<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 JULY 2, 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.
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(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)
[LOGO]
35 Technology Drive
Warren, New Jersey 07059
------------------ ------
(Address of principal executive offices) (Zip Code)
(908) 668-5000
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(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 July 2,
2000 was 29,865,985.
<PAGE>
INDEX
ANADIGICS, Inc.
Part. I. Financial Information
Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheets - July 2,
2000 and December 31, 1999.
Condensed consolidated statements of operations
and comprehensive income (loss) - Three and six
months ended July 2, 2000 and July 4, 1999.
Condensed consolidated statements of cash flows -
Six months ended July 2, 2000 and July 4,1999.
Notes to condensed consolidated financial
statements - July 2, 2000.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About
Market Risk
Item 4. Submission of Matters to a Vote of Security
Holders
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>
July 2, 2000 December 31, 1999
------------ -----------------
(unaudited) (Note 1)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 131,842 $ 149,895
Marketable securities 13,140 14,452
Accounts receivable, net 28,988 25,151
Inventory 16,101 10,334
Prepaid expenses and other current assets 3,552 2,708
Insurance settlement receivable -- 5,325
Deferred taxes 4,840 4,840
--------- ---------
Total current assets 198,463 212,705
Marketable securities 27,171 7,404
Property and equipment:
Equipment and furniture 130,312 115,195
Leasehold improvements 27,746 27,553
Projects in process 14,138 8,525
Less accumulated depreciation and amortization 73,320 66,383
--------- ---------
98,876 84,890
Other assets 2,514 2,164
Deferred taxes 3,313 10,447
--------- ---------
Total assets $ 330,337 $ 317,610
========= =========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 17,289 $ 15,901
Accrued litigation settlement costs -- 11,761
Accrued liabilities 7,433 6,577
Accrued restructuring costs 868 993
Current maturities of long-term debt 1,000 1,000
Current maturities of capital lease obligations 210 151
--------- ---------
Total current liabilities 26,800 36,383
Capital lease obligations, less current portion -- 32
Other long-term liabilities 1,790 1,546
Long-term debt, less current portion 2,500 3,000
Commitments and contingencies
Stockholders' equity
Common stock, $0.01 par value, 144,000,000 shares authorized,
29,865,985 and 28,853,614 issued and outstanding at
July 2, 2000 and December 31, 1999, respectively 298 289
Additional paid-in capital 307,028 296,496
Accumulated deficit (7,864) (20,010)
Accumulated other comprehensive loss (215) (126)
--------- ---------
Total stockholders' equity 299,247 276,649
--------- ---------
Total liabilities and stockholders' equity $ 330,337 $ 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 Six months ended
--------------------------- ---------------------------
July 2, 2000 July 4, 1999 July 2, 2000 July 4, 1999
------------ ------------ ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $ 47,517 $ 30,534 $ 90,522 $ 55,582
Cost of sales 23,135 19,248 44,968 36,148
------------ ------------ ------------ ------------
Gross profit 24,382 11,286 45,554 19,434
Research and development expenses 10,181 6,387 19,970 11,968
Selling and administrative expenses 6,627 4,885 12,764 8,744
------------ ------------ ------------ ------------
Operating income (loss) 7,574 14 12,820 (1,278)
Interest income, net 2,621 478 5,120 995
Gain on sale of equipment 290 1,339
Provision for litigation settlement -- 6,925 -- 6,925
------------ ------------ ------------ ------------
Income (loss) before income taxes 10,485 (6,433) 19,279 (7,208)
Provision (benefit) for income taxes 3,879 (2,380) 7,133 (2,667)
------------ ------------ ------------ ------------
Net income (loss) $ 6,606 $ (4,053) $ 12,146 $ (4,541)
============ ============ ============ ============
Basic earnings (loss) per share(1) $ 0.22 $ (0.18) $ 0.41 $ (0.20)
============ ============ ============ ============
Weighted average common
shares outstanding(1) 29,810,187 22,257,819 29,543,727 22,217,530
============ ============ ============ ============
Diluted earnings (loss) per share(1) $ 0.21 $ (0.18) $ 0.38 $ (0.20)
============ ============ ============ ============
Weighted average common and
dilutive securities outstanding(1) 31,782,288 22,257,819 31,774,482 22,217,530
============ ============ ============ ============
</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 Six months ended
------------------------------ ---------------------------------
July 2, 2000 July 4, 1999 July 2, 2000 July 4, 1999
------------ ------------ ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net income (loss) $ 6,606 $ (4,053) $ 12,146 $ (4,541)
Unrealized loss on
marketable securities (97) (81) (89) (87)
-------- -------- -------- --------
Comprehensive
income (loss) $ 6,509 $ (4,134) $(12,057) $ (4,628)
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
ANADIGICS, Inc.
(Amounts in thousands)
<TABLE>
<CAPTION>
Six months ended
--------------------------------
July 2, 2000 July 4, 1999
------------ ------------
(unaudited) (unaudited)
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 12,146 $ (4,541)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 10,182 11,721
Amortization 101 197
Deferred taxes 7,134 (2,511)
Gain on sale of equipment (1,339)
Provision for litigation settlement, net (6,436) 6,725
Changes in operating assets and liabilities
Accounts receivable (3,837) (6,343)
Inventory (5,767) (1,527)
Prepaid expenses and other current assets (1,194) (349)
Accounts payable 1,388 2,905
Accrued liabilities and other long-term liabilities 975 3,835
--------- ---------
Net cash provided by operating activities 13,353 10,112
Cash flows from investing activities:
Purchases of plant and equipment (24,069) (9,769)
Purchases of marketable securities (35,159) (14,094)
Proceeds from sale of marketable securities 16,615 14,112
Proceeds from sale of equipment 1,342 --
--------- ---------
Net cash used in investing activities (41,271) (9,751)
Cash flows from financing activities:
Issuance of common stock 10,541 1,630
Repayment of long-term debt (500) (500)
Payment of capital lease obligations (176) (135)
--------- ---------
Net cash provided by financing activities 9,865 995
--------- ---------
Net (decrease) increase in cash and cash equivalents (18,053) 1,356
Cash and cash equivalents at beginning of period 149,895 23,987
--------- ---------
Cash and cash equivalents at end of period $ 131,842 $ 25,343
========= =========
Supplemental disclosures of cash flow information:
Interest paid $ 156 $ 103
========= =========
Taxes paid $ 46 $ 180
========= =========
Supplemental schedule of non-cash investing activity:
Acquisition of equipment under capital leases $ 203
=========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
ANADIGICS, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited) - July 2, 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 July 2, 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:
July 2, 2000 Dec. 31, 1999
------------ -------------
Raw materials $ 2,953 $ 1,995
Work in process 8,831 7,370
Finished goods 6,190 4,105
------- -------
17,974 13,470
Reserves 1,873 3,136
------- -------
$16,101 $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) - July 2, 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 Six months ended
--------------------------------- ---------------------------------
July 2, 2000 July 4, 1999 July 2, 2000 July 4, 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Weighted average common shares
outstanding used to calculate
basic earnings per share 29,810,187 22,257,819 29,543,727 22,217,530
Net effect of diluted stock options -
based upon the treasury stock
method using an average market
price 1,972,101 - * 2,230,755 - *
---------- ---------- ---------- ----------
Weighted average common and
dilutive securities outstanding
used to calculate diluted earnings
per share 31,782,288 22,257,819 31,774,482 22,217,530
========== ========== ========== ==========
</TABLE>
* - The dilutive stock options are not included as their effect is
anti-dilutive.
5. Segment Information
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 Six months ended
------------------ -----------------
July 2, 2000 July 4, 1999 July 2, 2000 July 4, 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cellular and PCS Applications $ 25,508 $ 13,073 $ 48,883 $ 22,490
Cable and Broadcast Applications 16,989 10,575 32,293 20,506
Fiber Optic Applications 5,020 6,886 9,346 12,486
Engineering service sales - - - 100
---------- ---------- ---------- -----------
Total $ 47,517 $ 30,534 $ 90,522 $ 55,582
========== ========== ========== ===========
</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 Six months ended
------------------ -----------------
July 2, 2000 July 4, 1999 July 2, 2000 July 4, 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Europe $10,135 $ 7,772 $19,890 $13,583
Asia 8,786 7,385 18,005 14,810
North America (primarily U.S.A.) 19,057 12,172 36,082 21,482
South America 9,539 3,205 16,545 5,707
------- ------- ------- -------
Total $47,517 $30,534 $90,522 $55,582
======= ======= ======= =======
</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 Six months ended
------------------ -----------------
July 2, 2000 July 4, 1999 July 2, 2000 July 4, 1999
------------ ------------ ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 48.7% 63.0% 49.7% 65.0%
------ ------ ------ ------
Gross profit 51.3% 37.0% 50.3% 35.0%
Research and development expenses 21.4% 20.9% 22.1% 21.6%
Selling and administrative expenses 14.0% 16.0% 14.0% 15.7%
------ ------ ------ ------
Operating income (loss) 15.9% 0.1% 14.2% (2.3%)
Interest income, net 5.6% 1.5% 5.7% 1.8%
Gain on sale of equipment 0.6% -- 1.5% --
Provision for litigation settlement, net -- 22.7% -- 12.5%
------ ------ ------ ------
Income (loss) before income taxes 22.1% (21.1%) 21.4% (13.0%)
Provision (benefit) for income taxes 8.2% (7.8%) 8.0% (4.8%)
------ ------ ------ ------
Net income (loss) 13.9% (13.3%) 13.4% (8.2%)
====== ====== ====== ======
</TABLE>
Second Quarter 2000 (Ended July 2, 2000) Compared to Second Quarter 1999
(Ended July 4, 1999)
Net Sales. Net sales during the second quarter of 2000 increased 56% to
$47.5 million from $30.5 million in the second quarter of 1999. Sales of
integrated circuits for cellular and PCS applications increased 95% during the
second quarter of 2000 to $25.5 million from $13.0 million in the second 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 61% during the second quarter of 2000 to $17.0 million from $10.6
million in the second quarter of 1999. The increase in sales of integrated
circuits for cable and broadcast applications during the second 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 a repeater in cable television
distribution networks.
Sales of integrated circuits for fiber optic telecommunications and
data communications ("fiber optic") applications decreased 27% during the second
quarter of 2000 to $5.0 million from $6.9 million in the second quarter of 1999.
The reduction in sales of integrated circuits for fiber optic applications was
primarily due to a reduction in demand for its transimpedence amplifiers used in
Synchronous Optical Network (SONET) medium range and long-haul fiber optic
telecommunications applications.
Generally, selling prices for same product sales were lower during the
second quarter of 2000 compared to the second quarter of 1999.
8
<PAGE>
Due to certain first half of 2000 inventory corrections and issues
related to component shortages experienced by our largest cellular and PCS
(wireless) customer, we believe we may experience a mix shift of our product
revenue during the second half of 2000. This revenue shift may result in a
reduction in our revenue growth (from the sequential quarterly revenue growth
rate experienced during the second quarter of 2000 from the first quarter of
2000 of 10.5%).
Gross Margin. Gross margin during the second quarter of 2000 increased
to 51.3% from 37.0% in the second quarter of 1999. Gross margin during the
second quarter of 1999 included $2.7 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 $2.7 million, gross
margin during the second quarter of 1999 was 45.7%. The increase in gross margin
during the second quarter of 2000 to 51.3% compared to the second quarter of
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 second quarter of 2000, compared to
four-inch wafers used during the second quarter of 1999.
Research and Development. Company sponsored research and development
expense increased 59% during the second quarter of 2000 to $10.1 million from
$6.4 million during the second 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
increased to 21.4% in the second quarter of 2000 from 20.9% in the second
quarter of 1999.
The Company expects research and development expense to continue to
increase from the level incurred during the second quarter of 2000.
Selling and Administrative. Selling and administrative expenses
increased 36% during the second quarter of 2000 to $6.6 million from $4.9
million in the second quarter of 1999. The increase in selling and
administrative expenses during the second quarter of 2000 was primarily due to
increased recruiting and relocation costs and an increase in professional fees.
As a percentage of sales, selling and administrative expenses decreased to 14.0%
in the second quarter of 2000 from 16.0% in the second quarter of 1999.
Gain on Sale of Equipment. During the second quarter of 2000, the
Company sold equipment, which resulted in a gain on the sale of approximately
$0.3 million. Substantially all of the equipment was fully depreciated prior to
its sale.
Interest Income, net. Interest income, net increased $2.1 million to
$2.6 million during the second quarter of 2000 from $0.5 million during the
second quarter of 1999 on substantially higher invested cash balances following
our secondary offering of common stock completed in November 1999.
9
<PAGE>
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
second quarter of 2000 was recorded at an estimated annual effective tax rate of
37.0% of the income before income taxes.
Six Months 2000 (Ended July 2, 2000) Compared to Six Months 1999
(Ended July 4, 1999)
Net Sales. Net sales during the six month period ended July 2, 2000
increased 63% to $90.5 million from $55.6 million in the six month period ended
July 4, 1999. Sales of integrated circuits for cellular and PCS applications
increased 117% during the six month period ended July 2, 2000 to $48.9 million
from $22.5 million in the six month period ended July 4, 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 57% during the six month period ended July 2, 2000 to $32.3 million
from $20.5 million in the six month period ended July 4, 1999. The increase in
sales of integrated circuits for cable and broadcast applications during the six
month period ended July 2, 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 a repeater in hybrid cable television distribution networks.
Sales of integrated circuits for fiber optic telecommunication and data
communication applications decreased 25% during the six month period ended July
2, 2000 to $9.3 million from $12.5 million in the six month period ended July 4,
1999 as demand for transimpedence amplifiers for Synchronous Optical Network
(SONET) medium and long-haul fiber optic telecommunications applications
decreased.
Generally, selling prices for same product sales were lower during the
six month period ended July 2, 2000 compared to the six month period ended July
4, 1999.
Gross Margin. Gross margin during the six month period ended July 2,
2000 increased to 50.3% from 35.0% in the six month period ended July 4, 1999.
Gross margin during the six month period ended July 4, 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 six month period ended July 4, 1999 was 44.6%. The increase in
gross margin during the six month period ended July 2, 2000 to 50.3% compared to
the six month period ended July 4, 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 six month period ended July 2, 2000, compared to four-inch wafers used
during the six month period ended July 4, 1999.
10
<PAGE>
Research and Development. Company sponsored research and development
expense increased 67% during the six month period ended July 2, 2000 to $20.0
million from $12.0 million in the six month period ended July 4, 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 percent of sales, company funded research and
development increased to 22.1% during the six month period ended July 2, 2000
from 21.6% in the six month period ended July 4, 1999.
Selling and Administrative. Selling and administrative expenses
increased 46% during the six month period ended July 2, 2000 to $12.8 million
from $8.7 million in the six month period ended July 4, 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 six month period ended
July 2, 2000 from 15.7% in the six month period ended July 4, 1999.
Interest Income, net. Interest income, net increased $4.1 million
during the six month period ended July 2, 2000 to $5.1 million from $1.0 million
in the six month period ended July 4, 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
six month period ended July 2, 2000 was recorded at an estimated annual
effective tax rate of 37.0% of the income before income taxes.
Liquidity and Capital Resources
As of July 2, 2000, we had $131.8 million in cash and cash equivalents and
$40.3 million in marketable securities. We had $3.5 million outstanding under
our revolving bank credit facility as of the end of the second quarter of 2000.
We 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 July
2, 2000, we also had available $15.0 million under a credit facility. The credit
facility drawdown period expires on July 1, 2001. The outstanding bank debt and
credit facility are subject to certain financial covenants. Substantially all of
our assets are pledged as security for repayments of the outstanding bank debt
and borrowings, if any, under the credit facility.
Operating activities, which included a payment of $6.4 million during the
period to settle a shareholder lawsuit, generated $13.4 million in cash during
the six month period ended July 2, 2000. Investing activities, which primarily
consisted of purchases of equipment of $24.1 million and net purchases of
marketable securities of $18.5 million, used $41.3 million of cash during the
six month period ended July 2, 2000. Financing activities, which primarily
consisted of proceeds received from employee stock options exercised, raised
$9.9 million during the six month period ended July 2, 2000.
As previously planned and disclosed, we ceased our wafer fabrication
operations in our 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 the third
quarter of 2000. We plan to restore these areas as office space by the end of
the third quarter of 2000.
11
<PAGE>
As of July 2, 2000, we are committed to purchase approximately $15.0
million of equipment and furniture, and leasehold improvements during the second
half of 2000. Included in the $15.0 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 by the end of the third quarter of
2000.
We believe that our sources of capital, including internally generated
funds and $15.0 million available under our existing credit 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, which is required to be adopted
in years beginning after June 15, 2000. The Statement permits early adoption as
of the beginning of any fiscal quarter after its issuance. We expect to adopt
the new Statement effective January 1, 2001. The Statement will require us to
recognize all derivatives on the balance sheet at fair value. Derivatives that
are not hedges must be adjusted to fair value through income. If a derivative is
a hedge, depending on the nature of the hedge, changes in the fair value of the
derivative will either be offset against the change in fair value of the hedged
asset, liability, or firm commitment through earnings, or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. We do not anticipate that the adoption of this Statement
will have a significant effect on our 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 Operations
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.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of stockholders on May 24, 2000 at
which the Company's stockholders voted on:
(a) The election of two Class II Directors of ANADIGICS (Paul Bachow and
Bami Bastani) to hold office until 2003.
(b) To approve an amendment to the Amended and Restated Certificate of
incorporation to increase the number of authorized shares of ANADIGICS'
Common Stock by 76,000,000 to 144,000,000.
(c) To approve an amendment to the 1995 Long term Incentive and Share Award
Plan to increase the number of shares issuable thereunder by 750,000 to
4,912,500.
(d) The ratification of Ernst & Young LLP as independent auditors of
ANADIGICS, Inc. for the fiscal year ending December 31, 2000.
The four matters listed above were voted upon and approved by the
shareholders of the Company as follows:
(a) The election of Paul Bachow as a Class II Director was approved by
holders of 25,358,356 shares of the Company's outstanding capital
stock. Holders of 267,689 shares withheld from voting on such election.
The election of Bami Bastani as a Class II Director was approved by
holders of 25,362,647 shares of the Company's outstanding capital
stock. Holders of 263,398 shares withheld from voting on such election.
(b) Amendment to the Amended and Restated Certificate of incorporation to
increase the number of authorized shares of ANADIGICS' Common Stock by
76,000,000 to 144,000,000 was approved by holders of 22,235,769 shares
of the Company' outstanding stock. Holders of 3,363,264 shares voted
against the amendment, and holders of 27,012 shares abstained.
(c) Amendment to the 1995 Long Term Incentive and Share Award Plan to
increase the number of authorized shares issuable thereunder by 750,000
to 4,912,500 was approved by holders of 15,277,749 shares of the
Company' outstanding stock. Holders of 10,319,622 shares voted against
the amendment, and holders of 28,674 shares abstained.
(d) The ratification of the appointment of Ernst & Young LLP as independent
auditors was approved by holders of 25,601,037 shares of the Company's
outstanding capital stock. Holders of 7,394 shares voted against the
ratification, and holders of 17,614 shares abstained from voting on
such ratification.
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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 July 2, 2000.
The Company did not file any reports on Form 8-K during the
quarter ended July 2, 2000.
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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: July 28, 2000
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ANADIGICS, Inc.
EXHIBIT INDEX
Page
Exhibit 27. Financial Data Schedule ........................ 17
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