<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(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: 0-22068
LEVEL ONE COMMUNICATIONS, INCORPORATED
State: California I.R.S. Employer ID No.: 33-0128224
Address: 9750 Goethe Road, Sacramento, CA 95827
Telephone: (916) 855-5000
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 periods 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 Common Shares of the registrant outstanding on September 29, 1996,
was 12,983,554.
<PAGE>
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of September 29, 1996, and
December 30, 1995............................................ 3
Consolidated Statements of Operations for the Three and
Nine Months Ended September 29, 1996, and September 30, 1995. 4
Consolidated Statements of Cash Flows for the Nine Months
Ended September 29, 1996, and September 30, 1995............. 5
Notes to Financial Statements.................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................... 8
PART II. OTHER INFORMATION
Item 1. Litigation....................................................... 14
Item 4. Submission of Matters to a Vote of Shareholders.................. 14
Item 6. Exhibits and Reports on Form 8-K................................. 14
Signatures....................................................... S-1
</TABLE>
2
<PAGE>
LEVEL ONE COMMUNICATIONS, INCORPORATED
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
September 29, 1996 December 30, 1995
------------------ -----------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $13,747 $ 21,628
Short-term investments 16,208 8,223
Accounts receivable, net 17,004 15,390
Inventories 12,189 15,772
Deferred income tax benefit 2,504 4,289
Prepaid expenses 2,719 2,905
-------- --------
Total current assets 64,371 68,207
Property and equipment, net 19,920 20,438
Long-term investments 10,339 4,695
Related party note receivable 2,825 1,225
Other assets 11,829 6,236
-------- --------
Total assets $109,284 $100,801
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of capital lease obligations $ 1,218 $ 1,059
Accounts payable 6,488 9,541
Accrued payroll costs 2,253 1,762
Income taxes payable 319 -
Deferred revenue - 133
Other accrued liabilities 3,821 4,878
-------- --------
Total current liabilities 14,099 17,373
Capital lease obligations, less current portion 3,402 3,814
Deferred lease expense 622 649
-------- --------
Total liabilities 18,123 21,836
-------- --------
Shareholders' equity:
Common Stock 79,640 77,839
Retained earnings 11,521 1,126
-------- --------
Total shareholders' equity 91,161 78,965
-------- --------
Total liabilities and shareholders' equity $109,284 $100,801
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
LEVEL ONE COMMUNICATIONS, INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ ------------------------------
Sept. 29, 1996 Sept. 30, 1995 Sept. 29, 1996 Sept. 30, 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues $27,363 $21,680 $82,384 $51,503
Cost of sales 11,756 9,459 34,865 21,942
------- ------- ------- -------
Gross margin 15,607 12,221 47,519 29,561
Research & development 5,249 4,604 16,663 11,491
Sales & marketing 4,219 3,146 12,209 7,885
General & administrative 1,595 1,403 5,126 3,823
------- ------- ------- -------
Total operating expenses 11,063 9,153 33,998 23,199
------- ------- ------- -------
Operating income 4,544 3,068 13,521 6,362
Other income, net 1,084 511 1,825 1,580
------- ------- ------- -------
Income before provision for income
taxes 5,628 3,579 15,346 7,942
One time charge for SFT Acquisition - - - 750
Provision for income taxes 1,857 1,086 5,065 1,944
------- ------- ------- -------
Net income $ 3,771 $ 2,493 $10,281 $ 5,248
======= ======= ======= =======
Net income per share (Note 2) $ 0.27 $ 0.18 $ 0.75 $ 0.39
======= ======= ======= =======
Weighted average common shares
and equivalents 13,803 13,632 13,723 13,425
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
LEVEL ONE COMMUNICATIONS, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
------------------------------
Sept. 29, 1996 Sept. 30, 1995
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $10,281 $ 5,248
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 4,805 4,140
Purchased Research & Development expenses - 750
(Increase) decrease in acocunts receivable (1,614) (7,025)
(Increase) decrease in inventories 3,583 (1,330)
(Increase) decrease in prepaid expenses 186 (2,173)
Increase (decrease) in accounts payable and
accrued liabilities (3,299) 9,024
Increase (decrease) in deferred liabilities 1,652 (36)
Increase (decrease) in deferred lease expense (280) 14
------- --------
Total adjustments 5,033 3,364
------- --------
Net cash provided by operating activities 15,314 8,612
------- --------
Cash flows from investing activities:
Purchase of short-term investments (7,985) 20,519
Purchase of long-term investments (5,644) 200
Capital expenditures (4,288) (12,820)
Payments for related party notes receivable (1,600) -
Payments for other assets (5,593) (3,133)
------- --------
Net cash used in investing activities (25,110) 4,766
Cash flows from financing activities:
Principal payments under capital lease obligations - (220)
Proceeds from issuance of stock, net of
repurchases and costs of issuance 1,915 356
------- --------
Net cash provided by financing activities 1,915 136
------- --------
Net increase (decrease) in cash and cash equivalents (7,881) 13,514
Cash and cash equivalents, beginning of period 21,628 9,260
------- --------
Cash and cash equivalents, end of period $13,747 $ 22,774
======= ========
Supplementary disclosure of cash and noncash transactions
Cash payments for:
Interest $ 300 $ 65
======= ========
Income taxes $ 2,103 $ 739
======= ========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
LEVEL ONE COMMUNICATIONS, INCORPORATED
___________
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements 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, they 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.
Operating results for the three and nine month periods ended September 29, 1996,
are not necessarily indicative of the results that may be expected for the year
ending December 29, 1996. The information reported in this Form 10-Q should be
read in conjunction with the financial statements and footnotes contained in the
Company's Form 10-K filed with the Securities and Exchange Commission for the
year ended December 30, 1995, and subsequent filings with the Securities and
Exchange Commission.
NOTE 2 - NET INCOME PER SHARE
Net income per share is computed using the weighted average number of shares of
common stock outstanding, and the dilutive common equivalent shares outstanding
from stock options and warrants (using the treasury stock method).
6
<PAGE>
LEVEL ONE COMMUNICATIONS, INCORPORATED
__________
NOTE 3 - INVENTORIES
Inventories, stated at the lower of cost (first in, first out) or market,
consist of:
<TABLE>
<CAPTION>
(in thousands) September 29, 1996 December 30, 1995
------------------ -----------------
<S> <C> <C>
Raw materials $ 18 $ 26
Work-in-process 10,544 14,281
Finished goods 1,627 1,465
-------- --------
$ 12,189 $ 15,772
======== ========
</TABLE>
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment, net is comprised of the following:
<TABLE>
<CAPTION>
(in thousands) September 29, 1996 December 30, 1995
------------------ -----------------
<S> <C> <C>
Machinery & equipment $ 22,556 $ 22,557
Furniture & fixtures 12,533 8,244
-------- --------
$ 35,089 $ 30,801
Accumulated depreciation (15,168) (10,363)
-------- --------
$ 19,920 $ 20,438
======== ========
</TABLE>
7
<PAGE>
LEVEL ONE COMMUNICATIONS, INCORPORATED
_____
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The following information should be read in conjunction with the unaudited
interim financial statements and the notes thereto included in Item 1 of this
Quarterly Report on Form 10-Q, the Management's Discussion and Analysis of
Financial Condition and Results of Operations contained in the Company's Form
10-K filed with the Securities and Exchange Commission on March 29, 1996, and
subsequent filings with the Securities and Exchange Commission.
This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Actual results could differ materially from
those projected in the forward-looking statements as a result of the factors set
forth in "Factors that May Affect Future Results" and elsewhere in this Report.
REVENUES
Revenues increased 26.2% to $27.4 million in the third quarter of 1996 compared
to revenues of $21.7 million for the same quarter of 1995. For the first nine
months of 1996, revenues increased 60.0% to $82.4 million from $51.5 million for
the same period of 1995.
Networking product revenues were $12.9 million and $10.6 million for the third
quarter of 1996 and 1995, respectively, an increase of 21.7%. Transmission
product revenues were $14.5 million and $11.1 million, respectively, for the
third quarter of 1996 and 1995, an increase of 30.6%. For the first nine months
of 1996, networking product revenues were $37.1 million and transmission product
revenues were $45.3 million, an increase of 60.0% and 59.9%, respectively, over
the first nine months of 1995. The increases during the third quarter and first
nine months of 1996 reflect the substantial unit sales growth due to the
continued market acceptance of the Company's products in both the networking and
transmission markets, and the broadening of the Company's customer base.
International sales were $9.7 million or 35.4% and $6.8 million or 31% of sales,
respectively, for the third quarter of 1996 and 1995. For the first nine months
of 1996 and 1995, international sales were $31.0 million or 37.6% and $16.1
million or 31% of sales, respectively. The increase in international sales in
the third quarter and first nine months of 1996 over the same periods of 1995 is
attributable to the Company's increased international marketing efforts, which
included the addition of sales and application engineering personnel. All sales
are denominated in U.S. dollars, thereby eliminating the impact of foreign
currency exchange rate fluctuations on revenues. The Company's profit margin on
international sales is not materially different from that realized on its sales
in the United States.
8
<PAGE>
GROSS MARGIN
The Company's cost of sales includes the cost of wafer fabrication, packaging
and assembly performed by third party vendors, and costs associated with the
procurement, scheduling, product engineering, testing and quality assurance
functions performed by the Company. Gross margin as a percentage of revenues in
the third quarter of 1996 was 57.0% versus 56.4% in the third quarter of 1995.
During any period, the Company's gross margin is affected by several factors,
including the mix of products, test equipment utilization, foundry and assembly
manufacturing yields, selling prices, and the cost benefits achieved through die
size and other cost reductions. The Company conducts ongoing product
enhancement and cost reduction programs.
RESEARCH AND DEVELOPMENT
Research and development expenses were $5.2 million or 19.2% of revenues in the
third quarter of 1996 versus $4.6 million, or 21.2% of revenues in the second
quarter of 1995. For the first nine months of 1996, research and development
expenses were $16.7 million or 20.2% of revenues versus $11.5 million, or 22.3%
of revenues in the same period of 1995. The research and development expense
increase in absolute dollars on a year-to-year basis is due primarily to
additions to the Company's design engineering staff and related new product
design expenses.
The markets for the Company's products are characterized by continuing
technological change, evolving industry standards, and frequent new product
introductions. The Company believes that the continued introduction of new
products is essential to its success and is committed to continued investment in
new product research and development. The Company anticipates increased
investment in research and development in absolute dollars in future years,
although research and development costs as a percentage of revenues may decline
over time.
SALES AND MARKETING
Sales and marketing expenses were $4.2 million or 15.4% of revenues in the third
quarter of 1996 versus $3.1 million or 14.5% of revenues in the third quarter
of 1995. For the first nine months of 1996, sales and marketing expenses were
$12.2 million or 14.9% of revenues compared to $7.9 million or 15.3% of revenues
in the first nine months of 1995. The increased expenditures are primarily
attributable to the continued expansion of the Company's international sales
efforts, sales commissions associated with increased revenues, and the expansion
of the Company's sales and marketing staffs.
The Company anticipates that sales and marketing expenses will continue to
increase as revenues grow and as a result of the expansion of sales and support
offices worldwide.
GENERAL AND ADMINISTRATIVE
In the third quarter of 1996, general and administrative expenses were $1.6
million or 5.8% of revenues versus $1.4 million or 6.5% of revenues in the same
period of 1995. For the first nine months general and administrative expenses
were $5.1 million or 6.2% of revenues in 1996 versus $3.8 million or 7.4% of
revenues in 1995. The increased expenses are primarily attributable to
additional headcount associated with the Company's growth.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity as of September 29, 1996, consisted
of $30.0 million of cash, cash equivalents and short-term investments, and $10
million available under the Company's revolving line of credit. At September
29, 1996, the Company had no outstanding balance under this line of credit.
Working capital as of September 29, 1996, was $50.3 million.
During the first nine months of 1996, the Company generated $15.3 million of
cash from operating activities, as compared to $13.5 million in the same period
in 1995. In both years, net cash generated from operations in the third quarter
was primarily due to net income before depreciation and amortization expense.
During the first nine months of 1996, financing activities provided net cash of
$1.9 million versus net cash used of $136,000 for the same period a year ago.
The primary source of cash in both periods was the issuance of common stock upon
exercise of employee stock options.
During the first nine months of 1996, the Company used net cash of $25.1 million
for investing activities. The Company used $9.9 million for the purchase of
capital equipment and other assets, including a deposit with a third party
semiconductor foundry. During the first nine months of 1995, the Company used
net cash of $13.6 million for investing activities, primarily for the purchase
of short-term investments of $8.0 million and the purchase of long-term
investments of $5.6 million.
During 1995, the Company entered into five-year arrangements with three of its
suppliers for committed foundry capacity in consideration for equipment
financing or a cash deposit. Under one of these agreements, the Company is
subject to a penalty if it fails to purchase specified minimum quantities of
wafers. Through 1998, these arrangements provide for additional expenditures
aggregating $18 million, which the Company expects to fund using cash generated
from operations.
The Company expects to fund its remaining 1996 capital equipment requirements
using a combination of cash and equipment leasing. The Company believes that
its existing cash resources combined with cash generated from operations,
equipment lease arrangements and its line of credit will be sufficient to meet
the Company's cash requirements through the end of 1997. However, the Company
may from time to time seek additional equity or debt financing as a result of
the capital intensive nature of the semiconductor industry.
ONE-TIME GAIN FROM SALE OF PORTION OF MINORITY INTEREST
During the third quarter of 1996, in connection with a financing for Maker
Communications, Inc. ("Maker"), the Company sold a portion of its minority
interest in Maker for an aggregate of approximately $675,000. This sale was
accounted as a one-time gain in the third quarter. The Company continues to
hold a minority interest in Maker and to license certain Maker technology.
Other contractual rights and obligations, including the obligation to lend Maker
up to $3,000,000, were terminated in the transaction. After the end of the
third quarter, Maker repaid the Company approximately $2,875,000, the total
balance under an outstanding note.
10
<PAGE>
FACTORS THAT MAY AFFECT FUTURE RESULTS
The following risk factors may be associated with the outlook for the Company's
business:
DEPENDENCE UPON INDEPENDENT MANUFACTURERS
The Company does not manufacture the wafers used for its products. To date, the
Company's wafers have been manufactured by foundries located in the United
States, Europe, and the Far East. The Company depends upon these suppliers to
produce wafers at acceptable yields and to deliver them to the Company in a
timely manner at competitive prices. The Company may sustain an adverse impact
on operating results from problems with the cost, timeliness, yield and quality
of wafer deliveries from suppliers. From time to time, the available industry-
wide foundry capacity fluctuates significantly. During periods of constrained
supply, the Company may experience difficulty in securing an adequate supply of
wafers, and/or its suppliers may increase wafer prices which must be paid by the
Company. When foundry and assembly lead times are short, the Company may
experience less predictability in customer ordering patterns, as the shorter
lead times cause customers to place orders nearer to their planned delivery
dates. The Company's operating results depend in substantial part on its ability
to maintain or increase the capacity available to it from its existing or new
foundries.
The Company is also dependent upon third-party assembly companies that package
the semiconductor die. The Company depends upon these suppliers to produce
products in a timely manner and at competitive prices. The Company has in the
past and may in the future sustain a negative financial impact due to problems
with the cost, timeliness, yield and quality of product deliveries from these
suppliers.
FACTORS AFFECTING QUARTERLY OPERATING RESULTS
The semiconductor industry is characterized by rapid technological change,
intense competitive pressure and cyclical market patterns. The Company's
results of operations are affected by a wide variety of factors, including
general economic conditions, conditions specific to the semiconductor industry,
decreases in average selling price, the timing of new product introductions
(both by the Company and its competitors), use of new manufacturing
technologies, the ability to safeguard patents and intellectual property, and
rapid escalation or decline of demand for its products. The level of revenues
in any specific quarter can also be affected by the level of orders placed
during that quarter. The Company attempts to respond to changes in market
conditions as soon as possible; however, the suddenness of their onset may make
the prediction of and reaction to such events difficult. Due to the foregoing
and other factors, past results, such as those described in this report, may not
be predictive of future performance.
DEPENDENCE ON NEW PRODUCTS
The Company's future success depends on its ability to develop and introduce new
products on a timely basis. These new products need to compete effectively on
the basis of price, performance and features. During the third quarter of 1996,
the Company introduced four new products. Because of the complexity of its
products, the Company may experience delays from time to time in completing
development and introduction of new products, and, as a result, may not achieve
the market share anticipated for such products. The Company conducts its own
analysis
11
<PAGE>
of market trends and uses forecasts and information provided by industry
analysts. Market conditions may change rapidly as technology, economic, or user-
preference conditions cause different communications technologies to experience
different growth cycles from those forecast by the Company or others. There can
be no assurance that the Company will successfully identify new product
opportunities and bring new products to market in a timely manner, that products
or technologies developed by others will not render the Company's products or
technologies obsolete or noncompetitive, or that the Company's products will be
selected for design into the products of its targeted customers. In addition,
the average selling price for any particular product may decrease rapidly over
the product's life. To offset such decreases, the Company relies primarily on
obtaining yield improvements and cost reductions for existing products and on
introducing new products which incorporate advanced features and other
price/performance factors such that higher average selling prices and higher
margins are initially achieved relative to existing products. To the extent that
such cost reductions and new product introductions do not occur in a timely
manner, or the Company's products do not achieve market acceptance, the
Company's operating results could be adversely affected.
INTELLECTUAL PROPERTY
The Company relies upon patent, trademark, trade secret and copyright law to
protect its intellectual property. There can be no assurance that such
intellectual property rights can be successfully asserted in the future or will
not be invalidated, circumvented or challenged. Litigation, regardless of its
outcome, could result in substantial cost and diversion of resources of the
Company. Any infringement claim or other litigation against or by the Company
could have a material adverse effect on the Company's financial condition and
results of operations. In November 1995 the Company commenced infringement
litigation against a competitor. See Part II, Item 1, "Litigation".
SEMICONDUCTOR INDUSTRY
The semiconductor industry has historically been cyclical and subject to
significant economic downturns at various times, characterized by diminished
product demand, accelerated erosion of average selling prices and over or under
capacity. The Company may experience substantial period-to-period fluctuations
in future operating results due to general semiconductor industry conditions,
overall economic conditions or other factors.
In addition, the securities of many high technology companies have historically
been subject to extreme price and volume fluctuations, a factor which may affect
the market price of the Company's Common Stock.
Due to the number of weeks in the Company's accounting months within a quarter,
the Company generally receives bookings for and ships more product in the third
month of each quarter than in either of the first two months of the quarter.
This concentration of shipments in the last month of the quarter may cause the
Company's quarterly results of operations to be more difficult to predict.
Moreover, if a disruption in the Company's production or shipping occurs near
the end of a quarter, the Company's revenues for that quarter could be adversely
affected.
The Company must order wafers and build inventory in advance of product
shipments. There is risk that the Company may order incorrectly and produce
excess or insufficient inventories of
12
<PAGE>
particular products because the Company's markets are volatile and subject to
rapid technology and price changes, which could affect shipments.
Inventory risk is heightened because certain of the Company's customers place
orders with lead times that make such orders subject to cancellation or
rescheduling by that customer. To the extent the Company produces excess or
insufficient inventories of particular products, the Company's revenues and
earnings could be adversely affected.
In the third quarter of 1996, sales to customers who placed orders for shipment
within the quarter represented a larger portion of the Company's revenues than
the Company had generally experienced in the past. This was the second
consecutive quarter in which the Company experienced such a level of sales with
such short lead times. To the extent the Company continues to be subject to
such shorter ordering cycles, it may decrease the Company's visibility of the
mix of products that will be shipped in the current quarter.
In the future, increases in the general demand for semiconductor products may
result in a reduction in the availability of wafers from foundries. Such
capacity limitations may adversely affect the Company's ability to deliver
products to its customers on a timely basis, and may also adversely impact the
Company's margins. Additionally, the Company believes that during periods of
strong demand and/or restricted semiconductor capacity, customers will over
order to attempt to assure an adequate supply. Accordingly, certain of the
Company's customers may cancel or postpone orders without notice if parts become
available. These characteristics may result in volatility of the Company's
backlog.
Even if the Company has products available for sale to its customers, many of
the Company's products could be affected in the event the Company's customers
encounter shortages in other parts necessary to build and ship their products.
Shortages of components from other suppliers could cause the Company's customers
to cancel or delay programs incorporating the Company's parts, resulting in the
cancellation or delay of orders of the Company's products.
The Company's business is intensely competitive and is characterized by new
product cycles, price erosion, and rapid technological change. Competition
typically occurs at the design stage, where the customer evaluates alternative
design approaches that require integrated circuits. Because product life and
design-in cycles can be short, the Company and its competitors have
opportunities to achieve design wins in next generation systems.
Because of the foregoing factors that may affect future results, investors
should not use historical trends to anticipate results or trends for future
periods. In addition, the Company participates in a highly dynamic industry
that may result in significant volatility of the Company's common stock price.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On November 28, 1995, the Company initiated a patent infringement suit
against Seeq Technologies, Inc. in United States District Court for the Northern
District of California. The suit relates to two Level One patents, No.
5,267,269 and No. 5,249,183, and to certain Seeq products used in Ethernet
system products. The suit seeks damages and injunctive relief. Seeq has denied
the allegations. Although the Company does not believe such litigation will
have a material impact on the Company, litigation, regardless of its outcome,
could result in substantial cost and diversion of resources of the Company. See
"Factors Affecting Quarterly Operating Results".
There are no other material pending legal proceedings, other than routine
litigation incidental to the Company's business, to which the Company is a party
or of which any of its property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 18, 1996, the Company held its annual meeting of shareholders, at
which the following matters were submitted to shareholder vote:
Election of Directors:
Robert S. Pepper For: 11,270,590 Against: 154,114
Thomas J. Connors For: 11,271,280 Against: 153,424
Paul Gray For: 11,271,430 Against: 153,274
Martin Jurick For: 11,267,176 Against: 157,528
Henry Kressel For: 11,271,280 Against: 153,424
Joseph P. Landy For: 11,271,280 Against: 153,424
Amendment to Employee Stock Purchase Plan:
For: 10,970,572 Against: 151,219
Abstain: 20,379 No Vote: 282,534
Amendments to 1993 Stock Option Plan:
For: 6,317,451 Against: 2,100,257
Abstain: 22,231 No vote: 2,984,765
Ratification of Appointment of Arthur Andersen LLP as auditor:
For: 11,407,344
Against: 8,663
Abstain: 8,697
14
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - 27.1--Financial Data Schedule, September 29, 1996
(b) Reports on Form 8-K - None.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LEVEL ONE COMMUNICATIONS, INCORPORATED
Date: November 12, 1996 By: /s/ Robert S. Pepper
-------------------------------------
Robert S. Pepper, Ph.D.
Chairman of the Board of Directors,
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 12, 1996 By: /s/ John Kehoe
-------------------------------------
John Kehoe
Vice President and Chief Financial
Officer
(Principal Financial Officer)
S-1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE PERIOD ENDED SEPTEMBER 29, 1996, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> SEP-29-1996
<CASH> 13,747
<SECURITIES> 16,208
<RECEIVABLES> 17,111
<ALLOWANCES> 107
<INVENTORY> 12,189
<CURRENT-ASSETS> 64,371
<PP&E> 35,089
<DEPRECIATION> 15,169
<TOTAL-ASSETS> 109,284
<CURRENT-LIABILITIES> 14,099
<BONDS> 0
0
0
<COMMON> 79,640
<OTHER-SE> 11,521
<TOTAL-LIABILITY-AND-EQUITY> 109,284
<SALES> 82,384
<TOTAL-REVENUES> 82,384
<CGS> 34,865
<TOTAL-COSTS> 34,865
<OTHER-EXPENSES> 33,998
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 300
<INCOME-PRETAX> 15,346
<INCOME-TAX> 5,065
<INCOME-CONTINUING> 10,281
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,281
<EPS-PRIMARY> 0
<EPS-DILUTED> .75
</TABLE>
