, delays in commencing or maintaining volume shipments
of new products, the discovery of product, process, software, or programming
failures, and any related product returns could each have a materially adverse
effect on the Company's business, financial condition, or results of operation.
In 1995, the Company introduced the 1200XL family of FPGAs and the
first members of the 3200DX family. In 1996, the Company introduced additional
members of the 3200DX family and the RH1280, which is the first member of a
radiation-hardened family of FPGAs. No assurance can be given that the Company's
design and introduction schedules for subsequent members of the 3200DX or RH
families of products and supporting software will be met or that such families
will be well received by customers. No assurance can be given that any other new
products will gain market acceptance or that the Company will respond
effectively to new technological changes or new product announcements by others.
Any failure of the Company to successfully define, develop, market, manufacture,
assembly, or test competitive new products could have a materially adverse
effect on its business, financial condition, or results of operations.
The Company must also continue to make significant investments in
research and development to develop new products and achieve market acceptance
for such products. The Company currently conducts most of its research and
development activities at facilities operated by Matsushita and Lockheed-Martin
FSC and expects to conduct similar activities at facilities operated by Extel
Semiconductor, Inc. in the United States. Although the Company has not to date
experienced any significant difficulty in obtaining access to its current
facilities, no assurance can be given that access will not be limited or that
such facilities will be adequate to meet the Company's needs in the future.
Dependence on Independent Software Developers
The Company is dependent upon independent software developers for the
development, maintenance, and support of certain elements of its Designer Series
Development Systems software. The Company's reliance on independent software
developers involves certain risks, including lack of control over development
and delivery schedules and the availability of customer support. In addition,
independent software developers tend to be entrepreneurial businesses with
limited financial and technical resources. No assurance can be given that the
Company's independent developers will be able to complete software currently
under development, or provide updates, or customer support in a timely manner,
which could delay future releases and disrupt the Company's ability to provide
14
<PAGE>
customer support services. Any significant delays in the availability of the
Company's software would be detrimental to the capability of the Company's new
families of products to win designs, which could have a materially adverse
effect on the Company's business, financial condition, or results of operations.
Dependence Upon Design Wins
In order for the Company to sell an FPGA to a customer, the customer
must incorporate the FPGA into the customer's product in the design phase. The
Company therefore devotes substantial resources, which it may not recover
through product sales, in support of potential customer design efforts
(including, among other things, providing development system software) and to
persuade potential customers to incorporate the Company's FPGAs into new or
updated products. These efforts usually precede by many months (and sometimes a
year or more) the generation of volume FPGA sales, if any, by the Company. The
value of any design win, moreover, will depend in large part upon the ultimate
success of the customer's product. No assurance can be given that the Company
will win sufficient designs or that any design win will result in significant
revenues.
Importance of Military and Aerospace Customers
Although the Company is unable to determine with certainty the ultimate
uses of its products, the Company estimates that sales of its products to
customers in the military and aerospace industries, which often carry higher
profit margins than sales of products to commercials customers, accounted for
approximately 10% to 15% of net revenues from 1992 to 1995. Following the
introduction of the RH1280 in the third quarter of 1996, the military and
aerospace industries accounted for a greater percentage of the Company's net
revenues, but no assurance can be given that future sales to customers in the
military and aerospace industries will continue at current volume or margin
levels. Orders from the military and aerospace customers tend to be large and
irregular, which creates operational challenges and contributes to fluctuations
in the Company's net revenues and gross margins. These sales are also subject to
more extensive governmental regulations, including greater import and export
restrictions. In addition, products for military and aerospace applications
require processing and testing that is more lengthy and stringent than for
commercial applications, increasing the risk of failure. It is often not
possible to determine before the end of processing and testing whether products
intended for military or aerospace applications will fail and, if they do fail,
a significant period of time is often required to process and test replacements,
each of which makes it difficult to accurately estimate quarterly revenues and
could have a materially adverse effect on the Company's business, financial
condition, or results of operations.
Semiconductor Industry Risks
The semiconductor industry has historically been cyclical and
periodically subject to significant economic downturns, which are characterized
by diminished product demand, accelerated price erosion, and overcapacity. The
Company may in the future experience substantial period-to-period fluctuations
in business and results of operations due to general semiconductor industry
conditions, overall economic conditions, or other factors, including legislation
and regulations governing the import or export of semiconductor products.
Risks of International Manufacturing Operations
The Company buys a majority of its wafers from foreign foundries and
has most of its commercial products assembled by subcontractors located outside
the United States. These activities are subject to the uncertainties associated
with international business operations, including trade barriers and other
15
<PAGE>
restrictions, changes in trade policies, foreign governmental regulations,
currency exchange fluctuations, reduced protection for intellectual property,
war and other military activities, terrorism, changes in political or economic
conditions, and other disruptions or delays in production or shipments, any of
which could have a materially adverse effect on the Company's business,
financial condition, or results of operations.
Competition
The semiconductor industry is intensely competitive and is
characterized by rapid rates of technological change, product obsolescence, and
price erosion. The Company's existing competitors include suppliers of
conventional gate arrays, complex programmable logic devices ("CPLDs"), and
FPGAs. The Company's two principle competitors are Xilinx, a supplier of FPGAs
based on static random access memory ("SRAM") technology, and Altera, a supplier
principally of CPLDs. In connection with the settlement of patent litigation in
1993, the Company granted Xilinx a license under certain of the Company's
patents that permits Xilinx to manufacture and market antifuse-based products.
Xilinx recently announced that it had discontinued its antifuse-based FPGA
product line. The Company also faces competition from companies that specialize
in converting FPGAs, including the Company's products, into conventional gate
arrays. In addition, the Company expects significant competition in the future
from major domestic and international semiconductor suppliers, and the Company's
patents may not bar competitors to which it has not granted a license from
manufacturing other antifuse-based products. The Company may also face
competition from suppliers of logic products based on new or emerging
technologies. Given the intensity of the competition and the research and
development being done, no assurance can be given that the Company's antifuse
and architecture technology will remain competitive.
The Company believes that important competitive factors in its market
are price, performance, number of usable gates, ease of use and functionality of
development system software, installed base of development systems, adaptability
of products to specific applications, length of development cycle (including
reductions to finer micron design rules), number of I/Os, reliability, adequate
wafer fabrication capacity and sources of raw materials, protection of products
by effective utilization of intellectual property laws, and technical service
and support. Failure of the Company to compete successfully in any of these or
other areas could have a materially adverse effect on its business, financial
condition, or results of operations. In addition, all existing FPGAs and CPLDs
not based on antifuse technology are reprogrammable, a feature that makes them
more attractive to many designers. The Company also believes that, if there were
a downturn in the market for CPLDs and FPGAs, companies that have broader
product lines and longer standing customer relationships may be in a stronger
competitive position than the Company. Many of the Company's current and
prospective competitors offer broader product lines and have significantly
greater financial, technical, manufacturing, and marketing resources than the
Company.
Protection of Intellectual Property
The Company has historically devoted significant resources to research
and development and believes that the intellectual property derived from such
research and development is a valuable asset that has been and will continue to
be important to the success of the Company's business. The Company relies
primarily on a combination of nondisclosure agreements, other contractual
provisions, and patent and copyright protection to protect its proprietary
rights. No assurance can be given that the steps taken by the Company will be
adequate to protect its proprietary rights. In addition, the laws of certain
territories in which the Company's products are or may be developed,
16
<PAGE>
manufactured, or sold, including Asia and Europe, may not protect the Company's
products and intellectual property rights to the same extent as the laws of the
United States. Failure of the Company to enforce its patents or copyrights or to
protect its trade secrets could have a materially adverse effect on the
Company's business, financial condition, or results of operations.
Reliance on Distributors
In 1995, more than half of the Company's sales in the United States and
virtually all of the Company's sales outside the United States were made through
distributors. Three of the Company's distributors, Wyle, Arrow, and Pioneer,
accounted for approximately 14%, 12%, and 11%, respectively, of the Company's
net revenues in 1995. In addition, a fourth distributor, Innotech, accounted for
approximately 8% of the Company's net revenues. No assurance can be given that
future sales by these or other distributors will continue at current levels or
that the Company will be able to retain its current distributors on terms that
are acceptable to the Company.
The Company's distributors generally offer products of several
different companies, including products that are competitive with the Company's
products. Accordingly, there is a risk that these distributors may give higher
priority to products of other suppliers, thus reducing their efforts to sell the
Company's products. In addition, the Company's agreements with its distributors
are generally terminable at the distributor's option. A reduction in sales
efforts by one or more of the Company's current distributors or a termination of
any distributor's relationship with the Company could have a materially adverse
effect on the Company's business, financial condition, or results of operations.
The Company generally defers recognition of revenue on shipments to
distributors until the product is resold by the distributor to the end user. The
Company's distributors have on occasion built inventories in anticipation of
substantial growth in sales and, when such growth did not occur as rapidly as
anticipated, substantially decreased the amount of product ordered from the
Company in subsequent quarters. Such a slowdown in orders would generally reduce
the Company's profit margins on future sales of higher cost products because the
Company would be unable to take advantage of any manufacturing cost reductions
while the distributor depleted its inventory at lower average selling prices. In
addition, while the Company believes that its major distributors are currently
adequately capitalized, no assurance can be given that one or more of the
Company's distributors will not experience financial difficulties. The failure
of one or more of the Company's distributors to pay for products ordered from
the Company or to continue operations because of financial difficulties or for
other reasons could have a materially adverse effect on the Company's business,
financial condition, or results of operations.
International Sales
Sales to customers located outside the United States accounted for
approximately 38%, 32%, and 27% of net revenues for 1995, 1994, and 1993,
respectively. The Company expects that revenues derived from international sales
will continue to represent a significant portion of its total revenues.
International sales are subject to a variety of risks, including those arising
from currency restrictions, tariffs, trade barriers, taxes, and export license
requirements. All of the Company's foreign sales are denominated in U.S.
dollars, so the Company's products become less price competitive in countries
with currencies that are declining in value against the dollar. In addition,
since virtually all of the Company's foreign sales are made through
distributors, such sales are subject to the risks described above in "Reliance
on Distributors."
17
<PAGE>
Dependence on Independent Assembly Subcontractors
The Company relies primarily on foreign subcontractors for the assembly
and packaging of its products and, to a lesser extent, for the testing of its
finished products. The Company generally relies on one or two subcontractors to
provide particular services and has from time to time experienced difficulties
with the timeliness and quality of product deliveries. The Company has no
long-term contracts with its subcontractors and certain of those subcontractors
are currently operating at or near full capacity. There can be no assurance that
these subcontractors will continue to be able and willing to meet the Company's
requirements for such components or services. Any significant disruption in
supplies from, or degradation in the quality of components or services supplied
by, these subcontractors could delay shipments and result in the loss of
customers or revenues or otherwise have a materially adverse effect on the
Company's business, financial condition, or results of operations.
Key Personnel
The success of the Company is dependent in large part on the continued
service of its key management, engineering, marketing, sales, and support
employees. Competition for qualified personnel is intense in the semiconductor
industry, and the loss of the Company's current key employees, or the inability
of the Company to attract other qualified personnel, could have a materially
adverse effect on the Company. The Company does not have employment agreements
with any of its key employees.
Management of Growth
The Company has recently experienced and expects to continue to
experience growth in the number of its employees and the scope of its
operations, resulting in increased responsibilities for management personnel. To
manage recent and potential future growth effectively, the Company will need to
continue to hire, train, motivate, and manage a growing number of employees. The
future success of the Company will also depend on its ability to attract and
retain qualified technical, marketing, and management personnel. In particular,
the current availability of qualified design, process, and test engineers is
limited, and competition among companies for skilled and experienced engineering
personnel is very strong. The Company has been attempting to hire a number of
engineering personnel and has experienced delays in filling such positions.
During strong business cycles, the Company expects to experience continued
difficulty in filling its needs for qualified engineers and other personnel. No
assurance can be given that the Company will be able to achieve or manage
effectively any such growth, and failure to do so could delay product
development and introductions or otherwise have a materially adverse effect on
the Company's business, financial condition, or results of operations.
Volatility of Stock Price; Shares Eligible for Future Sale
The price of the Company's Common Stock can fluctuate substantially on
the basis of factors such as announcements of new products by the Company or its
competitors, quarterly fluctuations in the Company's financial results or the
financial results of other semiconductor companies, or general conditions in the
semiconductor industry or in the financial markets. In addition, stock markets
have recently experienced extreme price and volume volatility. This volatility
has had a substantial effect on the market prices of the securities issued by
high technology companies, at times for reasons unrelated to the operating
performance of the specific companies.
The price of the Company's Common Stock could be adversely affected by
sales of the Company's Common Stock not currently in the public market. In
connection with the Company's acquisition of TI's antifuse FPGA business during
18
<PAGE>
the second quarter of 1995, the Company issued to TI 1,000,000 shares of Series
A Preferred Stock convertible, at the option of TI, into 2,631,578 shares of the
Company's Common Stock. The Company also granted TI certain rights to have such
shares of Common Stock registered under the Securities Act of 1933. In addition,
any shares purchased upon the exercise of stock options will be eligible for
sale in the public market (subject in some cases to the provisions of Rule 701
and/or Rule 144 under the Securities Act).
"Blank Check" Preferred Stock; Possible Effect on a Change in Control
The Company's Articles of Incorporation authorize the issuance of up to
5,000,000 shares of "blank check" Preferred Stock (of which 4,000,000 shares
remain available for issuance), with such designations, rights, and preferences
as may be determined from time to time by the Board of Directors. Accordingly,
the Board is empowered, without approval by holders of the Company's Common
Stock, to issue Preferred Stock with dividend, liquidation, redemption,
conversion, voting, or other rights that could adversely affect the voting power
or other rights of the holders of the Common Stock. Issuance of the Preferred
Stock could be used as a method of discouraging, delaying, or preventing a
change in control of the Company. In addition, such issuance could adversely
affect the market price of the Common Stock. Although the Company does not
currently intend to issue any additional shares of its Preferred Stock, there
can be no assurance that the Company will not do so in the future.
The Company has adopted an Employee Retention Plan that provides for
payment of stock to the Company's employees who hold unvested stock options in
the event of a change of control of the Company. Payment is contingent upon the
employee remaining with the Company for six months after the change of control.
The Company has also entered into Management Continuity Agreements with each of
its executive officers, which provide for the acceleration of unvested stock
options in the event an executive officer's employment is actually or
constructively terminated other than for cause following a change of control.
Dividend Policy
The Company has never declared or paid any cash dividends on its
capital stock. The Company currently intends to retain any earnings for use in
its business and does not anticipate paying any cash dividends in the future.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
On January 20, 1994, the Company filed a lawsuit against QuickLogic
Corporation ("QuickLogic") for infringement of four of the Company's patents in
the United States District Court for the Northern District of California (the
"Court"). On November 15, 1994, the Company filed a motion for summary judgment
that QuickLogic infringes one of the Company's patents in the lawsuit. A hearing
on this motion was held on March 21, 1996, and on October 4, 1996, the Special
Master appointed by the Court recommended that the Court grant the Company's
motion for summary judgment. QuickLogic has objected to the Special Master's
recommendation, which is under submission before the Court.
On November 15, 1994, and January 10, 1995, the United States Patent
and Trademark Office issued Reexamination Certificates regarding two of the
Company's other patents in the lawsuit. The Reexamination Certificates confirmed
19
<PAGE>
the patentability of all claims of both patents. On March 15, 1995, the Company
filed an amended complaint adding a fifth patent to the lawsuit and a theft of
trade secrets claim. On March 8, 1996, the Company filed a supplemental
complaint adding a sixth patent to the lawsuit. The Company seeks damages and a
permanent injunction preventing QuickLogic from further infringement of such
patents.
QuickLogic has denied infringement and filed counterclaims seeking
declaratory judgment of non-infringement and invalidity of all the Company
patents in suit. On May 25, 1995, QuickLogic filed an amended counterclaim
alleging that the Company infringes two patents assigned to QuickLogic.
QuickLogic seeks damages and a permanent injunction preventing the Company from
further infringement of such patents. On June 14, 1995, the Company denied
infringement and filed counterclaims seeking declaratory judgment of
non-infringement and invalidity and alleging, among other things,
misappropriation of the Company's trade secrets. On January 18, 1996, the
Company filed a motion for summary judgment that QuickLogic's patents are
invalid because the accused products were on sale more than one year before the
filing date of the patents. On February 1, 1996, QuickLogic filed a motion for
summary judgment that the Company infringes the two QuickLogic patents in the
lawsuit. A hearing has yet to be set for these two summary judgment motions.
The parties are currently engaged in motion and discovery proceedings.
No trial is currently scheduled. After considering the facts currently known,
management does not believe that the ultimate outcome of the litigation will
have a materially adverse effect on the Company's business, financial condition,
or operating results, although no assurance can be given to that effect.
As is typical in the semiconductor industry, the Company has been and
expects to be notified from time to time of claims that it may be infringing
patents owned by others. No assurance can be given that such claims against the
Company will not result in litigation. All litigation, whether or not determined
in favor of the Company, can result in significant expense to the Company and
can divert the efforts of the Company's technical and management personnel from
productive tasks.
Although the Company has obtained patents covering elements of its
circuit architecture and certain techniques for manufacturing its antifuse, no
assurance can be given that the Company's patents will be determined to be valid
or that the claims of QuickLogic or any assertions of infringement by other
parties (or claims for indemnity from customers resulting from any infringement
claims) will not succeed. In the event of an adverse ruling in the QuickLogic
case or any other litigation involving intellectual property, the Company could
suffer significant (and possibly treble) monetary damages. The Company may also
be required to discontinue the use of certain processes; cease the manufacture,
use, and sale of infringing products; expend significant resources to develop
non-infringing technology; or obtain licenses under patents that it is
infringing. Any of these outcomes could have a materially adverse effect on the
Company's business, financial condition, and/or results of operations.
There are no other pending legal proceedings of a material nature to
which the Company is a party or of which any of its property is the subject.
There are no such legal proceedings known by the Company to be contemplated by
any governmental authority.
20
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
The following exhibits are filed as part of, or incorporated by
reference into, this Quarterly Report on Form 10-Q:
11. Statement re computation of per share earnings
(b) Reports on Form 8-K
None
SIGNATURE
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.
ACTEL CORPORATION
Date: November 11, 1996 /s/ David M. Sugishita
---------------------------------------
David M. Sugishita
Senior Vice President of Finance
and Chief Financial Officer
(as principal financial officer
and on behalf of Registrant)
21
<PAGE>
Exhibit 11
ACTEL CORPORATION
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(unaudited, in thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine months Ended
------------------------- -------------------------
Sept. 29, Oct. 1, Sept. 29, Oct. 1,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Primary:
Average common shares outstanding......................... 17,889 17,425 17,778 17,329
Convertible preferred stock............................... 2,632 2,632 2,632 --
Net effect of dilutive stock options and warrants......... 954 1,025 941 --
----------- ----------- ----------- -----------
Shares used in computing net income (loss) per share...... 21,475 21,082 21,351 17,329
=========== =========== =========== ===========
Net income (loss)......................................... $ 3,905 $ 2,935 $ 10,788 $ (5,010)
=========== =========== =========== ===========
Net income (loss) per share............................... $ 0.18 $ 0.14 $ 0.51 $ (0.29)
Fully diluted:
Average common shares outstanding......................... 17,889 17,425 17,778 17,329
Convertible preferred stock............................... 2,632 2,632 2,632 --
Net effect of dilutive stock options and warrants......... 1,234 1,105 1,213 --
----------- ----------- ----------- -----------
Shares used in computing net income (loss) per share...... 21,755 21,162 21,623 17,329
=========== =========== =========== ===========
Net income (loss)......................................... $ 3,905 $ 2,935 $ 10,778 $ (5,010)
=========== =========== =========== ===========
Net income (loss) per share............................... $ 0.18 $ 0.14 $ 0.50 $ (0.29)
=========== =========== =========== ===========
</TABLE>
22
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> JUL-1-1996
<PERIOD-END> SEP-29-1996
<CASH> 19,892
<SECURITIES> 5,021
<RECEIVABLES> 25,036
<ALLOWANCES> 1,620
<INVENTORY> 26,909
<CURRENT-ASSETS> 90,559
<PP&E> 33,609
<DEPRECIATION> 17,703
<TOTAL-ASSETS> 122,537
<CURRENT-LIABILITIES> 40,087
<BONDS> 0
<COMMON> 62,256
0
18,147
<OTHER-SE> 2,047
<TOTAL-LIABILITY-AND-EQUITY> 122,537
<SALES> 38,014
<TOTAL-REVENUES> 38,014
<CGS> 16,164
<TOTAL-COSTS> 16,164
<OTHER-EXPENSES> 16,271
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 338
<INCOME-PRETAX> 5,917
<INCOME-TAX> 2,012
<INCOME-CONTINUING> 3,905
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,905
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
