SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 28, 1997.
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
____________ TO ____________.
Commission File No. 0-25662
ANADIGICS, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
22-2582106
(I.R.S. Employer Identification No.)
35 Technology Drive
Warren, New Jersey
(Address of principal executive offices)
07059
(Zip Code)
(908) 668-5000
(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 [ ]
The number of shares outstanding of the registrant's common stock as of
October 15, 1997 was 14,596,214.<PAGE>
INDEX
ANADIGICS, Inc.
Part. I. Financial Information
Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheets - September 28, 1997 and
December 31, 1996.
Condensed consolidated statements of income - Three and nine months
ended September 28, 1997 and September 29, 1996.
Condensed consolidated statements of cash flows - Nine months ended
September 28, 1997 and September 29, 1996.
Notes to condensed consolidated financial statements - September 28,
1997.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
PART I
FINANCIAL STATEMENTS
Item 1. Financial Statements (unaudited)
CONDENSED CONSOLIDATED BALANCE SHEETS
ANADIGICS, Inc.
(Amounts in thousands, except share and per share amounts)
September 28, 1997 Dec. 31, 1996 *
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 25,526 $ 23,112
Marketable securities 9,591 9,008
Accounts receivable, net 18,889 10,696
Inventory Note 2 16,812 8,901
Prepaid expenses and other current assets 1,528 1,221
Deferred taxes 699 699
Total current assets 73,045 53,637
Marketable securities 18,253
Property and equipment:
Equipment and furniture 53,223 40,151
Leasehold improvements 4,138 3,710
Projects in process 34,634 6,702
Less accumulated depreciation and amortization 27,590 21,830
64,405 28,733
Deferred taxes 4,131 4,131
Deposits 945 495
Total assets $ 160,779 $ 86,996
Liabilities and stockholders' equity Note 3
Current liabilities:
Accounts payable $ 8,791 $ 7,173
Accrued liabilities 5,143 3,671
Income taxes payable 6,076 3,676
Current maturities of capital lease obligations 490 1,292
Total current liabilities 20,500 15,812
Capital lease obligations, less current portion 450 627
Total liabilities 20,950 16,439
Stockholders' equity
Common stock, $0.01 par value, 68,000,000 shares
authorized, 14,596,214 and 12,564,678, issued
and outstanding at September 28, 1997 and
December 31, 1996, respectively 146 126
Additional paid-in capital 157,308 98,800
Accumulated deficit (17,625) (28,369)
Total stockholders' equity 139,829 70,557
Total liabilities and stockholders' equity $ 160,779 $ 86,996
* The condensed balance sheet at December 31, 1996 has been derived from
the audited financial statements at that date but does not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements. Further, certain amounts as
of December 31, 1996 have been reclassified to conform with the
September 28, 1997 presentation. See Notes to Condensed Consolidated
Financial Statements.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
ANADIGICS, Inc.
(Amounts in thousands, except share and per share amounts)
Three months ended Nine months ended
09/28/97 09/29/96 09/28/97 09/29/96
(unaudited) (unaudited)
Net sales $ 26,727 $ 17,005 $ 74,556 $ 46,442
Cost of sales 13,688 11,136 39,168 26,226
Gross profit 13,039 5,869 35,388 20,216
Research and development exp 4,375 2,756 11,999 8,918
Selling and administrative exp 3,226 1,619 9,000 5,650
Operating income 5,438 1,494 14,389 5,648
Interest expense 33 84 150 299
Interest income 866 432 2,548 1,281
Income before income taxes 6,271 1,842 16,787 6,630
Provision for income taxes 2,310 369 6,043 1,326
Net income $ 3,961 $ 1,473 $ 10,744 $ 5,304
Net income per share of
common stock (1) $ 0.26 $ 0.11 $ 0.72 $ 0.41
Weighted average common and
common equivalent shares
outstanding (1) 15,499,400 13,045,769 14,960,148 12,835,432
(1) - Historical share and per share data have been restated to reflect a
3-for-2 stock split.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
ANADIGICS, Inc.
(Amounts in thousands)
Nine months ended
Sept. 28, 1997 Sept. 29, 1996
(unaudited) (unaudited)
Cash flows from operating activities:
Net income $ 10,744 $ 5,304
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 5,028 2,818
Amortization 985 1,603
Changes in operating assets and liabilities:
Accounts receivable (8,193) (2,100)
Inventory (7,911) 383
Prepaid expenses and other current assets (307) (235)
Deferred taxes (107)
Deposits (450) (221)
Accounts payable 1,618 659
Accrued liabilities 1,472 (934)
Income taxes payable 2,400 841
Net cash provided by operating activities 5,386 8,011
Cash flows from investing activities:
Purchase of property and equipment (41,685) (8,932)
Purchase of marketable securities (35,510) (8,955)
Proceeds from sale of marketable securities 16,674 20,270
Net cash (used in) provided by investing activities (60,521) 2,383
Cash flows from financing activities:
Payment of capital lease obligations (979) (1,298)
Exercise of warrants 3,610
Issuance of common stock 58,528 301
Net cash provided by financing activities 57,549 2,613
Net increase in cash and cash equivalents 2,414 13,007
Cash and cash equivalents at beginning of period 23,112 6,394
Cash and cash equivalents at end of period $ 25,526 $ 19,401
Supplemental cash flow information:
Interest paid $ 150 $ 275
Taxes paid $ 1,966 $ 592
ANADIGICS, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited) -
September 28, 1997
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited, condensed, consolidated 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 28, 1997 are
not necessarily indicative of the results that may be expected for the
year ending December 31, 1997. For further information, refer to the
financial statements for the year ended December 31, 1996 and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
The condensed consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary, ANADIGICS Foreign Sales
Corporation. All significant intercompany accounts have been eliminated in
consolidation.
2. Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market. Inventories consist of the following:
Sept. 28, 1997 Dec. 31, 1996
Raw materials $ 1,619 $ 1,278
Work in process 10,503 6,291
Finished goods 4,690 1,332
$ 16,812 $ 8,901
3. Stockholders' Equity
On January 30, 1997, the Company declared a stock dividend of one share of
common stock for each two shares of common stock outstanding. The dividend
was payable on February 20, 1997 to holders of record on February 10, 1997.
Accordingly, the financial statements have been retroactively restated
to reflect the three-for-two stock split.
On February 20, 1997, the Company successfully completed a public offering
of an additional 1,875,000 shares of common stock. The Company intends to
use the net proceeds from the public offering of approximately $55.4 million
to purchase capital equipment and leasehold improvements, and for general
corporate purposes, including working capital. Accordingly, the remaining
portion of the proceeds received from the public offering which was
designated for the purchase of capital equipment and to make leasehold
improvements of $18.3 million has been classified as long term as
of September 28, 1997.
ANADIGICS, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation
Results of Operations
The following table sets forth unaudited consolidated statements of
operations data as a percent of net sales for the periods presented:
Statement of Operations
Three months ended Nine months ended
09/28/97 09/29/96 09/28/97 09/29/96
(unaudited) (unaudited)
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 51.2% 65.5% 52.5% 56.5%
Gross profit 48.8% 34.5% 47.5% 43.5%
Research and development expenses 16.4% 16.2% 16.1% 19.2%
Selling and administrative expenses 12.0% 9.5% 12.1% 12.2%
Operating income 20.4% 8.8% 19.3% 12.1%
Interest expense 0.1% 0.5% 0.2% 0.6%
Interest income 3.2% 2.5% 3.4% 2.7%
Income before income taxes 23.5% 10.8% 22.5% 14.2%
Provision for income taxes 8.7% 2.1% 8.1% 2.8%
Net income 14.8% 8.7% 14.4% 11.4%
Third Quarter 1997 (Ended September 28, 1997) Compared to Third Quarter
1996 (Ended September 29, 1996)
Net Sales. Net sales during the third quarter of 1997 increased 57% to
$26.7 million from $17.0 million in the third quarter of 1996. Third
quarter 1997 sales of integrated circuits for cellular and personal
communication system ("PCS") applications increased $11.5 million to $17.1
million from $5.6 million in the third quarter of 1996 as demand for power
amplifier integrated circuits increased. Sales of integrated circuits for
the digital GSM, CDMA and TDMA standards accounted for over 90% of the
cellular and PCS sales during the third quarter of 1997. Sales of integrated
circuits for cable television ("CATV") applications increased 51% during
the third quarter of 1997 to $4.9 million from $3.3 million in the third
quarter of 1996 as demand for wide-band analog and digital CATV tuner
integrated circuits increased. Sales of integrated circuits for fiber optic
telecommunications and data communication applications decreased 2% during
the third quarter of 1997 to $2.7 million from $2.8 million in the third
quarter of 1996. Sales of integrated circuits for direct broadcast satellite
applications decreased 61% during the third quarter of 1997 to $1.8 million
from $4.5 million in the third quarter of 1996 as demand for low noise block
converter integrated circuits from European customers decreased. Engineering
service sales, which reflect customers' contributions to research and
development, decreased $0.6 million during the third quarter of 1997 to
$0.2 million from $0.8 million in the third quarter of 1996. Generally,
selling prices for same product sales were lower in the third quarter of
1997 compared to the same period in 1996.
Gross Margin. Gross margin during the third quarter of 1997 increased to
48.8% from 34.5% in the third quarter of 1996. The increase in gross margin
was due to improved production yields, and manufacturing efficiencies which
resulted in part from higher production volume and the conversion from
three-inch wafers used during the third quarter of 1996 to four-inch wafers
used during the third quarter of 1997.
Gross margin during the third quarter of 1997 increased to 48.8% from
47.3% in the second quarter of 1997. The increase in gross margin was due
to manufacturing efficiencies which resulted from higher production volume.
Research and Development. Company sponsored research and development
expense increased 59% during the third quarter of 1997 to $4.4 million from
$2.8 million during the third quarter of 1996. During the third quarter of
1996, certain engineering resources were temporarily allocated to
manufacturing sustaining activities to support the start-up of newly
developed products, causing a reduction in research and development expense
for that quarter.
As a percent of sales, research and development expense increased to 16.4%
in the third quarter of 1997 from 16.2% in the third quarter of 1996. During
the third quarter of 1997, the Company spent approximately two-thirds of its
research and development on integrated circuits for cellular, PCS and other
wireless applications and approximately 20.6% of its research and
development on integrated circuits for CATV and fiber optic applications.
Selling and Administrative. Selling and administrative expenses increased
99% during the third quarter of 1997 to $3.2 million from $1.6 million in
the third quarter of 1996. During the third quarter of 1996, the Company
reduced its accrual for performance-based incentive compensation expense
based upon lower than expected operating results achieved in that quarter.
General staffing increases and increased consulting expenses also
contributed to the increase in selling and administrative expenses during
the third quarter of 1997, compared to the third quarter of 1996. As a
percentage of sales, selling and administrative expenses increased to 12.0%
in the third quarter of 1997 from 9.5% in the third quarter of 1996.
Interest Income. Interest income increased $0.5 million to $0.9 million
during the third quarter of 1997 from $0.4 million during the third quarter
of 1996. The increase was due to higher invested cash balances following
the receipt of proceeds from the public offering of the Company's common
stock on February 20, 1997.
Provision for Income Taxes. The provision for income taxes during the
third quarter of 1997 was recorded at an estimated annual effective tax rate
of 36.0% of pre-tax income.
Nine Months 1997 (Ended September 28, 1997) Compared to Nine Months 1996
(Ended September 29, 1996)
Net Sales. Net sales during the nine month period ended September 28, 1997
increased 61% to $74.6 million from $46.4 million in the nine month period
ended September 29, 1996. Sales of integrated circuits for cellular and
personal communication system ("PCS") applications increased $29.7 million
during the nine month period ended September 28, 1997 to $42.0 million from
$12.3 million in the nine month period ended September 29, 1996. Sales of
integrated circuits for the digital GSM, CDMA and TDMA standards accounted
for over 85% of the cellular and PCS sales during the nine month period
ended September 28, 1997. Net sales of integrated circuits for CATV
applications for the nine month period ended September 28, 1997 increased
49% to $15.5 million from $10.4 million in the nine month period ended
September 29, 1996 as demand for wide-band analog and digital CATV tuner
integrated circuits increased. Sales of integrated circuits for fiber optic
telecommunication and data communication applications decreased 5% during
the nine month period ended September 28, 1997 to $8.5 million from $8.9
million in the nine month period ended September 29, 1996 as demand for
integrated circuits for a fiber optic data communication application
decreased. Sales of integrated circuits for direct broadcast satellite
applications decreased 38% during the nine month period ended September 28,
1997 to $7.5 million from $12.1 million in the nine month period ended
September 29, 1996, as demand for low noise block converter integrated
circuits from European customers decreased. Engineering service sales, which
reflect customers' contributions to research and development, decreased $1.6
million during the nine month period ended September 28, 1997 to $1.1
million from $2.7 million in the nine month period ended September 29, 1996.
Generally, selling prices for same product sales were lower in the nine
month period ended September 28, 1997 compared to the same period in 1996.
Gross Margin. Gross margin during the nine month period ended September 28,
1997 increased to 47.5% from 43.5% in the nine month period ended
September 29, 1996. The increase in gross margin was due to manufacturing
efficiencies which resulted in part from the conversion from three-inch
wafers used during the nine month period ended September 29, 1996 to
four-inch wafers used during the nine month period ended September 28, 1997,
and higher production volumes. Improved production yields also contributed
to the increase in the gross margin during the nine month period ended
September 28, 1997, compared to the same period in 1996.
Research and Development. Company sponsored research and development
expense increased 35% during the nine month period ended September 28, 1997
to $12.0 million from $8.9 million in the nine month period ended
September 29, 1996. As a percent of sales, company funded research and
development declined to 16.1% in the nine month period ended September 28,
1997 from 19.2% in the nine month period ended September 29, 1996. During
the nine month period ended September 28, 1997, the Company spent
approximately two-thirds of its research and development on integrated
circuits for cellular, PCS and other wireless applications
Selling and Administrative. Selling and administrative expenses increased
59% during the nine month period ended September 28, 1997 to $9.0 million
from $5.7 million in the nine month period ended September 29, 1996. As a
percentage of sales, selling and administrative expenses decreased to 12.1%
in the nine month period ended September 28, 1997 from 12.2% in the nine
month period ended September 29, 1996.
Interest income. Interest income increased $1.2 million to $2.5 million
during the nine month period ended September 28, 1997 from $1.3 million in
the nine month period ended September 29, 1996. The increase was due to
higher invested cash balances following the receipt of proceeds from
the public offering of the Company's common stock on February 20, 1997.
Provision for Income Taxes. The provision for income taxes during the nine
month period ended September 28, 1997 was recorded at an estimated annual
effective tax rate of 36.0% of pre-tax income.
Liquidity and Capital Resources
As of September 28, 1997, the Company had $25.5 million in cash and cash
equivalents and $27.8 million in marketable securities. Approximately $18.3
million of the marketable securities have been designated for the purchase
of capital equipment and to make leasehold improvements. No amounts
were drawn on the Company's credit facilities during the nine month period
ended September 28, 1997.
Net cash provided by financing activities was $57.5 million during the
nine month period ended September 28, 1997. On February 26, 1997, the
Company received $55.4 million in net proceeds from a public offering of
1,875,000 shares of common stock.
Net cash used in investing activities was $60.5 million during the nine
month period ended September 28, 1997. Purchases of equipment and leasehold
improvements totaled $41.7 million (primarily for the new four-inch wafer
fabrication facility) and net purchases of marketable securities amounted
to $18.8 million during the nine month period ended September 28, 1997.
Net cash provided by operations was $5.4 million during the nine month
period ended September 28, 1997, compared to $8.0 million provided by
operations during the nine month period ended September 29, 1996. The
reduction in cash provided by operations during the nine month period ended
September 28, 1997 of $2.6 million, compared to the same period of 1996, was
primarily due to increases in accounts receivable and inventory.
The Company expects to spend approximately $36 million on equipment and
furniture and approximately $10 million on leasehold improvements during the
twelve month period ending September 27, 1998. At September 28, 1997 the
Company had committed to purchase approximately $16 million of equipment
and furniture, and leasehold improvements, including approximately $7
million for the Company's new four-inch wafer fab.
The Company believes that its sources of capital, including internally
generated funds and existing bank credit facilities, will be adequate to
satisfy anticipated capital needs for the next twelve months. Nevertheless,
the Company may elect to finance its future capital requirements through
additional equity or debt financing.
Effect of Changes in Accounting Principles
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share" which is required to be adopted for the
Company's year ending December 31, 1997. At that time, the Company will be
required to change the method currently used to compute earnings per share
and to restate all prior periods. Under the new requirements for calculating
primary earnings per share, the dilutive effect of stock options will be
excluded. The impact of applying Statement 128 would have resulted in an
increase in basic earnings per share of $0.02 for the third quarter ended
September 28, 1997 and $0.01 for the third quarter ended September 29, 1996.
Statement 128 would have had no effect on the calculation of diluted
earnings per share for these quarters.
Risks and Uncertainties
Except for historical information contained herein, this Management's
Discussion and Analysis of Financial Condition and Results of Operation
contains forward-looking statements (as that term is described in the
Securities Act of 1933, as amended) that involve risks and uncertainties,
including timely product and process development, individual product pricing
pressure, order rescheduling or cancellation, variation in production yield,
difficulties in obtaining components and assembly services needed for
production of integrated circuits, change in economic conditions of the
various markets the Company serves, as well as the other risks detailed from
time to time in the Company's reports filed with the Securities and Exchange
Commission, including the report on Form 10-K for the year ended
December 31, 1996. These forward-looking statements can generally be
identified as such because the context of the statement will include words
such as the Company "believes", "anticipates", "expects", or words of
similar import. Similarly, statements that describe the Company's future
plans, objectives, estimates or goals are forward-looking statements. The
cautionary statements made in this Form 10-Q should be read as being
applicable to all related forward-looking statements wherever they appear in
this Form 10-Q. Important factors that could cause actual results and
developments to be materially different from those expressed or implied by
such statements include those factors discussed herein.
ANADIGICS, Inc.
PART II.
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included herein:
Exhibit 11. - Statement Re: Computation of Earnings Per Share
(unaudited)
Exhibit 27. - Financial Data Schedule
(b) Reports on Form 8-K during the quarter ended September 28, 1997.
The Company did not file any reports on Form 8-K during the
quarter ended September 28, 1997.
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.
ANADIGICS, INC.
By: /s/ John F. Lyons
John F. Lyons
Senior Vice President
and Chief Financial Officer
Dated: October 15, 1997
ANADIGICS, Inc.
EXHIBIT INDEX
Page
Exhibit 11. Statement Re: Computation of Earnings Per Share (unaudited) 15
Exhibit 27. Financial Data Schedule 16
ANADIGICS, Inc.
Exhibit 11. Statement Re: Computation of Earnings Per Share (unaudited)
Three months ended Nine months ended
09/28/97 09/29/96 09/28/97 09/29/96
Average shares outstanding 14,566,724 12,482,057 14,158,235 12,307,450
Net effect of dilutive stock
options -
based on treasury stock method
using average market price 932,676 563,712 801,913 527,982
Totals 15,499,400 13,045,769 14,960,148 12,835,432
Net income (in thousands) $3,961 $1,473 $10,744 $5,304
Per share amount $0.26 $0.11 $0.72 $0.41
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 28, 1997 AND THE CONDENSED
CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 28, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-28-1997
<CASH> 25,526,000
<SECURITIES> 27,844,000
<RECEIVABLES> 18,889,000
<ALLOWANCES> 0
<INVENTORY> 16,812,000
<CURRENT-ASSETS> 73,045,000
<PP&E> 91,995,000
<DEPRECIATION> 27,590,000
<TOTAL-ASSETS> 160,779,000
<CURRENT-LIABILITIES> 20,500,000
<BONDS> 0
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<COMMON> 146,000
<OTHER-SE> 139,683,000
<TOTAL-LIABILITY-AND-EQUITY> 160,779,000
<SALES> 26,727,000
<TOTAL-REVENUES> 26,727,000
<CGS> 13,688,000
<TOTAL-COSTS> 13,688,000
<OTHER-EXPENSES> 7,601,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (833,000)
<INCOME-PRETAX> 6,271,000
<INCOME-TAX> 2,310,000
<INCOME-CONTINUING> 3,961,000
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<EPS-DILUTED> .26
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