<PAGE>
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 30, 2000.
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO ____________.
Commission File No. 0-25662
ANADIGICS, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-2582106
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
[ANADIGICS LOGO]
35 Technology Drive
Warren, New Jersey 07059
---------------------------------------- --------------------------
(Address of principal executive offices) (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
September 30, 2000 was 29,908,071.
<PAGE>
INDEX
ANADIGICS, Inc.
Part. I. Financial Information
Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheets - September 30, 2000 and
December 31, 1999.
Condensed consolidated statements of operations and comprehensive
income (loss) - Three and nine months ended September 30, 2000 and
October 3, 1999.
Condensed consolidated statements of cash flows - Nine months ended
September 30, 2000 and October 3, 1999.
Notes to condensed consolidated financial statements -
September 30, 2000.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Part II. Other Information
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
2
<PAGE>
PART I - FINANCIAL STATEMENTS
Item 1. Financial Statements (unaudited)
CONDENSED CONSOLIDATED BALANCE SHEETS
ANADIGICS, Inc.
(Amounts in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
------------------ -----------------
(unaudited) (Note 1)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 103,264 $ 149,895
Marketable securities 29,746 14,452
Accounts receivable, net 34,149 25,151
Inventory 17,709 10,334
Prepaid expenses and other current assets 2,863 2,708
Insurance settlement receivable -- 5,325
Deferred taxes 4,106 4,840
--------- ---------
Total current assets 191,837 212,705
Marketable securities 35,652 7,404
Property and equipment:
Equipment and furniture 129,612 115,195
Leasehold improvements 29,151 27,553
Projects in process 20,395 8,525
Less accumulated depreciation and amortization 77,665 66,383
--------- ---------
101,493 84,890
Other assets 4,516 2,164
Deferred taxes -- 10,447
--------- ---------
Total assets $ 333,498 $ 317,610
========= =========
Liabilities and stockholders' equity Current liabilities:
Accounts payable $ 13,386 $ 15,901
Accrued litigation settlement costs -- 11,761
Accrued liabilities 7,168 6,577
Accrued restructuring costs 606 993
Current maturities of long-term debt 1,000 1,000
Current maturities of capital lease obligations 226 151
--------- ---------
Total current liabilities 22,386 36,383
Capital lease obligations, less current portion -- 32
Other long-term liabilities 1,908 1,546
Long-term debt, less current portion 2,250 3,000
Commitments and contingencies
Stockholders' equity
Common stock, $0.01 par value, 144,000,000 shares
authorized, 29,908,071 and 28,853,614 issued
and outstanding at September 30, 2000 and
December 31, 1999, respectively 299 289
Additional paid-in capital 307,464 296,496
Accumulated deficit (786) (20,010)
Accumulated other comprehensive loss (23) (126)
--------- ---------
Total stockholders' equity 306,954 276,649
--------- ---------
Total liabilities and stockholders' equity $ 333,498 $ 317,610
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
ANADIGICS, Inc.
(Amounts in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Three months ended Nine months ended
------------------ -----------------
Sept. 30, 2000 Oct. 3, 1999 Sept. 30, 2000 Oct. 3, 1999
-------------- ------------ -------------- ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $ 51,075 $ 35,460 $ 141,597 $ 91,042
Cost of sales 24,810 18,862 69,778 55,011
------------ ------------ ------------ ------------
Gross profit 26,265 16,598 71,819 36,031
Research and development expenses 10,852 8,293 30,821 20,260
Selling and administrative expenses 7,121 5,091 19,885 13,834
Restructuring charge -- (441) -- (441)
------------ ------------ ------------ ------------
Operating income 8,292 3,655 21,113 2,378
Interest income, net 2,756 503 7,876 1,497
Gain on sale of equipment 15 -- 1,353 --
Provision for litigation settlement, net -- -- -- 6,925
------------ ------------ ------------ ------------
Income (loss) before income taxes 11,063 4,158 30,342 (3,050)
Provision (benefit) for income taxes 3,986 1,413 11,119 (1,253)
------------ ------------ ------------ ------------
Net income (loss) $ 7,077 $ 2,745 $ 19,223 $ (1,797)
============ ============ ============ ============
Basic earnings (loss) per share(1) $ 0.24 $ 0.12 $ 0.65 $ (0.08)
============ ============ ============ ============
Weighted average common
shares outstanding(1) 29,880,442 22,487,981 29,655,966 22,314,602
============ ============ ============ ============
Diluted earnings (loss) per share(1) $ 0.23 $ 0.11 $ 0.61 $ (0.08)
============ ============ ============ ============
Weighted average common and
dilutive securities outstanding(1) 31,241,801 25,336,989 31,655,258 22,314,602
============ ============ ============ ============
</TABLE>
(1) - Historical share and per share data have been restated to reflect a
3-for-2 stock split.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
ANADIGICS, Inc.
(Amounts in thousands)
<TABLE>
<CAPTION>
Three months ended Nine months ended
------------------ -----------------
Sept. 30, 2000 Oct. 3, 1999 Sept. 30, 2000 Oct. 3, 1999
-------------- ------------ -------------- ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net income (loss) $ 7,077 $ 2,745 $ 19,223 $ (1,797)
Unrealized gain (loss) on
marketable securities 192 (10) 103 (98)
------------ ------------ ------------ ------------
Comprehensive income (loss) $ 7,269 $ 2,735 $ 19,326 $ (1,895)
============ ============ ============ ============
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
ANADIGICS, Inc.
(Amounts in thousands)
<TABLE>
<CAPTION>
Nine months ended
-----------------
Sept. 30, 2000 Oct. 3, 1999
-------------- ------------
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 19,223 $ (1,797)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 16,253 15,890
Amortization 226 242
Deferred taxes 11,181 (1,141)
Gain on sale of equipment (1,353) --
Provision for litigation settlement, net (6,436) 6,551
Changes in operating assets and liabilities
Accounts receivable (8,998) (11,670)
Inventory (7,375) (1,658)
Prepaid expenses and other assets (2,507) (2,787)
Accounts payable (2,515) 6,285
Accrued liabilities and other liabilities 566 3,815
--------- ---------
Net cash provided by operating activities 18,265 13,730
Cash flows from investing activities:
Purchases of plant and equipment (32,693) (17,048)
Purchases of marketable securities (67,510) (22,667)
Proceeds from sale of marketable securities 24,071 17,863
Proceeds from sale of equipment 1,342 --
--------- ---------
Net cash used in investing activities (74,790) (21,852)
Cash flows from financing activities:
Issuance of common stock 10,958 5,934
Repayment of long-term debt (750) (750)
Payment of capital lease obligations (314) (181)
--------- ---------
Net cash provided by financing activities 9,894 5,003
--------- ---------
Net decrease in cash and cash equivalents (46,631) (3,119)
Cash and cash equivalents at beginning of period 149,895 23,987
--------- ---------
Cash and cash equivalents at end of period $ 103,264 $ 20,868
========= =========
Supplemental disclosures of cash flow information:
Interest paid $ 230 $ 285
========= =========
Taxes paid $ 46 $ 225
========= =========
Supplemental schedule of non-cash investing activity:
Acquisition of equipment under capital leases $ 357 $ --
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
ANADIGICS, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited) - September 30,
2000
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 month
period ended September 30, 2000 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2000.
The condensed, consolidated balance sheet at December 31, 1999 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. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.
The condensed, 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.
2. Inventories
-----------
Inventories are stated at the lower of cost (first-in, first-out method) or
market. Inventories consist of the following:
Sept. 30, 2000 Dec. 31, 1999
-------------- -------------
Raw materials $ 3,501 $ 1,995
Work in process 10,407 7,370
Finished goods 8,061 4,105
------- -------
21,969 13,470
Reserves 4,260 3,136
------- -------
$17,709 $10,334
======= =======
3. Legal Proceedings
-----------------
The court-approved settlement of the previously-disclosed consolidated
securities class action, captioned In re ANADIGICS, Inc. Securities Litigation,
No. 98-CV-917 (MLC) (D.N.J.), and shareholder's derivative lawsuit, captioned
Deegan v. Rosenzweig, No. 98-CV-3640 (MLC) (D.N.J.), became final and was funded
in January 2000. The total settlement payment (including the costs of
administering the settlement) was $11.8 million, of which approximately $5.3
million was paid on behalf of ANADIGICS, Inc. by the Company's insurers.
6
<PAGE>
ANADIGICS, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited) - September 30,
2000 (Continued)
4. Earnings Per Share
------------------
The reconciliation of shares used to calculate basic and diluted
earnings per share consists of the following:
<TABLE>
<CAPTION>
Three months ended Nine months ended
------------------ -----------------
Sept. 30, 2000 Oct. 3, 1999 Sept. 30, 2000 Oct. 3, 1999
-------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
Weighted average common shares
outstanding used to calculate
basic earnings per share 29,880,442 22,487,981 29,655,966 22,314,602
Net effect of diluted stock options -
based upon the treasury stock
method using an average market
price 1,361,359 2,849,008 1,999,292 -- *
------------ ------------ ------------ ------------
Weighted average common and
dilutive securities outstanding
used to calculate diluted earnings
per share 31,241,801 25,336,989 31,655,258 22,314,602
============ ============ ============ ============
</TABLE>
* - The dilutive stock options are not included as their effect is
anti-dilutive.
5. Revenue Sources
Revenues by Application
The Company classifies its revenues based upon the end application of
the product in which its integrated circuits are used. Net sales by end
application are regularly reviewed by the chief operating decision maker and are
as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
------------------ -----------------
Sept. 30, 2000 Oct. 3, 1999 Sept. 30, 2000 Oct. 3, 1999
-------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
Cellular and PCS Applications $ 20,732 $ 15,715 $ 69,615 $ 38,205
Cable and Broadcast Applications 23,586 12,726 55,874 33,231
Fiber Optic Applications 6,757 6,997 16,108 19,483
Engineering service sale - 22 -- 123
------------ ------------ ------------ ------------
Total $ 51,075 $ 35,460 $ 141,597 $ 91,042
============ ============ ============ ============
</TABLE>
Geographic Information
The Company primarily sells to four geographic regions; Europe, Asia,
North America (primarily U.S.A.), and South America. The geographic region is
determined by the destination of the shipped product. Net sales to each of the
four geographic regions are as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
------------------ -----------------
Sept. 30, 2000 Oct. 3, 1999 Sept. 30, 2000 Oct. 3, 1999
-------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
Europe $ 7,709 $ 8,175 $ 27,599 $ 21,919
Asia 13,557 9,676 31,562 24,332
North America (primarily U.S.A.) 17,258 13,476 53,341 34,975
Central and South America 12,551 4,133 29,095 9,816
------------ ------------ ------------ ------------
Total $ 51,075 $ 35,460 $ 141,597 $ 91,042
============ ============ ============ ============
</TABLE>
7
<PAGE>
ANADIGICS, Inc.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
The following table sets forth unaudited consolidated statements of
operations data as a percent of net sales for the periods presented:
<TABLE>
<CAPTION>
Consolidated Statement of Operations
Three months ended Nine months ended
------------------ -----------------
Sept. 30, 2000 Oct. 3, 1999 Sept. 30, 2000 Oct. 3, 1999
-------------- ------------ -------------- ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 48.6% 53.2% 49.3% 60.4%
------------ ------------ ------------ ------------
Gross profit 51.4% 46.8% 50.7% 39.6%
Research and development expenses 21.2% 23.4% 21.8% 22.3%
Selling and administrative expenses 13.9% 14.4% 14.0% 15.2%
Restructuring charge -- (1.2%) -- (0.5%)
------------ ------------ ------------ ------------
Operating income 16.3% 10.2% 14.9% 2.6%
Interest income, net 5.4% 1.4% 5.6% 1.6%
Gain on sale of equipment -- -- 1.0% --
Provision for litigation settlement, net -- -- -- 7.6%
------------ ------------ ------------ ------------
Income (loss) before income taxes 21.7% 11.6% 21.5% (3.4%)
Provision (benefit) for income taxes 7.8% 4.0% 7.9% (1.4%)
------------ ------------ ------------ ------------
Net income (loss) 13.9% 7.6% 13.6% (2.0%)
============ ============ ============ ============
</TABLE>
Third Quarter 2000 (Ended September 30, 2000) Compared to Third Quarter 1999
(Ended October 3, 1999)
Net Sales. Net sales during the third quarter of 2000 increased 44% to
$51.1 million from $35.5 million in the third quarter of 1999. Sales of
integrated circuits for cellular and PCS applications increased 32% during the
third quarter of 2000 to $20.7 million from $15.7 million in the third quarter
of 1999. The increase in sales of integrated circuits for cellular and PCS
applications was primarily due to an increase in demand for our multi-band,
multi-mode power amplifier integrated circuits used in wireless telephone
handsets.
Sales of integrated circuits for cable and broadcast applications
increased 85% during the third quarter of 2000 to $23.6 million from $12.7
million in the third quarter of 1999. The increase in sales of integrated
circuits for cable and broadcast applications during the third quarter of 2000
was primarily due to increases in demand for our integrated circuit reverse
amplifiers and converters used in digital set-top boxes, cable modems, and our
integrated circuit line amplifiers used as repeaters in cable television
distribution networks.
Sales of integrated circuits for fiber optic telecommunications and
data communications ("fiber optic") applications decreased 3% during the third
quarter of 2000 to $6.8 million from $7.0 million in the third quarter of 1999.
The reduction in sales of integrated circuits for fiber optic applications was
due to a repositioning of the telecommunications product line.
Generally, selling prices for same product sales were lower during the
third quarter of 2000 compared to the third quarter of 1999.
8
<PAGE>
Due to certain inventory corrections and issues related to component
shortages experienced by our largest cellular and PCS (wireless) customer, we
believe we may continue to experience a mix shift of our product revenue
throughout the fourth quarter of 2000. This revenue shift is expected to result
in a sequential reduction in our revenue. On September 15, 2000 the Company
announced that fourth quarter revenues are anticipated to be 30 - 35% lower than
third quarter 2000 levels.
Gross Margin. Gross margin during the third quarter of 2000 increased
to 51.4% from 46.8% in the third quarter of 1999. The increase in gross margin
during the third quarter of 2000 resulted from leveraging fixed costs over
higher sales levels, as well as manufacturing efficiencies and per unit material
cost reductions which resulted from the use of six-inch wafers during the third
quarter of 2000 compared to four-inch wafers used during the third quarter of
1999.
Research and Development. Company sponsored research and development
expense increased 31% during the third quarter of 2000 to $10.9 million from
$8.3 million during the third quarter of 1999. The increase was primarily
attributable to: (1) increased research and development of integrated circuits
for cellular and PCS, CATV, and fiber optic applications, and (2) increased
research and development of new process technologies, particularly Indium
Gallium Phosphide Heterojunction Bi-polar Transistor (InGaP HBT) process
technology for integrated circuits used in cellular and PCS, and fiber optic
applications. As a percentage of sales, research and development expense
decreased to 21.2% in the third quarter of 2000 from 23.4% in the third quarter
of 1999.
Selling and Administrative. Selling and administrative expenses
increased 40% during the third quarter of 2000 to $7.1 million from $5.1 million
in the third quarter of 1999. The increase in selling and administrative
expenses during the third quarter of 2000 was primarily due to increases in
sales and marketing expenses to support our revenue growth, as well as an
increase in professional fees. As a percentage of sales, selling and
administrative expenses decreased to 13.9% in the third quarter of 2000 from
14.4% in the third quarter of 1999.
Interest Income, net. Interest income, net increased $2.3 million to
$2.8 million during the third quarter of 2000 from $0.5 million during the third
quarter of 1999 on substantially higher invested cash balances following our
secondary offering of common stock completed in November 1999.
Provision for Income Taxes. The provision for income taxes during the
third quarter of 2000 was recorded at an estimated effective tax rate of 36.0%
of the income before income taxes.
Nine Months 2000 (Ended September 30, 2000) Compared to Nine Months 1999 (Ended
October 3, 1999)
Net Sales. Net sales during the nine month period ended September 30,
2000 increased 56% to $141.6 million from $91.0 million in the nine month period
ended October 3, 1999. Sales of integrated circuits for cellular and PCS
applications increased 82% during the nine month period ended September 30, 2000
to $69.6 million from $38.2 million in the nine month period ended October 3,
1999. The increase in sales of integrated circuits for cellular and PCS
applications was due to an increase in demand for our multi-band, multi-mode
power amplifier integrated circuits used in wireless telephone handsets.
Sales of integrated circuits for cable and broadcast applications
increased 68% during the nine month period ended September 30, 2000 to $55.9
million from $33.2 million in the nine month period ended October 3, 1999. The
increase in sales of integrated circuits for cable and broadcast applications
during the nine month period ended September 30, 2000 was due to increases in
demand for the Company's integrated circuit reverse amplifiers and converters
used in digital set-top boxes and cable modems, and the Company's integrated
circuit line amplifiers used as repeaters in hybrid cable television
distribution networks.
9
<PAGE>
Sales of integrated circuits for fiber optic applications decreased 18%
during the nine month period ended September 30, 2000 to $16.1 million from
$19.5 million in the nine month period ended October 3, 1999. The reduction in
sales of fiber optic applications was due to the Company's repositioning the
product line to address the growing opportunities in higher data rates.
Generally, selling prices for same product sales were lower during the
nine month period ended September 30, 2000 compared to the nine month period
ended October 3, 1999.
Gross Margin. Gross margin during the nine month period ended
September 30, 2000 increased to 50.7% from 39.6% in the nine month period ended
October 3, 1999. Gross margin during the nine month period ended October 3, 1999
included $5.3 million of accelerated depreciation expense associated with the
closing of the Company's four-inch wafer fabrication facility. The accelerated
depreciation expense was due to a reduction in the useful lives of the
fabrication facility equipment and leasehold improvements with original lives
ranging from five to twenty years that were reduced to a life of nine months
beginning October 1, 1998. The reduction in estimated useful life followed our
October 1998 decision to close our four-inch wafer fabrication facility.
Excluding the accelerated depreciation expense of $5.3 million, gross
margin during the nine month period ended October 3, 1999 was 45.4%. The
increase in gross margin during the nine month period ended September 30, 2000
to 50.7% compared to the nine month period ended October 3, 1999, resulted from
leveraging fixed costs over higher sales levels, as well as manufacturing
efficiencies and per unit material cost reductions which resulted from the use
of six-inch wafers during the nine month period ended September 30, 2000,
compared to four-inch wafers used during the nine month period ended October 3,
1999.
Research and Development. Company sponsored research and development
expense increased 52% during the nine month period ended September 30, 2000 to
$30.8 million from $20.3 million in the nine month period ended October 3, 1999.
The increase was primarily attributable to: (1) increased research and
development of integrated circuits for cellular and PCS, CATV, and fiber optic
applications, and (2) increased research and development of new process
technologies, particularly InGaP HBT process technology for integrated circuits
used in cellular and PCS, and fiber optic applications. As a percent of sales,
company funded research and development decreased to 21.8% during the nine month
period ended September 30, 2000 from 22.3% in the nine month period ended
October 3, 1999.
Selling and Administrative. Selling and administrative expenses
increased 44% during the nine month period ended September 30, 2000 to $19.9
million from $13.8 million in the nine month period ended October 3, 1999. The
increase was due in part to increased relocation and recruiting costs, payroll
taxes associated with employee stock options exercised, professional fees, and
increased sales commission expense. As a percentage of sales, selling and
administrative expenses decreased to 14.0% during the nine month period ended
September 30, 2000 from 15.2% in the nine month period ended October 3, 1999.
Gain on Sale of Equipment. During the nine month period ended
September 30, 2000, the Company sold equipment, which resulted in a gain on the
sale of approximately $1.4 million. Substantially all of the equipment was fully
depreciated prior to its sale.
10
<PAGE>
Interest Income, net. Interest income, net increased $6.4 million
during the nine month period ended September 30, 2000 to $7.9 million from $1.5
million in the nine month period ended October 3, 1999 on substantially higher
invested cash balances following our secondary offering of common stock
completed in November 1999.
Provision For Litigation Settlement, Net. The Company recorded a
provision for litigation settlement of $6.9 million in the second quarter of
1999, as it reached an agreement in principle with the plaintiffs' counsel to
settle a consolidated class action lawsuit and a derivative lawsuit. The $6.9
million provision consisted of a payment of $11.8 million (offset by insurance
proceeds of $5.3 million) and $0.4 million of additional legal, settlement,
notification and court related fees. (See Part II. Other Information - Item 1.
Legal Proceedings - Shareholder Litigation for additional information on the
court-approved settlement of this litigation).
Provision for Income Taxes. The provision for income taxes during the
nine month period ended September 30, 2000 was recorded at an estimated annual
effective tax rate of 37% of the income before income taxes.
Liquidity and Capital Resources
As of September 30, 2000, the Company had $103.3 million in cash and cash
equivalents and $65.4 million in marketable securities. The Company had $3.3
million outstanding under its revolving bank credit facility as of the end of
the third quarter of 2000. The Company entered into an interest rate swap
agreement in 1998, which effectively fixes the interest rate on this portion of
the credit facility at 7.09%. The swap effectively changed the variable interest
rate of this bank debt to a fixed rate for which the present value of cash flows
are approximately the same. As of September 30, 2000, the Company also had
available $15.0 million under a term loan facility. The term loan facility
drawdown period expires on July 1, 2001. The outstanding bank debt and term loan
facility are subject to certain financial covenants. Substantially all of the
Company's assets are pledged as security for repayments of the outstanding bank
debt and borrowings, if any, under the term loan facility.
Operating activities, which included a payment of $6.4 million during the
period to settle a shareholder lawsuit, generated $18.3 million in cash during
the nine month period ended September 30, 2000. Investing activities, which
primarily consisted of purchases of equipment of $32.7 million and net purchases
of marketable securities of $43.4 million, used $74.8 million of cash during the
nine month period ended September 30, 2000. Financing activities, which
primarily consisted of proceeds received from employee stock options exercised,
raised $9.9 million during the nine month period ended September 30, 2000.
As previously planned and disclosed, the Company ceased the wafer
fabrication operations in the four-inch wafer fabrication facility during the
third quarter of 1999. Fabrication facility dismantling and restoration
activities began late in the fourth quarter of 1999 and are expected to continue
through early 2001. The Company plans to restore these areas as office space in
early 2001.
11
<PAGE>
As of September 30, 2000, the Company is committed to purchase
approximately $22.7 million of equipment and furniture, and leasehold
improvements. Included in the $22.7 million of equipment and furniture, and
leasehold improvements are commitments associated with the expansion of our
six-inch wafer fabrication facility. The expansion, which is expected to cost
approximately $11.0 million, will approximately double our current production
capacity and is expected to be completed in early 2001.
We believe that existing funds and sources of capital, including
internally generated funds and/or the $15.0 million available under the existing
term loan facility, will be adequate to satisfy anticipated capital needs for
the next twelve months and beyond. Our anticipated capital needs may include
acquisitions of complimentary businesses or technologies, or investments in
other companies. However, we may elect to finance all or part of our future
capital requirements through additional equity or debt financing. There can be
no assurance that such additional financing would be available on satisfactory
terms.
Impact Of Recently Issued Accounting Standards
In June 1998, the FASB issued Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended in June 2000 by
Statement of Financial Accounting Standards No. 138 ("SFAS 138"), "Accounting
for Certain Derivative Instruments and Certain Hedging Activities," which
requires companies to recognize all derivatives as either assets or liabilities
in the balance sheet and measure such instruments at fair value. As amended by
Statement of Financial Accounting Standards No. 137 (SFAS 137"), "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB 133," the provisions of SFAS 133 will require adoption no later than the
beginning of the Company's fiscal year ending December 31, 2001. Adoption of
SFAS 133, as amended by SFAS 138, is not expected to have a material impact on
the Company's results of operations or financial position.
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 that involve risks and uncertainties, including, but
not limited to, order rescheduling or cancellation, changes in customer's
forecasts of product demand, timely product and process development, individual
product pricing pressure, variation in production yield, changes in estimated
product lives, 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,
1999 and the Registration Statement on Form S-3 (Registration No. 333-83889).
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.
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Item 3. Quantitative And Qualitative Disclosures About Market Risk
We are exposed to changes in interest rates primarily from our credit
facility and our investments in certain available-for-sale securities. To date,
we have managed our exposure to changes in interest rates from our credit
facility by entering into interest rate swap agreements which allow us to
convert our debt from variable to fixed interest rates. We plan to continue to
reduce our exposure to changes in interest rates from our credit facility by
using interest rate derivative instruments. Our available-for-sale securities
consist of fixed income investments (U.S. Treasury and Agency securities and
short-term commercial paper). We continually monitor our exposure to changes in
interest rates from our available-for-sale securities. Accordingly, we believe
that the effects of changes in interest rates are limited and would not have a
material impact on our financial condition or results of operations. However, it
is possible that we are at risk if interest rates change in an unfavorable
direction. The magnitude of any gain or loss will be a function of the
difference between the fixed rate of the financial instrument and the market
rate and our financial condition and results of operations could be materially
affected.
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ANADIGICS, Inc.
PART II.
OTHER INFORMATION
Item 1. Legal Proceedings
Shareholder Litigation
The court-approved settlement of the previously-disclosed consolidated
securities class action, captioned In re ANADIGICS, Inc. Securities Litigation,
No. 98-CV-917 (MLC) (D.N.J.), and shareholder's derivative lawsuit, captioned
Deegan v. Rosenzweig, No. 98-CV-3640 (MLC) (D.N.J.), became final and was funded
in January 2000. The total settlement payment (including the costs of
administering the settlement) was $11.8 million, of which approximately $5.3
million was paid on behalf of ANADIGICS, Inc. by the Company's insurers.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included herein:
Exhibit 27. - Financial Data Schedule
(b) Reports on Form 8-K during the quarter ended September 30,
2000.
Form 8-K filed on August 15, 2000 relating to the Amended
and Restated By-Laws of the Company.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ANADIGICS, INC.
By: /s/ Thomas C. Shields
-------------------------------
Thomas C. Shields
Senior Vice President
and Chief Financial Officer
Dated: November 14, 2000
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ANADIGICS, Inc.
EXHIBIT INDEX
Page
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Exhibit 27. Financial Data Schedule ................................ 17
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