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 June 30, 1998
[ ] 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. 0-26690
ELANTEC SEMICONDUCTOR, INC.
(Exact Name of registrant as specified in its charter)
Delaware 77-0408929
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
675 Trade Zone Boulevard, Milpitas, California 95035
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 945-1323
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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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
As of August 2, 1998, 9,181,034 shares of the Registrant's Common Stock, $0.01
par value, were issued and outstanding.
<PAGE>
TABLE OF CONTENTS
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Page
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PART I FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements....................3
Notes to Condensed Consolidated Financial Statements...........6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................9
Item 3. Quantitative and Qualitative Disclosures about Market Risk....15
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..............................16
Signatures....................................................17
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
<TABLE>
ELANTEC SEMICONDUCTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
------------------- -------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net revenues $ 11,815 $ 9,195 $ 34,709 $ 25,690
Cost of revenues 6,123 5,223 17,980 14,737
-------- -------- -------- --------
Gross profit 5,692 3,972 16,729 10,953
Operating expenses:
Research and development 1,997 1,787 5,409 4,723
Marketing, sales, general and administrative 2,440 2,196 7,575 6,479
-------- -------- -------- --------
Total operating expenses 4,437 3,983 12,984 11,202
-------- -------- -------- --------
Income (loss) from operations 1,255 (11) 3,745 (249)
Interest and other, net 14 123 252 326
-------- -------- -------- --------
Income before taxes 1,269 112 3,997 77
Provision for taxes on income 101 14 319 10
-------- -------- -------- --------
Net income $ 1,168 $ 98 $ 3,678 $ 67
======== ======== ======== ========
Net income per share:
Basic $ 0.13 $ 0.01 $ 0.40 $ 0.01
======== ======== ======== ========
Diluted $ 0.12 $ 0.01 $ 0.38 $ 0.01
======== ======== ======== ========
Shares used in computing per share amounts:
Basic 9,170 8,962 9,119 8,842
======== ======== ======== ========
Diluted 9,769 9,239 9,732 9,271
======== ======== ======== ========
<FN>
See accompanying notes to the condensed consolidated financial statements.
</FN>
</TABLE>
3
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<TABLE>
ELANTEC SEMICONDUCTOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
June 30, September 30,
1998 1997 (1)
------- -------
(Unaudited)
<S> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $ 8,247 $ 9,839
Short-term investments 2,649 6,089
Accounts receivable, net 5,104 3,315
Inventories 9,947 7,369
Prepaid expenses and other current assets 580 627
------- -------
Total current assets 26,527 27,239
Property and equipment, net 18,225 9,230
Other assets, net 708 622
------- -------
Total assets $45,460 $37,091
======= =======
Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable and accrued liabilities $ 8,262 $ 5,367
Deferred revenue 3,174 2,094
Current portion of long-term debt and capital lease obligations 1,434 1,491
------- -------
Total current liabilities 12,870 8,952
Long-term debt and capital lease obligations 3,861 3,336
Stockholders' equity 28,729 24,803
------- -------
Total liabilities and stockholders' equity $45,460 $37,091
======= =======
<FN>
(1) The information in this column was derived from the Company's audited
consolidated financial statements at September 30, 1997.
See accompanying notes to the condensed consolidated financial statements.
</FN>
</TABLE>
4
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ELANTEC SEMICONDUCTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
June 30,
------------------
1998 1997
------- -------
Operating activities:
Net income $ 3,678 $ 67
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,871 1,456
Changes in operating assets and liabilities:
Accounts receivable (1,789) 825
Inventories (2,578) (715)
Prepaid expenses and other current assets 47 (2)
Accounts payable and accrued liabilities 2,895 (1,168)
Deferred revenue 1,080 (473)
------- -------
Net cash provided by (used in) operating activities 5,204 (10)
Investing activities:
Sale/maturity of available-for-sale securities 3,440 699
Purchase of property and equipment (9,245) (143)
Decrease (increase) in other assets (86) 85
------- -------
Net cash provided by (used in) investing activities (5,891) 641
Financing activities:
Payments on capital lease and other debt (1,153) (975)
Issuance of common stock 248 120
------- -------
Net cash provided by (used in) financing activities (905) (855)
Decrease in cash and cash equivalents (1,592) (224)
Cash and cash equivalents at beginning of period 9,839 9,377
------- -------
Cash and cash equivalents at end of period $ 8,247 $ 9,153
======= =======
Supplemental disclosures of cash flow information:
Lease and installment financing for capital equipment $ 1,621 $ 2,952
Interest paid $ 165 $ 193
Taxes paid $ 140 $ 50
See accompanying notes to the condensed consolidated financial statements.
5
<PAGE>
ELANTEC SEMICONDUCTOR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
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NOTE 1. BASIS OF PRESENTATION
The Company has prepared the unaudited condensed consolidated financial
statements included herein pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. In the opinion of management, all adjustments (consisting
of normal recurring items) considered necessary for a fair presentation have
been included. The results of operations for the nine months ended June 30, 1998
are not necessarily indicative of the results to be expected for the entire
year. These consolidated financial statements should be read in conjunction with
the consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the year ended September 30, 1997.
The Company's fiscal year end is the Sunday closest to September 30. The
Company's fiscal quarters end on the Sunday closest to the end of the calendar
quarter. For convenience, the Company has indicated that its quarters end on
December 31, March 31, June 30 and September 30.
NOTE 2. USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
NOTE 3. CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity
(at the date of purchase) of three months or less to be the equivalent of cash
for purposes of balance sheet and statement of cash flows presentation. Cash and
cash equivalents are carried at cost, which approximates market value.
NOTE 4. SHORT-TERM INVESTMENTS
The Company's policy is to invest in various short-term instruments with
investment grade credit ratings. Generally such investments have contractual
maturity of less than one year. All of the Company's marketable investments are
classified as "available-for-sale" and the Company classifies its
available-for-sale portfolio as available for use in its current operations. At
June 30, 1998, there was no significant difference between the fair market value
and the underlying cost of such securities.
6
<PAGE>
NOTE 5. INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market and consist of the following balances in thousands:
June 30, September 30,
1998 1997
----------------- ------------------
Raw materials $ 417 $ 431
Work-in-process 8,141 5,039
Finished goods 1,389 1,899
----------------- ------------------
$ 9,947 $ 7,369
================= ==================
NOTE 6. NET INCOME PER SHARE
Beginning in the first quarter ending December 31, 1997 (Q198), Financial
Accounting Standards No. 128 "Earnings Per Share" (FAS 128) required the Company
to change the method used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating basic earnings per share,
the dilutive effect of stock options and other potentially dilutive common share
equivalents is excluded. However, diluted earnings per share is analogous to the
methodology the Company used in past earnings per share reporting and is
calculated based on the weighted average number of common and dilutive common
share equivalents outstanding using the treasury stock method. Thus, diluted
income per share is the same number the Company previously reported as net
income per share.
<TABLE>
The following table sets forth the computation of basic and diluted earnings per
share:
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
----------------------- --------------------
1998 1997 1998 1997
----------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Numerator for basic and diluted net income per share:
Net income $ 1,168 $ 98 $ 3,678 $ 67
=========== ========== ========= =========
Denominator:
Denominator for basic net income per
share -- weighted average shares 9,170 8,962 9,119 8,842
Effect of dilutive securities:
Common stock options 599 277 613 429
----------- ---------- --------- ---------
Denominator for diluted earnings per share 9,769 9,239 9,732 9,271
=========== ========== ========= =========
Basic net income per share $ 0.13 $ 0.01 $ 0.40 $ 0.01
=========== ========== ========= =========
Diluted net income per share $ 0.12 $ 0.01 $ 0.38 $ 0.01
=========== ========== ========= =========
</TABLE>
7
<PAGE>
NOTE 7. RECENT ACCOUNTING PRONOUNCEMENTS
Capital Structure. In February 1997, the FASB issued Statement of Financial
Accounting Standards No. 129, "Disclosure of Information about Capital
Structure" (FAS 129). FAS 129 consolidates the existing guidance regarding
disclosure relating to a company's capital structure and is effective for fiscal
years beginning after December 15, 1997. Adoption of FAS 129 will not have a
material impact on the Company's consolidated financial statements.
Comprehensive Income. In June 1997, the FASB issued Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (FAS 130). FAS
130 establishes standards for the reporting and display of comprehensive income
and its components in a full set of general purpose financial statements and is
effective for fiscal years beginning after December 15, 1997. The Company
believes that adoption of FAS 130 will not have a material impact on the
Company's consolidated financial statements.
Segment Information. In June 1997, the FASB issued Statement of Financial
Accounting Standards No. 131, " Disclosures about Segments of an Enterprise and
Related Information" (FAS 131). FAS 131 will change the way companies report
selected segment information in annual financial statements and requires those
companies to report selected segment information in interim financial reports to
stockholders. FAS 131 is effective for fiscal years beginning after December 15,
1997. The Company has not completed the determination of the impact of the new
rule on the Company's consolidated financial statements.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Except for the historical information contained herein, the Company's
performance for the fiscal 4th quarter of 1998, certain matters discussed in
this Form 10-Q, including discussions related to the discontinuance of the
Company's military and commercial hybrid products, manufacturing capacity
expansion and the development and use of SOI technology, may contain
forward-looking statements that involve risks and uncertainties. The Company's
actual future results could differ materially from those discussed here. Factors
that could cause or contribute to such differences include, but are not limited
to, those discussed in this section, as well as in the section entitled
"Business" in the Company's 1997 Form 10-K filed with the Securities and
Exchange Commission.
<TABLE>
The table below states the income statement items for the three months ended
June 30, 1998 and 1997 as a percentage of net revenues and provides the
percentage change in absolute dollars from the previous year:
<CAPTION>
Three Three Nine Nine
Months Ended Months Ended Dollar % Months Ended Months Ended Dollar %
June 30, 1998 June 30, 1997 Change June 30, 1998 June 30, 1997 Change
-------------- -------------- --------- -------------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net revenues 100.0% 100.0% 28% 100.0% 100.0% 35%
Cost of revenues 51.8% 56.8% 17% 51.8% 57.4% 22%
Gross profit 48.2% 43.2% 43% 48.2% 42.6% 53%
Operating expenses:
Research and development 16.9% 19.4% 12% 15.6% 18.4% 15%
Marketing, sales, general
and administrative 20.7% 23.9% 11% 21.8% 25.2% 17%
</TABLE>
Results of Operations - During the third fiscal quarter of 1998, the Company
generated net revenues of $11.8 million, an increase of 28% from the $9.2
million reported in the same quarter of the previous year. For the first
nine-months of fiscal 1998 net revenue was $34.7 million, an increase of 35%
from the $25.7 million reported in the corresponding period of fiscal 1997.
These increases were attributed to overall increases in unit sales volumes in a
majority of the Company's product lines.
Cost of goods sold was 52% of net sales for the third quarter and first nine
months of fiscal 1998, this compares to 57% for the same periods of fiscal 1997.
These decreases in cost and corresponding increase in gross margin were
primarily due to improved manufacturing variances, offset in part by provisions
to increase inventory reserves.
Research and development expenses increased $0.2 million or 12% in the third
quarter of 1998 when compared to the third quarter of 1997. This increase is
primarily due to costs associated with increased engineering headcount and the
initial production cost associated with new dielectric isolation process
technology in the Company's fabrication facility. Research and development
expenses increased $0.7 million or 15% during the first nine months of 1998 when
compared to the first nine months of 1997. As a percentage of revenues, research
and development expenses decreased from 19% to 17% for the third quarter of 1998
and decreased from 18% to 16% of net revenues for the first nine months of
fiscal 1998. These decreases, as a percentage of net revenues, reflect higher
net revenues in the third quarter and first nine months of fiscal 1998.
Management expects research and development expenses, in absolute
9
<PAGE>
dollars, to increase as the Company develops silicon on insulator (SOI)
technology (see discussion below). However, there can be no assurance that net
revenues will increase at the same rate as anticipated research and development
expenses.
Marketing, selling and general and administrative expenses increased $0.2
million or 11% in the third quarter of 1998 when compared to the third quarter
of 1997, and increased $1.1 million or 17% for the first nine-months of fiscal
1998 when compared to the first nine-months of fiscal 1997. These increases were
due to increased expenses related to commissions to outside sales
representatives, travel, advertising, legal, accounting services, and
recruiting. As a percentage of net revenues, marketing, selling and general and
administrative expenses decreased to 21% and 22%, respectively, for the third
quarter and first nine months of fiscal 1998, compared to 24% and 25% of net
revenues in the third quarter and first nine months of fiscal 1997. These
decreases as a percentage of net revenues reflect higher net revenues in the
third quarter and nine-months of fiscal 1998.
The Company's provision for income taxes for the first nine-months of fiscal
1998 are lower than the statutory rate, principally due to the benefit of net
operating loss and tax credit carry forwards offset by state taxes and foreign
withholding taxes.
In July 1997, the Company announced that it would discontinue its military and
commercial hybrid product. This product line accounted for 8.9% and 8.5% of
product revenues during the third quarters of 1998 and 1997, respectively.
Orders for these discontinued products were accepted through the middle of 1998
with last shipments from the factory extending throughout fiscal 1999. The
Company expects higher gross margins from last-buy orders during fiscal 1998.
However, the Company does not expect the discontinuance of this product line to
have a material impact on the Company's fiscal 1999 results from operations.
Factors Affecting Future Results - Looking forward to the fiscal fourth quarter
1998, management of the Company expects revenues to be impacted by an overall
weak demand for analog semiconductor products. Weaker demand for the Company's
core products will be partially offset by increases in the Company's optical
storage products. In addition, management expects overall margins to decline due
to changing product mix, pricing pressures and under-utilization of
manufacturing capacity as the Company adjusts production to meet weakened
product demands. However, the Company believes the long-term prospects for the
business are good, and the Company has invested in manufacturing infrastructure,
business software systems and technical talent that will allow the Company to
exploit its opportunities.
The Company sells its products to distributors and manufacturers in Asian
countries that are currently experiencing an economic recession. The Company
experienced a sequential increase in revenues to these countries during the
third quarter of fiscal 1998 and Company does not expect that the financial
difficulties experienced in Asia will have a material adverse impact on the
Company's results of operations in the near term. However, should the financial
conditions in this region worsen, become prolonged, or affect other countries
where the Company generates significant revenues, there can be no assurance that
the Company's results of operations will not be adversely impacted in the
future.
The Company utilizes various external foundries for the production of CMOS and
bipolar wafers as well as certain process steps in the manufacturing of
dielectric isolation wafers. The number of foundries that have the capability to
process dielectrically isolated semiconductor wafers is limited. The Company has
developed internal capability for a number of these dielectric isolation process
steps and has secured an alternate vendor for one key process step. The Company
has been informed that the current dielectric isolation foundry will discontinue
supplying this technology in the fourth fiscal quarter of 1998. As a
10
<PAGE>
result of this information, the Company will convert production, except for one
key process step, to its in-house capability during the fourth fiscal quarter of
1998.
To mitigate potential problems during the transition of suppliers, the Company
has increased its inventory of processed dielectric isolated wafers. However,
there can be no assurance that this manufacturing change can be successfully
made in a timely manner or that the increased levels of dielectrically isolated
wafers will be sufficient to meet the Company's requirements. Products based on
dielectrically isolated wafers represent a majority of the Company's revenues.
Significant delays in the transition to the new supply of dielectric isolated
wafers or manufacturing problems encountered with either the internal process or
the new supplier would have a material adverse effect on the Company's business
and results of operations.
The Company is in the process of an extensive production expansion at its
primary manufacturing facility in Milpitas, California. The facilities expansion
is expected to be completed late in the fourth quarter of fiscal 1998.
Manufacturing is scheduled to be phased-in through the first two quarters of
fiscal 1999. This will result in a significant increase in fixed and operating
expenses, which could reduce gross margins. Specifically, the Company could
incur substantial operating costs and depreciation expense relating to the
expanded facility before production of substantial volume is achieved. If
revenue levels of products manufactured in the expanded facility do not increase
sufficiently to offset these additional expense levels, or if the Company is
unable to achieve gross margins greater than or comparable to the Company's
current products, the Company's future results of operations could be materially
adversely impacted. Additionally, the project faces a number of substantial
risks including, but not limited to, project termination, delays in
construction, cost overruns, equipment delays or shortages, manufacturing
start-up or process problems, or difficulties in hiring key managers and
technical personnel.
The semiconductor industry is extremely capital intensive. To remain
competitive, the Company must continue to invest in advanced manufacturing
equipment and process technologies. The Company expects to expend approximately
$0.5 million on capital expenditures during the remainder of fiscal 1998.
Additionally, the Company anticipates significant continuing capital
expenditures in the next several years. There can be no assurance that the
Company will not be required to seek debt or equity financing to satisfy its
cash and capital needs or that such financing will be available on terms
satisfactory to the Company. If such financing is required and if such financing
were not available on terms satisfactory to the Company, its operations would be
materially adversely affected.
New products, process technology and start-up costs associated with the
Company's new Milpitas wafer fabrication facility will require significant
research and development expenditures. However, there can be no assurance that
the Company will be able to develop and introduce new products in a timely
manner, that new products will gain market acceptance or that new process
technologies can be successfully implemented. If the Company is unable to
develop new products in a timely manner, and to sell them at gross margins
comparable to the Company's current products, the future results of operations
could be adversely impacted.
Part of the Company's future bipolar product development strategy includes the
development of an alternative form of silicon-on-insulator ("SOI") technology
called bonded wafers. The Company currently believes that, if successful, the
bonded wafer technology could provide technologically advanced products at a
lower cost than the current dielectric isolation complementary bipolar
technology. There can be no assurance that bonded wafer technology can be
successfully implemented in a timely manner or that it will provide the desired
improvements over the Company's current technology. Significant delays or
cancellation of the development of the bonded wafer technology and/or
11
<PAGE>
manufacturing problems associated with transferring the Company's current
product line to this technology would have a material adverse affect on the
Company's business and results of operations. In addition, delays or
cancellation of the development of this technology could adversely affect the
Company's new product development program.
From time to time, the Company has experienced production difficulties that have
caused delivery delays and quality problems. There can be no assurance that the
Company will not experience manufacturing problems and product delivery delays
in the future as a result of, among other things, changes to its process
technologies, ramping production, installing new equipment at its facilities and
constructing new facilities in Milpitas, California.
The semiconductor industry is highly cyclical and has been subject to
significant economic fluctuations at various times that have been characterized
by rapidly fluctuating product demand, periods of over and under capacity, and
accelerated erosion of average selling prices. A material change in
industry-wide production capacity, shift in industry capacity toward products
competitive with the Company's products, rapidly fluctuating demand, or other
factors could result in a rapid decline in product pricing or unit volumes which
could have a material adverse affect on the Company's operating results.
Vigorous protection and pursuit of intellectual property rights or positions,
which have resulted in significant and often protracted and expensive
litigation, characterize the semiconductor industry. In recent years, there has
been a growing trend of companies to resort to litigation to protect their
semiconductor technology from unauthorized use by others. The Company believes
its products do not infringe upon any valid patents. However, there can be no
assurance that the Company's position in these matters will prevail. There can
be no assurance that additional future claims alleging infringement of
intellectual property rights will not be asserted against the Company. The
intellectual property claims that have been made, or may be asserted against the
Company in the future, could require that the Company discontinue the use of
certain processes or cease the manufacture, use and sale of infringing products.
Additionally, the Company may incur significant litigation costs and damages to
develop non-infringing technology. There can be no assurance that the Company
would be able to obtain such licenses on acceptable terms or to develop
non-infringing technology without a material adverse effect on the Company.
The Company is subject to a variety of regulations related to hazardous
materials used in its manufacturing process. Any failure by the Company to
control the use of, or to restrict adequately the discharge of, hazardous
materials under present or future regulations could subject it to substantial
liability or could cause its manufacturing operations to be suspended.
The Company's Common Stock has experienced substantial price volatility and such
volatility may occur in the future, particularly as a result of
quarter-to-quarter variations in the actual or anticipated financial results of
the Company, the companies in the semiconductor industry or in the markets
served by the Company, or announcements by the Company or its competitors
regarding new product introductions. In addition, the stock market has
experienced extreme price and volume fluctuations that have affected the market
price of many technology companies' stock in particular. These factors may
adversely affect the price of the Common Stock.
The Company initiated a Year 2000 remediation plan during fiscal 1997 to make
the Company's primary and ancillary information systems Year 2000 compliant.
This plan includes the implementation of manufacturing-execution and financial
applications software that is Year 2000 compliant. The new software has been
purchased and a majority of the project has already been implemented. The
Company
12
<PAGE>
expects the implementation will be completed by the end of the fourth quarter of
fiscal 1999. However, if the Year 2000 plan is not completed on a timely basis,
the Year 2000 issue could have a material impact on the operations of the
Company. There can be no assurance that the systems of other companies on which
the Company's systems rely will be timely converted, or that any such failure to
convert by another company would not have an adverse effect on the Company's
systems.
The Company has initiated formal communications with all its significant
suppliers and will be working with them to ensure that they are Year 2000
compliant.
The Company's current revenue is generated from products that will not generate
any product warranty or product defect liability issues related to the Year 2000
compliance.
The cost of implementing such a plan is being funded by income from operations
and capital leases and is not expected to be material to the Company's operating
results. The cost of the Year 2000 project and the date on which the Company
believes it will complete the Year 2000 modification are based on management's
best estimates, which were derived utilizing numerous assumptions of future
events, including the continued availability of certain resources and other
factors. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer codes, and similar
uncertainties.
Elantec's operating results have been, and in the future may be, subject to
fluctuations due to a wide variety of factors including the timing of or delays
in new product and process technology announcements and product introductions by
the Company or its competitors, competitive pricing pressures, fluctuations in
manufacturing yields, changes in the mix of product sold, availability and costs
of raw materials, reliance on subcontractors, the cyclical nature of the
semiconductor industry, industry-wide wafer processing capacity, political and
economic conditions in various geographic areas, and costs associated with other
events, such as under-utilization or expansion of production capacity,
intellectual property disputes, litigation, or environmental regulation.
Liquidity and Capital Resources - Cash and equivalents and short-term
investments were $10.9 million at June 30, 1998, a decrease of $5.0 million from
September 30, 1997. The decrease is primarily a result of cash outflows from
investing activities, including capital expenditures of approximately $5.9
million, and cash outflows from financing activities, including payments on
capital leases and other debt, of approximately $0.9 million. These cash
outflows were partially offset by cash generated by operations of $5.2 million.
Accounts receivable increased 54.0% from September 30, 1997 to June 30, 1998
while revenues grew by 35.0% during the same period. This increase was due to
increased volumes of product shipped during the first nine months of fiscal 1998
combined with an unusually high collection rate during the last quarter of
fiscal 1997. Inventories increased 35.0% from September 30, 1997 to June
30,1998. This increase is due to a number of factors including, but not limited
to, purchase of additional dielectric isolation processed materials to protect
against production interruption as the Company brings the majority of that
process in-house, and taking delivery of purchased foundry wafers. Inventory
management remains an area of focus as the Company balances the need to maintain
strategic inventory levels to ensure competitive lead times versus the risk of
inventory obsolescence because of rapidly changing technology and customer
requirements.
13
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Accounts payable and accrued liabilities increased by 53.9% at June 30, 1998
over September 30, 1997. This increase is primarily due to unpaid invoices
relating to the Company's expansion of its Milpitas manufacturing facility at
June 30, 1998. Deferred revenue increased by 51.6% primarily due to higher
deferred revenues on distributor sales.
At June 30, 1998 there was approximately $3.1 million available credit under
lease lines. There were outstanding commitments to purchase capital assets and
leasehold improvements of approximately $0.3 million at June 30, 1998. The
Company expects to expend approximately $0.5 million on capital expenditures
during the remainder of fiscal 1998.
The Company's management believes that its current cash and equivalents,
short-term investments, line of credit, borrowing capacity, and cash generated
from operations will satisfy its expected working capital and capital
expenditure requirements for the next twelve months.
14
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
15
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ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of this report:
Exhibit 27.1 - Financial Data Schedule
(b) Reports on Form 8-K:
The Company filed a Form 8-K on May 29, 1998 covering the changes in
Registrant's Certifying Accountant.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to report to be signed on its behalf
by the undersigned thereunto duly authorized.
ELANTEC SEMICONDUCTOR, INC.
(Registrant)
Date: August 13, 1998 By: /s/ Ephraim Kwok
----------------
Ephraim Kwok
Chief Financial Officer (duly authorized officer and
principal financial officer)
17
<PAGE>
EXHIBIT INDEX
Exhibit
- -------
27.1 Financial Data Schedule
18
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> MAR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 8,247
<SECURITIES> 2,649
<RECEIVABLES> 6,274
<ALLOWANCES> 1,170
<INVENTORY> 9,947
<CURRENT-ASSETS> 26,527
<PP&E> 28,371
<DEPRECIATION> 10,145
<TOTAL-ASSETS> 45,460
<CURRENT-LIABILITIES> 12,870
<BONDS> 3,861
0
0
<COMMON> 92
<OTHER-SE> 28,638
<TOTAL-LIABILITY-AND-EQUITY> 45,460
<SALES> 11,815
<TOTAL-REVENUES> 11,815
<CGS> 6,123
<TOTAL-COSTS> 6,123
<OTHER-EXPENSES> 4,437
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14
<INCOME-PRETAX> 1,269
<INCOME-TAX> 101
<INCOME-CONTINUING> 1,168
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,168
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.12
</TABLE>
